In brief: Regular columnist and contributor Jim Levey looks at the battle brewing in the living room. Cable companies, telcos or Internet giants – who will control (and monetize) our content experiences? Look for companies that successfully wield personalization and recommendation technologies to deliver content we appreciate and advertising we accept to be in the winner’s circle.
Imagine a living room where a large flat screen wirelessly attached to a set top box hangs from the wall. You enter a personal code into the set top box that recognizes your profile; the screen welcomes you to a portal where there are no channels only menus with links to personalized content and apps that range from social networking to commerce to premium content and entertainment. A blinking icon reminds to you to record Wimbledon while an ad from Wilson invites you to view their latest rackets. As you click the record button, you slide out the keypad on your remote and navigate to the Wilson site where you purchase a new tennis racket. Payment for the racket is included in your monthly cable invoice.
Sounds like science fiction? Hardly. We are on the cusp of next generation iTV (interactive television), services that will elevate our viewing experience. Advertising will also be transformed, paving the way for two-way communications that enable brands to target households according to key demographics and other information collected by the set top box (STBs). Mobile devices, widely regarded to be the remote control of our digital lives, will surely play an important role in this scenario. (Mobile already has a central spot if we consider how people reach to their phones to cast their vote for talent shows, follow sports and read the gossip during soap operas.)
The promise of being able to access the wide open Internet and everything in between on your TV may be a while away, but the battle for the living room, the one that will decide who monetizes our content consumption and who cashes in on the commercial messages we consume, is being fought now.
Best positioned in my view are the cable companies, who have the trump because they own the signal into the home and have a trusted relationship with subscribers. They also benefit from established business partnerships with broadcast and cable network programmers, that receive billion-dollar fees for entertainment content.
But there are other players lining up to stake their turf. For example, Tier 1 service providers in North America and Europe are rolling out high-speed connections into the home as part of their multi-play strategies to deliver premium content and advertising services via IPTV (TV via the Internet). While the viewing experience for consumers might not be radically different, the opportunities for brands to deliver targeted and relevant advertising could get a boost since multiplay is about creating a holistic view of the customer by monitoring behavior across channels including mobile.
Little wonder that Internet giants are also lining up to own the living room experience. Navic (acquired by Microsoft), gives broadcast and network programmers a unified platform to distribute premium content and advanced advertising services across disparate cable systems. And let’s not forget Google. Through its relationship with Dish Networks and Visible World, Google is geared to provide brand advertisers with expanded reach and more precise demographic targeting aimed at satellite and cable subscribers.
These companies have their eye on the prize: knowing the customer first and best. But it’s not an easy goal to reach. Operators concerned about privacy issues are predictably reluctant to release STB data to marketers and industry partners. What’s more, cable’s legacy architecture presents a host of interoperability and scalability problems that must be overcome in order to provide brands national reach across regional cable companies.
So what is cable doing to overcome these challenges?
Although the space is crowding and the privacy/technology obstacles are significant, cable companies are nonetheless next positioned to win the battle for the living room. But how well prepared are they for the struggle ahead?
The cable industry along with CableLabs, the industry’s research and development arm, has developed several key initiatives to usher in the age of iTV. These efforts, already well underway, provide the standards and interfaces that will allow brands and publishers to conduct business via cable and better target their audience demographic.
To get the inside track on work in progress I recently spoke with Paul Delzio, Director of Business Development and Product Management at ARRIS, a provider of infrastructure and advanced advertising solutions to cable. As Paul put it: ARRIS and other solution providers are “helping operators build a superhighway to the home and throughout the home using modern architecture that will ensure an interactive future with robust subscriber services.” As he sees it, operators will monetize this highway through differentiated data plans, digital TV fees and new revenue streams from t-commerce (tv commerce), advertising and billing.”
CableLabs’ development of tru2way, java-based middleware that will be integrated directly into next-generation TV sets, is a critical step in this process. With it, subscribers will be able to interact with a wide range of applications such as program guides, commerce, games, Video on Demand (VOD) and web browsing, without the need for a set top box. Naturally, the world’s largest TV manufacturers are on board to bring us this technology. Panasonic, Toshiba, Sony, Sharp and Samsung are just a few of the players lining up to cash in on this opportunity. Look for a big push at retail this holiday season.
But not everyone is going to rush out and buy tru2way TVs. So, CableLabs has introduced EBIF (enhanced binary interchange format), a technology which is being integrated into STBs as we speak. In fact, 15 million units are projected to be installed throughout the U.S. by 2010. EBIF will enable true interactivity through multimedia pages that resemble html, so the consumer experience will have a similar look-and-feel to what we get on the Web. The advantage for brands is lead generation because cable viewers can click on a marketing message, in the form of a static banner, and receive information or goodies in the mail.
According to Paul, this “Cable Advertising 1.0 (which makes use of snail mail to fulfill a consumer request for information) will open the doors for brands eager to justify TV spend.” Marketers see the opportunity and have stepped up spend on advanced advertising solutions from ARRIS and its partners, which supports them with the same tools they know from online and mobile, such as campaign management, media planning, analytics and response measurement.
These Cable Advertising 1.0 ad products and fulfillment services have been wisely engineered to meet the needs of this emerging ecosystem and to provide user experiences we can appreciate via this medium. Graphic overlays on top of full motion TV commercials will allow viewers to click through to micro sites where they can request information or coupons which will be delivered in the mail, allowing advertisers to target demographic segments by selecting zip codes.
Interactivity will also play a role, but mobile won’t be a shoe-in here. Subscribers can also participate in voting and polling using their TV remote control. Will we really want to use the cable remote control for text messaging? The jury is out is out on this one, but it’s clear there is a laundry-list of usability issues that will have to be solved before the cable remote is our keypad of choice in the living room–particularly when you consider the sophisticated touch and tactile keypads next generation smartphones will provide.
Personalization and relevancy on the big screen
Where are brands in the equation? The good news is significant progress is being made on the new standards and interfaces that will allow brands and marketers to buy interactive and addressable advertising locally or across multiple cable operators. Spearheading this effort is a consortium of ecosystem partners including SCTE (Society of Cable Technical Engineers), systems manufacturers including ARRIS, Biap, BlackArrow and Sigma and Canoe Ventures, a joint venture funded by the cable operators.
For brands seeking national reach, Canoe Ventures is developing a platform for advertising stewardship and fulfillment across the top six cable operators in the U.S. The platform will aggregate inventory and subscriber intelligence to provide brands with rich data services, localized messages, lead generation and fulfillment on a national basis.
The platform will also no doubt attract the attention of Web giants who want to get in on the action. In fact, Paul tells me it’s “inevitable that major retail portals like Amazon and Expedia will want to collaborate with operators to provide subscribers with a personalized shopping experience.” What will make this experience more enjoyable for consumers and more targeted for advertisers? The key to the equation is unlocking the rich assets — our transactions, interactions, browsing behavior and viewing history all captured in the STB.
And why wouldn’t they be there? After all, it’s much more enjoyable to view a HD large screen to select your next vacation rather than squint and scroll on a 15” laptop. Moreover, cable operators are in great position to expand their billing systems to accommodate billing partnerships with the leading online retailers. Now consumers can buy what they see on TV and add it their monthly bill (Does this sound familiar? Mobile operators are determined to leverage their billing relationship in a similar way.) Shoppers benefit from a consolidated bill from a trusted provider. Brands will love this — a virtuous cycle of shopping, analysis, advertising and more shopping.
In fact, astute brand managers will see the synergies between cable and mobile. Leads collected from the TV can be fed into mobile advertising systems enabling brands to continue the conversation on an individual basis. Additionally, mobile SMS will grow as sports and reality TV continue to prompt voting and polling.
What else is cable doing to hedge their bets?
While excitement around Cable Advertising 1.0 continues to grow, some cable operators are exploring their options. In July Time Warner Cable and Comcast joined up to launch “TV Everywhere”, an over the top service (that is, where content is going over the Internet and not through the STB) designed to give cable subscribers access to premium content online. Content from cable network programmers such as TBS, TNT and Starz, along with movies from HBO and Cinemax, will be made available to Comcast and Time Warner subscribers. It is rumored that AT&T will jump on the band wagon, as well.
But, as Paul pointed out, over the top is both “an opportunity and a threat.” On the opportunity side, TV Everywhere will accomplish several important tasks; it will extend audience reach, allowing operators to further monetize ad revenue, while at the same time reinforcing brand loyalty.
As a threat, TV Everywhere will enable subscribers with tru2way TVs to access the Web and enjoy premium content at no cost. Case in point is premium content provider Hulu. The company’s audience , which has doubled since launch to approximately 1.3 million daily visitors as of July (Quantcast), underlines the validity of the ad-supported business model. Hulu advertisers include some of the world’s leading brands : Johnson & Johnson, McDonald’s, Visa, American Express, Best Buy, Chili’s, DirectTV, GM, Intel, Nissan, State Farm, Unilever, Wal-Mart, Cisco, and Procter & Gamble.
Plus, it doesn’t take much imagination to envision extending the concept of TV Everywhere to the mobile Internet. Combined with mobile’s portal personalization and recommendation engines (already delivering good user experiences to millions of subscribers in Europe and Asia), premium content streamed over the mobile Internet would provide the broad reach brands have been waiting for. Major Tier 1 service providers planned CAPEX investments in LTE can be subsidized in, no small way, by interactive video advertising dynamically inserted into premium content on the handset.
Bottom line: who will dominate the living room?
At the end of the day, the battle for the living room will be determined by sophisticated personalization and recommendation engines that understand our preferences and profiles and serve us relevant content and marketing messages.
When operators append third-party retail data to subscriber demographics and STB viewing patterns, then the vision of personalization begins to get interesting. Comcast Spotlight, in fact, is leading the way by appending third-party data from Experian to improve household targeting. It’s easy to imagine households that frequently purchase from Toys R Us are a good bet for family products or mini vans. And personalization technologies will connect the dots for sure.
While the wide spread adoption of tru2way is good news for cable operators it is also good news for telcos and premium publishers. Sure, subscribers will be free to browse off-portal. But why bother? A rich and personalized portal with premium content, entertainment, shopping, social networking, video on demand and other services, will make browsing the Internet irrelevant.
So, who will dominate the living room? Cable is in the driver’s seat – for now. In view of somewhat difficult (but not insurmountable) environmental challenges, time will tell if they will be able to deliver the vision of a personalized portal with robust services supported by advertising, If they don’t, the leading telcos that follow a multiplay strategy and Internet players will be just a few clicks away.
Jim Levey, formerly Director of Product Marketing for Search and Digital Advertising at Amdocs, joins the roster of authors and influencers contributing news, analysis and thought leadership to MSearchGroove. He comments on developments in personalization, recommendation and mobile advertising.