Enhanced Ads Take a Hit but Keep Coming

For about as long as anyone has ever talked about IPTV, enhanced advertising has been part of the equation. Whether targeting ads to specific consumers, making video ads interactive or making them more entertaining, enhanced advertising was expected to provide revenues to the next generation of video providers, as advertising has always done for broadcasters and cablecos.

Along the way, however, enhanced advertising has hit more than its share of bumps in the road. Targeting ads has run afoul of privacy advocates, especially when that targeting was based on tracking consumer habits, such as Web surfing or TV viewing, and involved data collection on specific households. Other forms of enhanced ads, such as interactivity, have struggled for lack of a business model. And the entire industry has suffered without a single, cohesive platform or format by which ads can be delivered.

Just this summer, two major enhanced ad initiatives took hits. Canoe Ventures, the joint venture of six major cablecos, announced in mid-June that it would discontinue plans to launch a messaging format that enabled ads to vary by based on demographics. While Canoe had faced some opposition over privacy issues, the reasons cited for pulling what it called “community addressable messaging” were that older cable systems would need to pay for costly upgrades to set-top boxes (STBs) to support the format and ads would have to be scheduled more than a week in advance of the air date. Canoe still plans to launch interactive TV that focuses on lead generation later this year.

In early July, BT announced it would stop work with Phorm to develop targeted advertising, citing “other priorities.” Phorm's platform was not yet ready for deployment and faced complaints about “spying” on consumer behavior.

Those stumbles are just the latest evidence that enhanced advertising has proven much more difficult than expected.

“That's putting it mildly,” said Pat Dunbar, director of advertising for the TV, video and music group for Microsoft. “All the cards have been thrown into the air, and I don't think anyone knows where they are going to land.”

Those involved in enhanced advertising say the lack of a single delivery platform remains the largest challenge.

“I would say to a great extent, the greatest challenge has been a footprint for a single technology and a business model behind that,” said Jaspal Bhasin, chief operating office for itaas, which provides interactive technology. “Each [cableco] was trying out different technologies with different vendors; there wasn't a ubiquitous footprint — which is what Canoe is charted to bring in, but the model is what was missing. On the telco side, they just don't have the footprint yet.”

There are, however, some near-term options still available, and many of those are based around Enhanced TV Binary Interchange Format (EBIF). EBIF-based applications are bound to the video content itself but allow viewers to interact as well, for things like voting, direct buying from a shopping channel or clicking on an ad to get more information from the sponsor.

There are interactive applications based on EBIF that let consumers request more information during the body of a 30-second commercial and be “telescoped” to a longer-form video ad, Bhasin said. With more STBs being rolled out that are EBIF- and Tru2way-capable (another interactivity standard), Bhasin expects to see more applications and business models develop.

“As more of this technology is deployed, we will see more ad houses warming up to the idea,” he said, “especially when you think about how the Web already has a good targeted paradigm for ad delivery, and it has the ability to target.”

John Reister, chief IPTV architect for BigBand Networks, also expects EBIF-based apps to have a major impact this year, particularly in cable.

“For content, it is exciting that content providers can now put in applications on ESPN to let you get sports scores that are customized for your teams or stats about a player or any sort of interactive data,” Reister said. “For advertising, this allows you to start doing things like telescoping, collecting interests from the subscribers so they can get a follow-up with more details.”

Reister sees IPTV players as just now gaining the footprint needed to begin interesting advertising and warns that “closed” software-based IPTV solutions will be of limited appeal.

Microsoft feels very differently on that front and is offering its version of EBIF-type interactivity via its Microsoft Presentation Framework (MPF), which AT&T, among others, already is deploying and using for interactivity, Dunbar said. MPF offers an end-to-end solution that encompasses the IPTV framework.

“We have developed some solutions that will allow you to take an EBIF implementation and turn it into a Presentation Framework application, which is a richer experience,” Dunbar said. “Logically then, the advertiser or the content provider has to decide how much of a richer experience. We are not backtracking on dumbing down our solution because of EBIF. We would rather take EBIF and allow it to be upgraded than dumb down our solution.”

Verizon, among others, is using EBIF as one of three virtual machines within its FiOS TV STBs, along with a virtual DVD machine for which there also are commercial possibilities, said Joe Ambeault, director of product development for consumer TV for Verizon, in an interview earlier this year. The DVD machine ingests DVDs into a video-on-demand system, and the file looks to a FiOS STB like a physical disk, Ambeault said. “When you press play on the asset, what you are presented with is exactly like putting a disc in, but it is streamed from our network,” he said.

One advertiser, aXe, built a DVD and gave it to Verizon for distribution. While the DVD included a commercial for the aXe brand, it also included “a lot of things that teenaged and early-20-something boys would like,” Ambeault said. “It was a very effective marketing tool.”

Having DVD and EBIF technology available opens up possibilities for enhanced ads, but Ambeault said technology is far from enough.

“Everyone always focuses on the technology; the technology is the easy stuff,” he said. “The more innovation you open up on a platform, the more profit opportunity you open up on the value chain. In some sense, the business case is easy also. It's a revenue opportunity at a lower cost. But to exactly quantify it and to work out the business relationships — that is the effort.”