One of the most talked-about commercials this year never appeared on regular television. It was available for voluntary viewing on, of all places, hotel pay-per-view networks. The 10-minute video promoted Virgin Atlantic's new first-class flat-bed seats and salaciously (though cleanly) parodied an adult film with "Austin Powers"-like humor. In six months, more than 1.2 million hotel guests clicked on their remote controls and sat through an average of seven minutes. Did we mention the commercial was about an airline seat? Virgin Atlantic was thrilled, of course, but not just with the response to the ad. "We actually thought the brilliance of the idea was the placement," says Virgin Atlantic VP Chris Rossi. "We want to put our message where business travelers are spending their time."
There's lots of hand-wringing on Madison Avenue these days. Companies like Virgin Atlantic are concluding that advertising on TV is too pricey and the effects too difficult to measure. They're also eying the inexorable advance of technology with trepidation. Digital video recorders like TiVo, video-on-demand services and Internet broadband allow consumers to skip the hallowed 30-second spot like a crack in the sidewalk. The industry must adapt to a coming world where consumers enjoy total control and will no longer tolerate tedious commercials that hold them hostage to messages they care nothing about. "The consumer is increasingly in the driver's seat in all forms of media, and TV is no exception," says Tim Hanlon, vice president of the Starcom MediaVest Group. "There are still a lot of people in the business that don't accept what is about to happen. That is myopic."
Perhaps it's time for the TV industry to get contact lenses, because the latest research suggests that trouble lies ahead. Although only 5 percent of households own DVRs, the number is expected to grow rapidly; most ominous, 70 percent of DVR owners skip the ads. Meanwhile, the average wired consumer now spends more time fiddling with the Internet at work and home than watching TV. Accordingly, the top 50 advertisers are slowly scaling back TV spending in their ad budgets, to 54.9 percent last year from 55.5 percent in 2001, even while overall advertising revenues rose in that time period, according to a study by TNS Media Intelligence. These trends have provoked a flurry of self-examination at ad agencies. Last month a long essay called "The Chaos Scenario" in the trade publication Ad Age worried that the industry might not be prepared for the collapse of the old advertising model. And a book to be published next month, "Life After the 30-Second Spot," surveys the formats that might replace the industry's workhorse. Says author Joseph Jaffe, "Unfortunately, nothing in this industry has changed except consumers, who don't take commercials at face value anymore."
The broadcast TV networks aren't exactly watching idly while their $42 billion in ad revenue dwindles. CBS, for example, is exploring video-on-demand and tailoring programs for cell phones. "You might see the rise of 15-minute shows," says Larry Kramer, head of digital media for CBS. But some of the network's solutions may be doing more damage than good. Commercials in prime time are now more expensive and more obtrusive than ever—18 minutes per hour in the most popular prime-time shows, versus 13 minutes back in 1992. Reality TV, as those who swear by it know, is now clogged with product placements, some subtle and clever but others unbearably clunky. Despite (or maybe because of) these strategies, marketing dollars are slowly fleeing from TV to outdoor ads and into the rising online ad networks of Google and Yahoo.
No one is giving up television advertising for dead quite yet. But even while they argue that the 30-second, mass-targeted commercial will never truly go away, broadcasters are experimenting with ways of replacing or complementing them. One curious strategy involves ads that are actually longer than 30 seconds. A few years ago, BMW started putting on its Web site short videos filmed by notable Hollywood directors and featuring BMW cars. Millions of users downloaded the stylish spots, proving that longer formats can give advertisers more leeway to tell compelling stories, as opposed to just shouting trivial corporate slogans.
Now advertising innovators are tailoring that idea for the TV. Advertisers working with TiVo can send long ads to a consumer's set-top box, then try to entice viewers to watch them. For example, during Disney's live spots about the anniversary celebrations at its theme parks, TiVo users see an icon inviting them to click on the remote to watch the longer clip for a chance to win a free vacation.
The coming wave of interactive TV is also bringing new advertising opportunities. In a trial over the past year, Time Warner Cable in Hawaii allowed consumers to use their remotes to play along with game shows, look up news headlines and interact with commercials. The Game Show Network, for example, let its Hawaiian viewers compete along with contestants and other audience members in programs like "World Series of Blackjack." During the commercials, viewers could add to their scores by answering questions related to the ad, such as choosing their favorite meal at Burger King. It sounds like a transparent, easily ignored ploy, right? Game Show Network exec John Roberts says that 85 percent of viewers interacted with the commercials when they could have skipped right by them. "We're TiVo-proof," he brags.
Advertising insiders concede that these new formats will not deliver the massive audiences of prime-time network TV. So they theorize that most companies will soon target multiple, smaller pools of consumers—on TV, on the Web, over cell phones and, yes, even in hotel rooms. The key will be finding audiences that are interested in the product to begin with—say, someone who is shopping for a new car and wouldn't mind seeing the latest GM SUV mount a staged assault on a mountaintop. Fulfilling this vision will require significant changes in the ad industry. Media research—how advertisers measure what people watch and how they respond to ads—will have to get considerably savvier about gauging media consumption habits. Creative ad teams will have to make better ads that people are actually interested in watching. If all this occurs, in a decade or so, when everything about TV has changed, we'll undoubtedly miss all the old advertising tropes we grew up with. But a vibrant, smarter ad industry that continues to subsidize good programming is better than having no commercials at all and seeing every channel turn into pay-per-view. Nine out of 10 dentists agree.
Brad Stone, Newsweek.
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