• by May 11, 2001

Richard Williamson, in a recently released article in Interactive Week, writes about new rules for interactivity and convergence. He points out that, at a time when many businesses are just beginning to recognize the need for coordinated online strategies, the Internet revolution is moving to television, forcing companies to adopt strategies for a medium that merges advertising, entertainment and electronic commerce into a single platform.

This new interactive arena is built around "walled gardens," pay-to-play marketplaces that control an audience's access to content. The goal is to keep the viewer on your channel and/or your sponsor's Web site, away from the boundless Internet flea market. A walled garden might be the first screen you see when you turn on your TV. From there, navigation is highly controlled and destinations are largely limited to paying partners.

Many believe the time is ripe for companies to make the deals necessary to move at least a portion of their e-commerce platforms to this next level. "Any company spending $10 million or more on TV advertising should invest now in building interactivity, turning impression-based ads into lead generators," Bernoff of Forrester Research said. "Interactivity will cost far less per lead than telemarketing or direct mail.

Gartner Group predicts TV portals will generate $4 billion in revenue by 2004 from advertising, subscriptions and commissions on TV commerce sales. Sales of goods and services alone will account for $10.7 million, said Mark Snowden, senior analyst for Gartner's e-business services.

"As two-way digital cable plant upgrades continue, as services are introduced in more areas and as TV viewers become more accustomed to interacting with their TV, we expect TV portal revenue will double the 2004 level by 2007," Snowden said

Jupiter Media Metrix predicts that households signed up for iTV services will grow at an annual rate of 83 percent through 2005. By next year, 17 percent of the U.S. TV viewers are expected to adopt iTV services, a critical mass for this technology, said Jupiter analyst Lydia Loizides.

"The average household watches TV 50 hours a week, seven times the duration of typical Internet usage," Bernoff said. "Interactive TV could dwarf the Net as a response-based medium." And, in a technology downturn, cable has proven virtually recessionproof. Homeowners are unwilling to sever their entertainment lifelines.

But, as the Internet invades TV, viewers will be able to dodge ads. Devices like the personal video recorder already enable viewers to scoot past ads. "The result," said Josh Bernoff, principal analyst at Forrester Research, has been "a 30 percent decline in viewing of commercials, leading to the loss of $18 billion in traditional ad revenue."

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