From 2017 to 2020, the iTV and addressable advertising business promises to be the single most explosive growth category in the television and advertising industry.
With the recent and not-so-sudden collapse of Canoe Ventures, industry pundits and executives are questioning the future of interactive and addressable television advertising. My conclusion is that this is a wake-up call for the industry and will be a spur for expansion and growth. In my annual Advertising and Marketing Data and Forecasts, I project steady growth for iTV and addressable advertising for the next half-decade, followed by "hockey stick" acceleration through the end of the decade as advanced set-top boxes are fully deployed; as applications become readily available across multiple platforms; as control over and monetization of usage data is defined; and as both distributors and networks, as well as marketers, have well-defined economic incentives.
|Jack Myers Media Business Report|
|Jack Myers Media, Advertising and Marketing Data & Forecasts|
|2010 - 2020|
|INTERACTIVE TELEVISION ADVERTISING REVENUES|
|Source: Jack Myers Media, Advertising and Marketing Data & Forecasts 2010-2020|
Two weeks ago, Canoe, formed in 2008 by the six largest U.S. cable operators (Comcast, Time Warner Cable, Cox Communications, Charter Communications, Cablevision Systems and Bright House Networks) closed its New York office and laid off 120 employees, including CEO Kathy Timko -- leaving about 30 employees in Denver to focus on VOD ads as its sole product. After three years of testing and development, plus the investment of several hundred million dollars, Canoe had enabled the delivery of interactive TV ads to more than 25 million cable homes nationwide across eight cable networks: AMC, Bravo, Discovery, E! History, G4, Style and USA Network.
Newly appointed Canoe Ventures CEO Joel Hassell, formerly the company's CTO, said:
"Cable's ITV business will continue through the ad sales teams and video business units at the individual MSOs, as they pursue business opportunities with these capabilities within their own footprints." It's a smart move for the industry.
Last June, Jack Myers Media Business Report, in a report on Canoe's lack of progress,advised readers: "The key question confronting the industry during the next several months is whether Canoe Ventures will be the organization designated to lead [iTV and addressable advertising] growth through this decade. " I questioned the "sincerity of the cable industry's commitment," and suggested that while generating significant publicity, Canoe has failed to achieve the ambitious goals outlined early in the company's development.
But, as spelled out by former Canoe CEO David Verklin,
"If you are in a business that is growing in low single digits, you want to pay attention to advanced TV, which is one of few growth opportunities out there. Selling linear 30-second commercials without advances is a recipe for serious challenge on Wall Street and Madison Avenue. The linear: 30 has to evolve on TV."
Criticisms of Canoe's advertising platform included:
- it was too expensive as an incremental add-on to existing advertising campaigns;
- the audience footprint now and into the foreseeable future did not represent a scalable business;
- TV salespeople are not the best advocates for ITV nor are they trained in the skills required to adequately represent and manage ITV campaigns;
- Agency TV buyers are not the appropriate targets for advancing arguments for ITV campaigns to corporate chief marketing officers and brand managers, who often must be engaged and involved in the decision to approve ITV.
While the shut-down of Canoe is a PR black mark for the cable industry, it is just one in a long line of failed cable industry initiatives to advance interactivity, beginning with Warner Communications' QUBE in the 1970s and Time Warner's Full Service Network, both of which failed to meet even the most conservative business goals although technologically they exceeded many current ITV achievements.
While Canoe was the largest collaborative infrastructure ever attempted by the U.S. cable industry, the focus on interactive development requires a clear economic incentive for cable operators, which Canoe did not provide. Advanced set-top box applications will become more universally deployed, as they are in Cablevision systems. Marketers will shift larger shares of their ad spending to digital opportunities that deliver a targeted two-way communications path. Cable distributors and TV networks, led by Comcast/NBCU, will have the economic incentive to make interactivity and addressability a priority. Similarly, advanced technology will enable large media agencies to structure arbitrage-based economics that assure profitable addressable advertising models.
In the next 24-months the battle for control of set-top box data will be resolved. While Google is reported to be selling the Motorola set-top box business they recently acquired, it's more likely they will seek to advance their Google TV platform and data-usage right through deals with cable and satellite operators, dramatically ramping-up addressable TV activity. Whether it's mined by Google, Accenture, Cisco or any one of several companies, set-top box data is treasure waiting to be tapped.
Last June, Verklin, just weeks away from announcing his resignation from Canoe, commented, "We need to ignite the market and it is a challenge. Our final piece is marketplace ignition." Ironically, the departure of Canoe from the iTV and addressable advertising business may be the spark that finally ignites the fire.
This next two-year period will be one of turmoil, disruption and debate in the iTV and addressable advertising business, followed by 36-months of organizational focus and accelerated growth. From 2017 to 2020, the iTV and addressable advertising business promises to be the single most explosive growth category in the television and advertising industry.
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