April 26, 2004 12:21 PM PDT

Advertisers face up to TiVo reality

A majority of national advertisers plan to cut spending on TV commercials by 20 percent in the next five years, when they believe that ad-skipping devices like TiVo will take hold in households, according to a new survey.

The Web is at the top of many advertisers' lists for a replacement medium, according to a survey Cambridge, Mass.-based Forrester Research released Monday.

The premise of the report is that digital video recorders (DVRs) like TiVo that let TV viewers record programming and skip over commercials easily, will be in 30 million homes within the next five years, up from an estimated 3 million today. That has national advertisers considering their options, given the expectation that DVRs will undermine the potency of commercials. It also has them resigned to spending more on advertising in the future, only to reach fewer people.

At least three-fourths of the 55 national advertisers Forrester surveyed said they will cut spending on commercials as a result. Of those, 63 percent plan to reduce spending by 20 percent or more. A majority said they will first scale back national cable ads, followed by national network ads, local spots and local cable ads.

More than 90 percent of advertisers also want new measurements for advertising ratings and program viewing. They say the TV industry will need to report audience measurements outside classical benchmarks like "reach" (for number of people reached) and "frequency" (for how often they see an ad).

Advertisers called on TV programmers to work with device manufacturers and cable companies on DVR features that can help spur innovation and measurement in the marketplace, the report found. Three-fourths of advertisers also believe that they will have to begin creating content and programming to invigorate their brand campaigns.

In addition, advertisers plan to shift their money to other media. Nearly half of advertisers said they will transfer dollars to other traditional media, including magazines and radio, in which ads aren't as easily skipped.

Three-fourths of advertisers surveyed said they will boost budgets for the Internet, including banner ads and rich-media spots. Fifty-three percent said they will invest in search engine marketing, which lets advertisers track and measure the effectiveness of their campaigns.

A majority of national advertisers expect other forms of TV ads to evolve and become more effective than the status quo, according to the report. Targeted TV advertising to specific households is on the horizon, too, drawing interest from at least half of those surveyed. DVRs are ultimately designed to make it easier to track people's interests and demographics for targeted advertising. A handful of advertisers say they would pay a premium for those capabilities.

"Thirty-second spots will become increasingly easy to skip--it's time to get creative," Forrester analyst Josh Bernoff said in the report. He advised advertisers to vary the timing of commercials, to adopt interactive TV ads and to develop new formats, such as "screen badges."

Forrester's survey followed a report it conducted two years ago, posing many of the same questions to advertisers. The research was done in concert with the Association of National Advertisers.

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DVRs could enable new ways of advertising
A DVR is a computer (usually linux based). This computer can run a webserver and deliver it's content over a wireless LAN in the home. Laptops with wireless adapters are already commonplace.
DVRs (or any digital cable box) could transmit a stream of web content which is synchronized with the TV program content. This content would contain useful details about the TV program, and you could embed advertizing in this web content.
The response to such advertizing is automatically very easy to measure.

Eventually lots of advertizing could move out of the actual TV program and into such a synchronized stream of web content.
Perhaps the technology would be RSS which is becoming very popular now.

I've written about this on
<a class="jive-link-external" href="http://geocities.com/karlsson/link_programming.html" target="_newWindow">http://geocities.com/karlsson/link_programming.html</a>

Gudmundur
<a class="jive-link-external" href="http://geocities.com/karlsson/" target="_newWindow">http://geocities.com/karlsson/</a>
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