Interactive TV Spots Gain Steam

With companies seeking better ROI from all aspects of their marketing, many are turning television advertising, often described as passive or intrusive, on its head.

A new study from Forrester Research finds that while interactive television (iTV) advertising still suffers from low penetration rates and technological limitations, those that have tested the technology will spend nearly 2 percent of their TV advertising budgets on interactivity by 2003.

So far, interactivity is limited to commercial overlays, where pop-ups appear over commercials for viewers whose TVs support iTV systems, where viewers click to respond or request more information. The other iTV avenue is program guide ads, which appear in interactive program guides. Viewers click for a more detailed information page. The study finds that commercial overlays are by far the more popular choice.

But even though the study anticipates 18 million homes will have iTV services, that is not good enough for advertisers, who see the lack of consumer adoption as the biggest roadblock to their fully embracing the technology. And with high technology costs and low penetration, the cost of iTV advertising is still too high for many advertisers, making ROI elusive.

But that's not to say advertisers aren't enthusiastic about the idea, says senior analyst Daniel O'Brien, who wrote the report. At a time where technology lets people to skip over commercials, iTV enables advertisers to turn television ads into something that can actually engage viewers and get to them to interact with the companies shilling their goods and services. Most 30-second spots don't even resonate with serious couch potatoes. Only 41 percent actually watch the ads, while the other 59 percent leave the room, ignore the ads or partially watch, or change the channel.

But with iTV, advertisers will actually know which commercials viewers click on to get more information, telling them which one of several 30-second spots is getting the best response.

The study predicts that by 2004, all TV viewing will be on-demand, from either video-on demand servers or personal video recorders -- such as TiVo -- allowing viewers to skip commercials. Therefore, advertising will have to provide viewers the opportunity to get more information than what is in a 30-second spot.

The biggest surprise, says O'Brien, is that even though it is relatively small, the penetration of iTV into homes is higher than anticipated. And he is also surprised by the enthusiasm of advertisers to the small but quickly growing penetration of iTV.

"They are very excited about what they can do," says O'Brien of the advertisers. "They plan to quadruple their budgets. They are desperate to find new ways to reach their audience."