Carat's Exchange: Helping To Lead Digital Change

Three years after forming Carat Digital to incubate an interactive TV advertising marketplace, Carat is managing to do what some of the TV industry's biggest players haven't been able to in as many decades: Get necessary, sometimes competing players to break down walls, open up, work together and begin sharing their results publicly. To be sure, the interactive TV advertising marketplace still is nascent, and highly diffused, but Carat at least has managed to field some fruitful campaigns, and perhaps more importantly, has made them public via a series of its so-called Digital Exchange meetings, and has convinced others to do so as well.

That was clear during a one of the periodic Exchange meetings that took place this week in an overcapacity conference room at Carat's U.S. headquarters in New York, where scores of sweaty executives sat shoulder-to-shoulder and endured nearly three hours of presentations without air conditioning, or much if any elbow room. Most amazing of all, some of the executives in attendance were from rival media agencies that otherwise compete with Carat.

"It's fantastic," beamed Carat CEO David Verklin, scanning the room and observing, "The fact that other agencies will join in and are working together is what gets me really excited, because Carat can't do it alone. MindShare can't do it alone. OMD can't do it alone. Starcom can't do it alone."

Verklin is known for taking on seemingly unpopular causes, and in establishing Carat Digital and its Exchange meetings seems to have gone out on a limb that many in the industry have backed off of after decades of fits, false-starts and unfulfilled promises about a utopian advertising world that interactive TV would usher in. A world in which marketers engaged with consumers using the power of TV's sound, sight, motion and emotion to create greater returns on investment than have ever been seen. A world in which the brand building power of TV advertising is coupled seamlessly with the power of direct response and database marketing and more precision targeting that improves the medium for marketers and consumers alike.

Others have come back to this vision. The integration of Interpublic's Draft and FCB operations is premised on it. The integration of Interpublic's Futures Marketing Group also is. But after a series of noble, failed interactive TV test beds and the seeming inability of big TV players to work together, many agencies and marketers are now looking past television and on to the Web for their interactive video future.

That, in fact, was evident from some of the players presenting at this week's Exchange meeting, most of which included at least some Web component as part of their backchannel. The truth, according to Mitch Oscar, the executive vice president of Carat Digital and the impresario behind the Exchange meetings, is that TV and the Web are fusing and may ultimately become indistinguishable. The important thing, he adds, is that the resulting medium preserves the emotional power of conventional TV advertising.

"We hear at Carat think the 30-second commercial, worth $60 billion, isn't dead," he asserted. "We think of it as a portal. That's what's so important about these technologies, which will mix together and will be called video."

Put another way, Verklin said the real goal of the Exchange meetings was to develop an industry consensus that would help the next generation of television avoid some of the pitfalls that initially plagued the Internet.

"What we've tried to do with the exchange is to be a place that is bringing the marketplace together so that we can work as a family or a team to bring new technologies to market that are relevant to advertisers," he said.

"We didn't have that in the early days of the Web. What did we get with the Web? We got banners this big," he added holding a closely parted thumb and index finger for all to see, "and we got a CPM model."

To help cultivate TV's new interactive marketplace, Carat has been willing to do something most agencies historically have not: share. More importantly, it has gotten its clients to do so.

That was evident in the latest in a series of presentations Carat financial services client Chase made this week, revealing the most recent results of its interactive TV campaigns.

The findings, which were gleaned from various versions of interactive TV ads for the Chase Freedom Card utilizing satellite TV operator EchoStar's Dish network video-on-demand platform, have generated lots of data, but not necessarily a great deal of understanding about how best to use interactive TV, or how it works differently than conventional TV advertising.

But when Oscar revealed one particularly intriguing, but seemingly perplexing data point coming out of the campaign, Verklin drew on some traditional direct response television logic to explain it.

The data showed that the Chase ads airing in so-called "fringe" dayparts actually generated a higher ratio of interactivity from viewers than 30-second spots airing in prime-time.

"I don't know why," said a stymied Oscar, long one of the most knowledgeable of Madison Avenue's interactive TV pioneers.

But drawing on his knowledge of direct response, Verklin noted that there historically has been an "inverse correlation" between response rates and the relative engagement of the programming and or daypart. In other words, that viewers are more reluctant to tune out of top prime-time TV shows than from syndicated re-runs airing outside of prime-time.

"If you're a direct response advertiser, you love ["Gilligan's Island"], because you've seen it so many times that you don't feel like you're disrupting your viewing experience to go somewhere else," he explained.

It is just such insights Verklin and his team are hoping to glean from others, and that by assembling groups of experts from diverse and varied backgrounds on neutral ground, maybe, just maybe, some will step forward for the betterment of all.

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