• by Laurie Sullivan  @lauriesullivan, August 15, 2007

Activated Content has developed audio watermarking technology through a new license agreement with Microsoft announced Wednesday. The technology lets advertisers connect with consumers on a variety of mobile devices and Internet protocol television (IPTV).

Audio watermarking plays an important role in tracking digital content or protecting media files from piracy, but Activated Content will offer the technology to advertisers that want to connect with consumers through broadcast, streaming or downloadable media. The watermarking technology developed by Microsoft's research lab lets Activated Content insert advertisements and promotions in digital audio content.

Software tools embedded in portable devices, such as Apple's iPhone or Palm's Treo, encode and extract the data embedded in audio files that run either on open source or Windows operating systems.

"It's like attaching metadata to a picture taken with a digital camera," says Louis Carbonneau, general manager for the Intellectual Property Licensing Group at Microsoft. "You can send the picture to your friends, and they can open and view it whether they have a Mac or PC."

The technology listens to the audio, recognizes the encoded watermark and directs the listener through a link to an advertisement or promotional offering without interrupting or disrupting the audio or video content in movies, videos or high-definition radio on mobile devices, laptops or IPTV.

"The technology works on any device with a smart chip in it," says Eric Silberstein, CEO at Activated Content, which supports companies like Sony Music and Universal.

Technology advancements made possible by a joint effort between Microsoft and Activated Content required developing a method to insert digital advertising links into audio files without affecting the size or the quality, or drawing too much juice from the battery as the file encodes and decodes.

But it's going to take more than technology to make this advertising model work. It could mean a cultural change that requires consumers to seek out the advertisement for more information or to buy a product or a service. Consumers in Japan would likely accept the technology today, while the U.S. lags about six months behind.

Evan Hill, Activated Content chief technology officer, says it's difficult to predict consumer behavior and timing on adoption, but there are some customers trying the technology. An early advertising model might let consumers purchase a song heard on the radio with a click of a button. Many of the details surrounding these advertising models are still being worked out.

Successful online and mobile advertising requires a disruptive technology--but not at the risk of creating consumer backlash, says Marissa Gluck, managing partner at Radar Research in Los Angeles.

"The problem with mobile ads is no one knows how to effectively deliver, price and measure it," she says. "There's high demand, and advertisers are willing to experiment because they've been using 30-second spots for about 50 years, but it's fraught with logistical complexities, such as the buying, the measuring and the optimization processes."