Imagine a world where a single network carries phone calls, internet traffic and television. Where viewers can click through a commercial to call the advertiser for more information or make a purchase on the spot. Where a single back-end database stores data about what a user has recently browsed for, which shows what they've watched and whom they've called. Where you can use that database to sell ad space across individual computer screens, TV sets and mobile phones for the last word in targeted messaging.
Internet Protocol Television (IPTV) -- television delivered via a fully converged broadband network -- will strive to make this marketing nirvana possible. And according to participants at Network Ventures 2006, a Dow Jones VentureWire event held February 8 and 9 in San Jose, California, it's already on its way.
Although the two-day conference focused on opportunities for technology start-ups to find success in emerging networking markets, the ramifications for the interactive marketing industry are clear. True convergence, with its potential for creating a single, fully searchable ecosystem of information about consumers' interests, needs and habits, is about to change advertising forever.
"The potential to make media purchases by zip code across television, internet and mobile phones is just two years away," said Russell Zack, chief operating officer of Cauldron Systems, which makes software that allows service providers to track and control their customers' network use more precisely. "The fully addressable home will be a huge marketing opportunity."
Some participants questioned whether consumers will be as quick to adopt IPTV in the U.S. -- where cable and satellite are well-established -- as they will in Asia and Europe. However, according to analyst Michael Howard of Infonetics Research, the technology is already taking off. By the end of this year, 1.2 million people in the U.S. will subscribe to IPTV. Within three years, 54 million people worldwide will have IPTV, 13 million of them in North America, he predicted; by 2015, it will be ubiquitous.
The potential market for IPTV is in the hundreds of millions-- every broadband subscriber and every mobile phone owner in the world. Cable providers, with their package deals that include broadcast television, video on demand and high-speed internet access via cable modem, are closer to achieving IPTV than telephone companies. As a result, the telcos are under enormous pressure to roll it out to keep their customers from being poached by cable, particularly once voice-over-IP technology becomes practical on a wide scale. AT&T and Verizon are already testing IPTV in small markets, and customers are adopting it in great enough numbers to justify further expansion, said Peter Barrett, CTO and general manager of engineering for Microsoft's TV division, in the conference-opening keynote discussion.
There are still barriers to successful wide deployment of IPTV, said Howard. High-definition video requires far more bandwidth than voice or data, and current networks lack the capacity to carry multiple video streams without quality issues. "If everyone turns on the same program at once, it fails," he said. However, new video compression codecs have emerged that provide higher quality video at lower network speeds, which will let service providers get more mileage out of existing infrastructure even as they race to upgrade from copper to fiber.
Barrett said he believes IPTV's value proposition over satellite and cable will be search. By combining robust search technologies with digital video recording, video on demand, channel guides and other navigational tools, users will be able to select among a potentially limitless number of channels and create fully customized programming. For example, IPTV will allow users to find out what movies their neighbors recommend, search for programs that are especially popular among other people who read the same blogs they do or see what the people on their IM buddy lists are watching.
Consumers will experience that as a fun and convenient feature set, adding value to the familiar television-watching experience. Marketers, though, will be able to use search data to target specific users in ways never before possible: putting ads next to or within content, customizing ads based on the programming viewers seek out and creating new demographic segments based on a combination of viewing and searching behavior.
"There's no question, it will come," said Shawn Carolan, managing director of Menlo Ventures, a venture capital firm that's investing heavily in digital media. Noting that Google generates a 25 percent clickthrough rate from the ads it serves to its Gmail users based on keywords in their emails, he asserted, "Well-targeted advertising becomes content." Given the choice between paying a premium to avoid ads or watching an ad to keep the cost of content lower, he added, "Wouldn't you want a tailored ad?"
Barrett put it more succinctly, "Search [on television] will change ads. It will be an entirely new way for advertising to work."
Additional resources:
Request your invitation to Breakthrough '06, iMedia's new Summit about emerging marketing platforms in video, games and mobile, March 26 to 28, 2006.
Fawn Fitter is a freelance journalist whose work has appeared in magazines ranging from Marie Claire to Knowledge Management. She is also the co-author of "Working in the Dark: Keeping Your Job While Dealing With Depression." Read her full bio.
