• by December 12, 2000

Excite News carried a recent Reuters report that shows that major advertisers are using the power of interactive TV to target finely-tuned audiences. New technology, however, such as personal video recorders, also enables viewers to skip commercials. But from an advertisers' perspective iTV, can provide vital information about consumer preferences.

As a mass market medium that reaches millions of viewers, advertisers have traditionally never been sure whether consumers are watching ads or going to the kitchen or bathroom. As a result, the primary goal of an advertisement has been to blitz viewers with a message and build brand awareness. But iTV changes that model and makes the TV a direct marketing tool to target specific consumer groups.

Forrester research estimates that the traditional commercial model provides TV networks with some $75 billion a year -- a figure which is expected to peak at $86 billion by 2003 -- while new forms of advertising could generate $17 billion in new revenues by 2005. "The economics are such that the contact -- the name of the consumer -- is worth 100 times as much as a general impression," said Josh Bernoff, principal analyst with Forrester.

For major networks in the United States, widespread iTV is probably more than five years away, as cable, satellite and broadcast TV operators upgrade systems to handle the prerequisite digital signals. But the market is growing rapidly. Forrester expects about 4.9 million U.S. homes to have interactive video by the end of 2000, rising to 12.2 million in 2001 and 65.2 million in 2005.

As the market grows, TV networks are expected to be paid by advertisers on the basis of the number of customer contacts made when ads air. At a later stage, they will share in any t-commerce sales generated from a specific ad.

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