WebTV to run online ads

WebTV harnesses "the power of the Internet to make watching television more involving, even inspirational," according to the company. Now it also includes commercial advertisements, just like TV.

Starting this week, the company will begin running online commercials, a move that has angered some WebTV users. Subscribers already see banner ads on Web sites that they access via the network, but the new ads--from the likes of General Motors, Honda, and AT&T--will appear as subscribers log onto WebTV, as well as during page downloads. Some include full-motion video.

"This month, WebTV is beginning to 'spam' its subscribers with intrusive, nonavoidable ads," said one user in an email to CNET's NEWS.COM. "[Microsoft CEO] Bill Gates has now commercialized WebTV and many are unhappy about it, myself included. I might desubscribe."

The commercials, in beta for about a month, are a hot topic in the WebTV users' newsgroup.

The company denies that Microsoft, which bought WebTV for $425 million in April, had anything to do with advertising strategy. "It has been in the works for a long time," Joe Poletto, vice president of sales for WebTV, said today.

"I think people generally understand that if we're going to continue to give them the service we do now, as well as free upgrades," then the ads are necessary, he added.

WebTV, with 150,000 subscribers, has come to symbolize the much-hyped convergence of TVs and PCs, but it has yet to prove itself as a moneymaker. The ad revenue will augment revenues received from licensing deals and Internet access charges.

"We're really concerned about the user's experience," Poletto said. He emphasized that the ads do not delay connections or download times for subscribers. Not all users will see the ads, either, depending on the ISP they use or whether they use a "message watch" feature that automatically checks email.

The goal is that users will find the commercials useful, he noted, adding that no users have complained to him about the policy. In its terms, WebTV also warns users that the ads are a possibility, according to Poletto.

The ads include the following:

Video spots, which feature 15-second full-motion broadcasts when users log on to the network.

Surf spots, which occur during downloads of some pages.

Topical spots, which include the sponsorship of a category page, such as money, sports, or travel. For example, a Charles Schwab ad might appear on the financial category page.

Such ads are becoming more common. Last month, for example, Prodigy tested full-screen ads for Honda, also upsetting some of its subscribers.

Last month, WebTV rolled out an upgrade with a suggested retail price of $299, plus $19.95 a month for Net access. The upgrade includes a 1.1GB hard disk for local multimedia storage, the capability to print directly from the TV screen, and picture-in-picture capability.

Earlier this week, Microsoft said it will write off $300 million in the current quarter for research and development related to its buyout of WebTV.