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Interactive Ads Start to Click On Cable and Satellite TV

When Sony Corp. launched a television ad for its action movie "XXX: State of the Union" last month, EchoStar Communications Corp.'s satellite-television subscribers got to watch a lot more than 30 seconds of explosions and fistfights.

An icon appeared on the screen inviting viewers to push a button on their remotes if they wanted to learn more about the film. Doing so switched them to a 30-minute program giving more detail on the movie as well as interviews with stars Samuel L. Jackson and Ice Cube. It even included the first 10 minutes of the movie.

The Sony ad was the latest sign that a growing number of companies are experimenting with interactive television commercials, a potentially powerful form of advertising that lets viewers opt to get more information about products -- and lets advertisers find out about viewers and their habits.

Other advertisers others also are sticking their toes in the water. Chrysler Group, a unit of DaimlerChrysler AG, is working with satellite broadcaster DirecTV Group Inc. to develop interactive commercials that will let viewers "click through" a traditional 30-second spot and go to a special screen where they can customize a car, schedule a test drive or order a brochure.

In such cities as Philadelphia and Atlanta, cable giant Comcast Corp. has added messages at the end of ads for products like Old Spice Red Zone body wash, Reebok athletic shoes and Cadillacs that instruct digital-cable subscribers where to go in Comcast's video-on-demand service to find more information.

For years, advertising and television industry executives have been predicting that new interactive technologies would transform TV commercials. No longer would businesses use commercials primarily to reach mass audiences with broad branding messages, promoters of interactive ads said. New technology would let viewers use TV ads to seek out information and even order specific products, much as consumers today use Web sites, they predicted.

Some believe that the stars now are aligning in the $60 billion-a-year TV-commercial business to make that change occur. The standard of the business, the 30-second spot, is becoming increasingly threatened by the growing popularity of video on demand and digital video recorders, like TiVo, that allow viewers to skip through traditional commercials when watching recorded shows. Industry experts predict that in five years half of TV will be watched this way, and that as many as 80% of the viewers who do so will fast-forward through most ads.

Initial results from some of the interactive campaigns are encouraging. A click-through ad for Mercedes, another DaimlerChrysler unit, run on EchoStar earlier this year generated 15,000 requests for more information from viewers in three weeks, four times the response rate expected, according to a person familiar with the matter.

Technology has advanced to the point that interactivity is possible on a massive scale. A few years ago, TiVo was alone in offering advertisers a way to offer long-form ads that viewers could access by clicking through a traditional commercial. Today both major satellite companies and most large cable operators, like Comcast and Time Warner Inc.'s cable division, are offering some form of interactive ads and are working to develop new ones.

DirecTV, in particular, has been expected to make a major push into interactive ads since Rupert Murdoch's News Corp. took control of it in late 2003. Mr. Murdoch's satellite-TV service in England, British Sky Broadcasting Group PLC, or BSkyB, is a world leader in interactive commercials, having run close to 600 campaigns since launching the service in 2000.

"All the cards are falling into place," says Eric Shanks, a DirecTV senior vice president. "Moving forward, we will be getting into much more immersive experiences for advertisers."

What's still not clear, though, is how quickly the TV industry will move into interactive commercials. At this point, while advertisers are pouring more than $7 billion a year into Internet advertising, they're only experimenting with interactive techniques on TV. Experts estimate that interactive commercials today account for less than 1% of all TV advertising spending.

Reebok International Ltd. is testing interactive ads to ensure the company is prepared when they go mainstream, says Marc Fireman, global director of interactive marketing. But he predicts that will happen in three to five years. "I don't see a big shift of dollars happening in the next year or so," he says.

Adoption of interactive commercials may run into some hurdles because the new medium upsets the traditional relationships among advertisers, ad agencies, TV networks and cable and satellite TV operators. Even at this early stage, that's causing no small amount of friction.

Programmers, for example, are concerned that viewers could stop watching their shows if they click through a commercial and get sidetracked examining, say, the latest BMW features. For the same reason, advertisers don't want their commercials to come after interactive ads that might divert viewers.

Operators are trying to be sensitive to these concerns. When a viewer clicks to an interactive ad on TiVo, the unit records the program he or she is watching. EchoStar runs its interactive commercials at the end of a commercial break so the ads before it get watched. "If anything tends to be affected, it is the programming," says Steve Caulk, EchoStar spokesman. "We try to make sure that other advertisers are not affected." Many EchoStar subscribers also have digital video recorders so they don't have to miss shows while they're checking out long-form ads.


Peter Grant, The Wall Street Journal. May 26, 2005

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