YOU may be forgiven for thinking that interactive advertising died a death, along with the worst extravagences of the dotcom boom. In the midst of the biggest downturn in advertising for decades, media companies have stopped talking about it just as they have abandoned the idea that TV viewers will use the box to buy their favourite actor's clothing and check their bank balance.
So, it was something of a surprise when Universal McCann announced recently that it plans to work with US cable company Cox Communications to develop new forms of advertising, designed for the emerging era of on-demand TV. The idea is that Universal McCann's clients will develop long ads, known as "advertainment", that viewers must watch in order to get free access when they want it to TV
programmes including The Sopranos and Sex and The City as well as Hollywood films.
In return, advertisers get a harder hit and a more accurate profile of viewers and their preferences for more targeted advertising. Coca-Cola and Sony's Epic Records have signed up for the service, called FreeZone, which will be launched in San Diego next month. So have a number of local advertisers. Cox will charge on the basis of click-throughs and take a fee for business generated through its network.
This is, of course, dependent on digital video recording technology being in place in one form or another so that viewers can call up, fast forward and replay programmes held in a digital archive either on their set-top boxes or on the broadcaster's network.
The problem with interactive advertising at the moment is that it is prohibitively expensive to make. Technology used by one digital TV network doesn't work with that of another in most cases. In the UK, Sky Digital, cable and the digital terrestrial network formerly run by ITV are all incompatible. Which means advertisers would be obliged to write the same interactive ad from scratch three times to reach a big enough audience. Ironically, only the publicly-funded BBC, which is supposed to be an ad-free zone, has the funds to recreate interactive services that many times, which is why it has done more than almost any other TV network in the world with interactive services.
In the US, however, it's a different game. Cable and satellite networks are putting serious money into building video-on-demand services because they have discovered that simply adding more channels to their digital services is not enough to keep viewers interested.
But where viewers have been persuaded to pay a fee to watch what they want, when they want, they like it. Networks have seen churn fall by 40% in some cases and average monthly revenues from each home rise. Time Warner offers VOD services to 42% of its four million digital cable subscriber base. And TiVo claims that in homes equipped with one of its PVR boxes, 70% of TV viewing is done from the PVR, not from live broadcasts.
So Cox and Universal McCann believe the time is right, at least in the US, to ride the gathering momentum behind VOD with interactive advertising. Their deal appears to presage a new level of cooperation between advertisers and network operators.It will take a long time before PVRs are a mass-market item. Market research estimates that PVRs will be in about 1.5 million US TV homes by the end of 2002 and in 46 million by 2007.
But even with only 10% to 20% of TV households are equipped, that would still force some big changes on the broadcast and advertising industries.