When it debuted in 1999, TiVo revolutionized the TV experience by wresting control of screen time from advertisers, allowing viewers to record shows and skip commercials. TiVo's slogan said it all: "TV your way."
Behind the scenes, though, TiVo was courting advertisers, selling inroads to a universe most customers saw as commercial-free. The result is a groundbreaking new business strategy, developed with more than 30 of the nation's largest advertisers, that in key ways circumvents the very technology that made TiVo famous.
By March, TiVo viewers will see "billboards," or small logos, popping up over TV commercials as they fast-forward through them, offering contest entries, giveaways or links to other ads. If a viewer "opts in" to the ad, their contact information will be downloaded to that advertiser — exclusively and by permission only — so even more direct marketing can take place.
By late 2005, TiVo expects to roll out "couch commerce," a system that enables viewers to purchase products and participate in surveys using their remote controls.
Perhaps even more significant is TiVo's new role in market research. As viewers watch, TiVo records their collective habits — second by second — and sells that information to advertisers and networks. (It was TiVo that quantified the effect of Janet Jackson's Super Bowl "wardrobe malfunction," reporting a 180% increase in the number of replays reported by viewers.)
For advertisers it's an extraordinary boon, a quicker and more effective way than they've ever had of measuring the effects of their TV commercials.
For viewers, TiVo's new strategy means the technology famously christened "God's machine" by Federal Communications Commission Chairman Michael K. Powell is rapidly becoming a marketer's best friend, proving that try as they might, consumers cannot hide from marketing.
"TiVo looked like it was going to be the weapon of mass destruction of Madison Avenue," says Robert Thompson, Syracuse University professor of television and pop culture. "However, we knew that the [TV] spot ad would not go gently into the night, and this is the next battle strategy."
The shift underscores what industry observers have been saying since TiVo started — that TV advertising and programming must change dramatically to survive.
These are anxious times for marketers, who are faced with commercial-busting technology that's evolving faster than they can keep up. Broadcast-ready cellphones, hyper-real video games, interactive DVDs and the Internet give consumers the on-demand, often commercial-free entertainment they crave.
Traditional network television viewing, by comparison, can seem antiquated. The number of American households with a TiVo or TiVo-like recording system is expected to increase from 5% to 41% in five years, according to Forrester Research, which studies technology's effect on business.
For this reason, ad agency executives who initially ignored TiVo and its digital video recorder technology, or DVR, are now praising it as an industry savior.
"I look at TiVo being first generation of the TV advertising of the future," says Tim Hanlon, a vice president at Starcom MediaVest Group, one of the world's largest media-buying companies, with clients including General Motors Corp., Procter & Gamble Co. and Best Buy Co. "There's a whole witch's brew of change coming to the linear television form."
But what about TiVo's devotees, those folks who send the company fan mail and photos of their pets posed with TiVo boxes, and act as missionaries, converting their friends to the technology?
Some say they don't mind a little pop-up advertising — just so long as they can fast-forward through it — because it could help keep TiVo in business. (A September report from Forrester shows that DVR owners typically fast-forward through 92% of commercials.)
Others are wary of the changes and concerned the company's priorities may be shifting away from the consumer.
"A company can get too big for its britches, you know?" says Bill Calogero, a Chicago computer business analyst and TiVo subscriber since 1999. "I just don't want them to interfere with the experience. If it isn't broke, don't fix it."
Yet from its inception, TiVo engineered its system with advertisers and networks in mind. While competitor ReplayTV had allowed its subscribers to skip commercials entirely — TiVo restricted its fast-forward capabilities so viewers could still see the commercial, albeit eight times faster than intended. (ReplayTV last year was forced by litigious studios and networks to adopt a more TiVo-like system.)
TiVo also sold space on its main menu to advertisers as a venue for commercials that ran longer than the usual 30- or 60-second spots. And the company developed "tagging" technology as a way for networks to advertise TV shows by embedding a green thumbs-up sign in the corner of the screen during a show's promo, reminding the viewer to record it. Advertisers saw tagging as an opportunity and jumped at it.
By 2002, TiVo was selling "tag" time to Lexus and Best Buy. The thumbs-up icons appeared during live commercials, inviting the viewer to "click here" for a chance to enter a contest, receive a DVD or brochure or watch a glossy, long-form commercial.
Over time, General Motors, Nissan Motor Co., Coca-Cola Co., Walt Disney World and Royal Caribbean International cruise line paid their way into the program. And all the while, TiVo recorded viewer response.
The tags proved so lucrative for TiVo, and so popular with viewers, that the Alviso, Calif.-based company expanded their capabilities significantly. They created "billboards," more robust tags that are larger and promote greater brand awareness with logos and text.
Until now, the new technology has been relatively subtle and not widely seen; by spring, it will be hard for TiVo users to miss. (The technology is part of the software provided to all TiVo users.)
"The message we really want to get across," says Davina Kent, TiVo's advertising and research sales manager, "is that we now have a dedicated road map for advertising."
There are TiVo users who say that as long as the new technology doesn't interfere with their ability to fast-forward through a commercial, they're happy to ignore it. It's the timesaving apparatus they say they cherish most.
"To be able to see things when I want to see them is the real advantage," says L.A. radio promotion executive Jennifer Sperandeo.
Other TiVo users say they hope the new partnerships prove lucrative enough to keep the company afloat. Five years after its launch, TiVo still hasn't turned a profit and doesn't expect to until January 2006. (Kent says the advertising revenue will probably bring down the cost of TiVo to its 2 million subscribers — currently $12.95 a month.)
And in the year since Rupert Murdoch's News Corp. took control of satellite operator DirecTV Group Inc., TiVo's largest source of customers, the future of that relationship has grown increasingly uncertain.
"I want them to be successful," says Gary Beck of Long Beach, who bought his first TiVo in 1999 and now has three. "They have clawed their way up. As long as they're not giving out personal data, I don't mind."
Some observers, however, interpret TiVo's new ad campaign as a profound change in its ideology that won't sit well with devotees.
Matt Haughey, whose Portland, Ore.-based PVRblog.com gets 10,000 hits a day (PVR is short for personal video recorder), says he wasn't surprised by the shift. After last year's lawsuit against ReplayTV and TiVo's hiring of NBC executive Martin Yudkovitz as president, he figured the glorious "David versus Goliath" days, when TiVo was the best defense against corporate tyranny, were numbered.
"My first impulse is, this is going to start the slippery slope," Haughey says.
"TiVo is dependent on a psychology," says Neal Gabler, a senior fellow at the Norman Lear Center at USC Annenberg and author of "Life the Movie: How Entertainment Conquered Reality." "It is not just a technology. You don't want people to intrude in your life. That's the whole point of it — to give you control of that mechanism…. I think they're going to find themselves losing customers. I say this as a TiVo subscriber."
To Syracuse University's Thompson, the concept of interactive advertising interrupts the most relaxing aspect of watching TV. "People seem to forget that what we've loved about television so dearly is its abject passivity," he says. "That's why they call it couch potato. TV was so great because it wasn't interactive."
But TiVo research suggests that notion is out-of-date. Between 5% and 20% of TiVo viewers given the opportunity to "participate" in an ad — either by clicking on a tag or by selecting a long-form commercial from a main menu — take it.
That's because TiVo has done its homework and knows its customer, Kent says. The new ads intrigue viewers instead of annoy them. They pop up and disappear in a matter of seconds if the viewer isn't interested. "You'll never see TiVo roll out any kind of intrusive advertising," Kent says. "It's very core to our mission."
What remains to be seen is whether consumers will embrace this culture shift at TiVo.
"Watching [an ad] is one thing," TiVo loyalist Calogero says. "Interacting with it is something that the consumer is going to need a little more reassurance that their information isn't being sold. I mean, TiVo knows how many times I rewinded to see Janet Jackson's breast come up. How much more do they know about me?"
Gina Piccalo, Los Angeles Times. November 17, 2004.
Copyright © 2004 Los Angeles Times. All rights reserved.