At OMMA Behavioral in July, former TACODA Chairman Dave Morgan advised the industry he helped proselytize, if not invent, that the next frontier for behavioral tracking was the living room.  Addressable TV promises to bring Internet-like interactivity and marketing accountability to the set top box.

As cable, telco, and satellite providers all start migrating TV delivery to IP-based systems, we can imagine an infrastructure where individual TV screens can be tracked and segmented in much the way Web traffic is today.

But what is the status of these interactive TV technologies? The undisputed guru of ITV is Mitch Oscar, executive vice president, Televisual Applications, MPG. For years at Carat, and now at MPG, Oscar is renowned for his research into bleeding edge ITV platforms and consulting work on many systems. On occasion, he gathers nascent technologies for presentation to gatherings of agency professionals and the press. In a lengthy discussion with us recently, he walked through the history of interactive TV technologies, the state of the model, and the hurdles he sees to moving forward with the platform. In this first part of the interview, Oscar outlines the major players and some interesting learnings from early trials. Next week he explores the kinds of targeting possible in addressable TV and the limits of behavioral tracking on the platform.

Behavioral Insider: Interactive TV and addressable set top boxes seem to be a technology that has been promised for a long time, with a lot of fits and starts. How has it evolved?

Mitch Oscar: It's never been linear. But every time a technology gets launched, whether it succeeds or fails, we learn something from it. WINK was one of the most notable failures. It went to about 8 or 9 million homes through DirecTV. While people watched, a banner ad would come up with which they could interact. Do you want a coupon, someone to call you, or do a study, etc.? So we have a lot of companies now that are attempting things in the particular addressable environment. There is Invidi Technologies, Navic, Visible World, and OpenTV. Each is at a different phase and has different applications.

Visible World is involved in a trial with CableVision in Brooklyn. Invidi is with Comcast in Baltimore. OpenTV had done a Comcast in Huntsville. Those companies are addressable with video. So there is no interactivity. The consumer doesn't know that somehow they are being targeted. They just know they are getting commercials and it is regular TV viewing.

Then there is Navic, which doesn't work with video but works with an overlay. You watch a commercial, and a banner may come up and ask, do you want to know more information or get a coupon or a call? You click on it and there is either a response or a micro-site. And that is addressable to about 10 million homes right now. And those are the two models we see moving forward right now. Hopefully, they will intermingle at some point where you can have a video commercial and interactive elements attached to it. I also think EchoStar does an iAd application that is at least in five million homes.

BI: On a logistical level, can any of these applications just be layered onto existing set top boxes, or do they require new technologies installed?

Oscar: They require injection. It's about middleware. None of these is built into the set top box but does have to be in the future. Right now it is root canal. Historically with cable, there is a bunch of legacy boxes from 10,000  systems. So although there are six major operators there was once 10,000 individual systems, each with a different box and different middleware.

Uniformity of cost is one problem. The second is bandwidth. How much can you put into a box, and what can it tolerate? The third is your own cost and bandwidth. The fourth is, how much is it worth? If I invest in all of this, then what kind of premiums will advertisers pay?

BI: Will they? Do we have any insight yet about whether the added functionality will benefit marketers?

Oscar: Unfortunately in our business the operators want the advertisers to invest by purchasing at premium cost and they can't give us leadership as to what might happen. They can tell us what the technology can do, but they can't give us guidance as to the experience. With the Navic or overlay technology a banner or overlay will come up over the commercial as it begins to play. We did one experiment and we had to wait 10  seconds in a 30-second commercial before we introduced the banner. With the creative in the commercial it just didn't fit anyplace. We found that we got a response rate of 33% less because we lost those 10 seconds. Now, someone should be able to tell me that.

BI: Are you seeing initial results from response rates involving frequency and the context of the ads?

Oscar: One example involved TiVo. When you do a campaign for TiVo you generally buy one week at a time. We discovered that if you buy two weeks and use the same creative, there is really very little deliverable in the second week. With the Navic technology we just finished an experiment in a four-week campaign. After the first two weeks of running a schedule the number of responses decreased dramatically. We also learned that for interactivity, even when you are targeting, news programming doesn't seem to do well in terms of responses. It doesn't mean that news programming is wrong for a campaign. If someone saw enough branded commercials maybe they will be interactive on another one [elsewhere].

BI: Have you run into any privacy issues with these systems yet?

Oscar: There is also something called the double opt-in. Cable satellite, and telcos are very concerned about privacy. There is a 1984 privacy act that says if you violate a consumer's privacy then there is a $500 a day fine per set top box. So they want to be very careful. We did one experiment for Hyundai asking if viewers wanted a dealer to call. After the person clicked on yes then there was another banner that said please confirm that you did say yes. We lost 75% of the people who clicked on the first one. So the question was, I know we are concerned about privacy, but do we really want to lose 75% of our interaction because of this? What could we do? All these things the cable industry and telcos should be experimenting with and coming to the advertiser to say these are things we discovered. When you advertise with us, here is some guidance for you. They really haven't done that. So that is also holding it up.