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Convergence: It's Becoming a Brave New World

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Imagine a world where video, photography, text and music are all available from any device that can connect to the Internet at any time. Whether you're using your computer, iPod, television or mobile phone, you will have the information you need and the diversion you want.

In this new world, you never have to read those free daily papers again. Instead, while you wait in the airport lounge, the school carpool lane or even the supermarket checkout, you can use handheld devices to catch up on your favorite soap opera, comment on a blog or review your brother-in-law's list of favorite tunes as you choose some new music.

Such a fantasy world is closer than you think. In the next few years, we will be moving toward a convergence of many types of content and communications media.

There are several big trends that together will have a massive impact on how consumers interact with content and spend their "online time":

  • The number of digital-cable households is expected to swell 48 percent, to 42 million, by 2008, according to Kagan Research. This hardware will give us an opportunity to add all kinds of new technological bells and whistles, enabling more sophisticated applications.

  • Cable operators such as Comcast and Echostar, satellite companies, and DVRs are also putting hardware into homes that enables two-way communication, allowing viewers to respond to requests from content providers.

  • Although standards for transmission are not yet nailed down, wireless networks already offer reasonable two-way delivery of huge quantities of information—from photos to movies.

  • Sharing of content and one-click purchases have become part of mass culture. From iPods to blogs to photos, we want to buy stuff and share information with friends.

  • The visual and audio quality of mobile phones is skyrocketing—allowing for a future of watching video content and storing photos in these tiny devices. "It's a brave new world," says Dietrich Ulmer in a recent article in Forbes (6/6/05). Ulmer is chief executive of Siemens AG's mobile venture arm, which has seeded $26 million in a dozen mobile software outfits and plans to bet $100 million in total. "It feels like 1995 and the emergence of the Internet. We don't see any limitations to innovation."

  • Software for developing and deploying content across all of these devices is becoming highly sophisticated and extremely easy to use.

Consumers are interacting with content in new ways—TiVo-ing only the programs they want to watch, skipping ads, selecting favorite songs instead of buying the whole CD, doing their market research and shopping simultaneously, voting on television programs, snapping photos on their phone and sharing them online, etc.


What is all this going to mean for us marketers? Advertising has to change to meet the changing expectations and requirements of consumers. Some key rules:

  • Ads need to be targeted. Google figured out how to do this with AdWords, leaping over the whole system of banner ads in a single bound. Whoever figures out the new paradigm for television advertising will win.

  • Ads can be longer and deeper. If a consumer does choose to watch an ad, chances are she is ready to buy—and the ad can be less entertaining, more informative. For example, in an ad for a digital camera, you can look at different views of the camera, see funny movies created with the camera, see pricing and even request a discount coupon to be mailed to your home.

  • Smart brands will be able to build awareness and loyalty through innovative promotions. Games, interactive contests and sweepstakes will seamlessly blend programming and advertising. For example, a network and an advertiser, say Coke, could do a promotion where home viewers clicked every time they saw a character on the network drinking a Coke, to be entered into a sweepstakes.

  • As blogging and video converge, there will be a proliferation of highly customized and personal content. To the extent that this content can be interactive, it will be more relevant to viewers. These bloggers may become the owners of the most valuable advertising real-estate with their customized and loyal audiences.

We also need to remember that it may be a while before all the players in this ecosystem coordinate enough to make this vision a reality. In the meantime, one of the biggest questions is whether television itself will become truly interactive.

To a certain extent, it already is—we digitally record our favorite shows and then watch them when we want to, skipping the commercials. We can watch pay-per-view movies, sometimes on demand. But for at least 10 years pundits have been promising truly interactive television—being able to choose your own angles for watching sports, vote Idol-style, instantly purchase items on shopping channels without picking up the phone, even place bets on everything from roulette to horse races.

The hardware is already available in some TVs in America. A small percentage of US homes now has some type of set-top box or other means of transmitting communications from homes back to the operators.

In other parts of the world (like Britain with BSkyB), interactive applications are already reasonably common. The software for creating and deploying the content is available here through vendors such as EnseQuence and Emuse Technologies. (Both have already partnered with some key operators.) And the vanguard of advertisers is investing cautiously in tests of interactive advertising—big companies such as HP, Daimler Chrysler, and Sony Corp (with its launch of XXX-State of the Union). Even some networks are dabbling in iTV, with a notable announcement by the soon-to-launch network Casino and Gaming Television (CGTV).

There are a few big challenges, though.

First, do consumers really want to interact with their TVs in ways that go beyond choosing programming, changing channels and skipping commercials? I talked to experts with experience working at WebTV, TiVo and OpenTV and heard a resounding no for anything not directly related to managing what programs people want to watch.

All of their data indicates that people are comfortable interacting with certain devices, like phones and computers, but not with television. WebTV's initial product—the set-top box that connected televisions to the Internet—did not grow past a niche market, perhaps because of the rise of inexpensive PCs.

My personal theory, however, is that consumers will interact if they get enough value—the value provided so far hasn't been worthwhile. After all, do we really want the ability to drill down on advertising? And how long will we find control of camera angles a compelling feature?

Advertisers, content providers and operators are hard at work to identify compelling applications that will appeal to viewers—both the new generation of savvy users of electronic devices who expect a truly interactive experience and the old folks like me who are used to a more passive relationship with television. Maybe if someone wants to invest in an application that helps me find better programming, I'd be interested. But I'm not sure what that company's incentive would be.

A second challenge is figuring out the economics. According to a Wall Street Journal article of May 26, there is a battle underway between networks and the cable operators about who cuts the deal with the advertisers. Right now, the cable operators are winning, and the advertisers are going direct to the EchoStars and DirectTVs, bypassing their historical partners. But they risk losing their viewers to Internet content if they integrate too seamlessly with Web sites. In other words, the battle is just getting started.

How are things going to shake out in the end? Will we have computers with movies downloaded onto them or TVs with Internet hookups and browsers? Which devices will win the coveted space in our living rooms—and which vendors will own those devices?

Such questions remain unanswered. But all of this is good news for marketers. There are an increasing number of ways to reach our consumers, and more information on how they like to research purchases, and execute transactions.

If we read the data carefully, and listen to the consumers, we have an unprecedented opportunity for truly two-way communication—and this brave new world could be here within the next five years!


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Robbie Kellman Baxter is president of consulting firm Peninsula Strategies (www.peninsulastrategies.com).

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