• by Tim Avila , January 18, 2012

At CES in Las Vegas last week, connected TVs were the talk of the show. It seemed everyone was making an announcement – Yahoo rolled out new features and partners to its connected TV business, Panasonic partnered with Myspace to launch Myspace TV on the Viera Connect Smart TV platform, and Google announced that LG will join the list of companies supporting Google TV.

There is substantial consumer demand for streaming television content, evidenced by virtually every major TV manufacturer rolling out Web-connected TVs in the past year. Companies are placing bets on connected TV for good reason. NPD DisplaySearch predicts that connected TV shipments will account for 47% of all flat-panel TVs in 2015.

Connected TV is still in its infancy, but its digital marketing potential is huge. Millions of videos that were previously only accessible online are now available to consumers via their TVs.  Online video to date has been focused on “snacking,” but the living room consumer has more time for longer-form content and the substantial ad inventory that accompanies it.  It’s not hard to imagine literally thousands of “channels” of professional and “prosumer” niche content.  

While the promise of this is exciting, it also feels very familiar. We’re cresting the peak of inflated expectations.  Brace yourselves for another ride on the hype cycle for the video ad business.  Despite the potential that connected TV holds, 2012 will not be the year that connected TV changes video advertising.  Three basic impediments will prevent this:

Connectivity: Broadband Internet connections power online video consumption. As of 2011, U.S. broadband Internet penetration had reached approximately 68% of U.S. households according to a February 2011 US Department of Commerce report.  More importantly, of the seven in 10 households with broadband Internet access, only a small fraction have devices that enable simple integrated Web video access. 

Technology: It’s clear from CES that television makers and set-top-box manufacturers are competing for control of how users access the Web.  As of now, there’s no clear platform winner with the scale to make reaching audiences with technology economically attractive.  

Content: To date, the vast majority of video content streamed on connected devices has been via paid services such as iTunes and Netflix.  While there is a huge opportunity for ad-supported content and the variety it will bring to consumers, the connected TV user experience, ad infrastructure and advertiser demand are not yet in place to make it a reality this year.

It’s clear that over the next few years this will become a new and important communication channel for marketers.  Ad exchanges and networks are already exploring ways of aggregating substantial inventory for advertisers.  Savvy marketers and agencies are looking for ways to test this emerging opportunity and learn more.  The industry is rapidly advancing, and once connected TV achieves its full potential, there will be amazing opportunities for marketers to reach their audiences in unique, immersive and hyper-targeted ways.