The theme of the year for media companies has been "on demand." From the video iPod to selling episodes of hit TV programs through video-on-demand services to the explosion of broadband programming, video is increasingly available when consumers want it. Now, advertisers are mulling whether their TV marketing messages can follow suit, and what it will take to get consumers to choose to watch them.
TiVo last week announced its next step in developing an on-demand advertising system, which CEO Tom Rogers told advertisers and agencies "totally flips the model" of interruptive advertising by giving consumers control of when they see marketing messages. Beginning this spring, the digital video recorder service will let its 4 million customers search for product information to watch.
In the near term, the TiVo search system will remain as small as its customer base, which will likely grow with Comcast distribution next year. Yet if successful, agency executives say, it could migrate to video-on-demand cable systems and other DVR operators, making TV more Web-like.
"All video except commercials is becoming on demand," said Tracey Scheppach, vp of video innovations at Publicis Groupe's Starcom agency, which advised TiVo on the product. "Why not commercials?"
In addition to giving viewers more control over what ads they see, such a system promises to bring a dose of accountability to TV advertising. Mimicking the ad-search system on Google, TiVo executives said they are discussing performance-based pricing models with media agencies, such as price-per-click and time-per-view variables, according to Davina Kent, vp of ad sales at TiVo.
But will TiVo users seek out commercials, when they tend to skip them on TV? The first hurdle, Rogers admits, is getting viewers comfortable with the notion of using their TVs to search for product information. But he points out the average TiVo user already makes 350 different clicks a day. "That, I submit, is a very active and engaged viewer," he said.
TiVo has a fair amount of evidence from its other on-demand ad offerings, including clickable tags in commercials and TiVo Showcases of branded entertainment offerings, that viewers will seek out marketing messages. TiVo has seen click rates of 10 to 15 percent for campaigns it has run through TiVo Showcases, with viewers typically interacting with a marketing message between two and four minutes.
There are other examples of entertainment-oriented on-demand ads that consumers have embraced. Reebok ran a campaign on Comcast in Philadelphia in the spring, featuring basketball star Allen Iverson, that was Comcast's most-viewed VOD, according to Reebok, which earlier this month signed a deal to produce an hour's worth of hip-hop-themed VOD content for Comcast. Similarly, Burger King has seen success in its recent video iPod foray with youth-focused site Heavy.com. In the past month, the site has streamed 5.6 million of quirky user-created videos that feature Crispin Porter + Bogusky's "King," according to Heavy.com.
"For every consumer who rejects an ad, there's another who might be interested in one," said Joseph Jaffe, an ad consultant and author of Life After the 30-Second Spot.
The key to enticing viewers to voluntarily watch messages is through relevance, according to Rogers. TiVo hopes to achieve this by targeting marketing messages in a way similar to Google's keyword-based approach. Web search has proven a powerful method for matching users with relevant information, noted Suranga Chandratillake, co-founder of Blinkx, a video search company. Blinkx has built a personalized Web video platform that allows viewers to set up their own channels--a navigation system it hopes to migrate to TV. "We've basically captured your intent and your interest," he said. "That interest can be converted immediately and directly into an ad."
On top of intent through searches, TiVo plans to further match messages to interested viewers through its trove of data on viewing interests and geographic location, Kent said, opening up the possibility of showing more precise ad offers. She said these types of on-demand ads would work well for clients in high-consideration categories, such as autos and financial services. TiVo has found that incentive offers, either discounts or sweepstakes, drive higher viewer response.
"From our experience over the last few years, we know our users will be interested in advertising if they're in the market [for a product] and it's relevant," said Kent, who noted a recent TiVo Showcase for an automaker was viewed by 16 percent of TiVo users and led to 1,200 test drives, according to TiVo executives.
For consumer products like soft drinks, the creative challenge will be partnering with content producers that consumers will seek out, said Chuck Fruit, CMO of Coca-Cola and a member of TiVo's board of directors, such as a Coke TiVo campaign featuring music performances. He expects Coke's spending on "new media" like TiVo and the Web to increase from under 5 percent now to 25 percent in five years, particularly as the distinction between traditional and digital media blurs. "Many more advertisers will think of themselves in the entertainment business," he predicted.
While Rogers sees a role for typical TV commercials in TiVo's search service, he added: "We're going to have to have material that goes beyond the 30-second ad." Forrester Research analyst Josh Bernoff doubted many consumers, even if in the market for a product, will want to watch typical TV pitches, but he sees a place for longer product demonstrations. "It's halfway between a commercial and a Web site," he said.
Adam Gerber, vp of advertising products and strategy at Brightcove, a broadband video company, sees an opportunity for a retailer like Home Depot to offer viewers home-repair videos, with only light brand integration. Not focusing on products will be a hard proposition for many brand managers, he said, but "the only way that longer-form content works is if it becomes much more focused on the consumer behavior and their needs."
For that reason, interactive agencies see opportunities to tap into their digital expertise. "The real opportunity is for those [agencies] that understand consumer behavior and have a deep analytics capability," said Carl Fremont, global media director at Digitas.
AQuantive's Avenue A/Razorfish vp of media Jeff Lanctot said a media landscape that includes VOD would mean "experts in digital marketing should own that."