• by Joe Mandese  @mp_joemandese, June 11, 2008

After weeks of speculation, the cable industry officially anointed Madison Avenue media maven David Verklin as its paddler-in-chief of Canoe Ventures, an initiative to finally fulfill on the cable industry's promise of advance TV advertising capabilities. The initial reaction from the ad industry isn't exactly optimistic. Comparing Canoe to something more akin to a Chinese "dragon boat," a similar water craft in which the paddlers propel themselves forward by facing backwards, Magna Global Director of Industry Analysis Brian Wieser suggested the venture initially would receive a tepid response from major national advertisers.

Wieser who has previously estimated that the cable industry's advanced television advertising marketplace took in a mere $140 million during 2007, says the lackluster growth has been due to years of over-promising and under-delivery and a variety of fits and false-starts with cable's enhanced TV advertising infrastructure - spanning form Warner Amex's ill-fated Qube system in the 1970s to Time Warner's full-service network in the 1990s to a myriad of non-standardized interactive TV advertising platforms over the past couple of decades.

"Canoe was established in part to address these waning levels of interest, nominally due to difficulties in implementing advanced TV campaigns across meaningfully-sized geographic footprints," Wieser writes in a section of a new edition of Magna's On-Demand Quarterly report entitled "From Canoe To Dragon Boat."

"Today's largest advertisers are commonly expected to become dominant sponsors of advertising powered by Canoe," he noted, adding, "However, systemic changes in methods of assessing media effectiveness - necessary to address emerging media vehicles' fundamental differences in comparison to traditional media - are unlikely to become widespread in the near-term.

While Wieser projects that some of television's largest advertisers are likely to experiment with the kinds of features expected to be developed by Canoe, he says those efforts will remain largely "ad hoc" and that the "bulk of revenues supporting advanced TV applications may instead emerge from new large advertisers, along with the small enterprises who today drive the bulk of growth in online search."

The report is particularly damning coming on the heels of Verklin's announcement, because Wieser is a highly regarded analyst and forecaster, and because Magna represents some of the industry's biggest television advertisers.

"Factors beyond implementation may yet reveal themselves as obstacles to widespread adoption," his report continued. "Early indications suggest that most programming viewed on [video-on-demand] will not exceed single digit percentages of the viewership achieved when the same programming airs in a linear fashion."

Devoid of the kind of critical mass that is a primary factor for advertisers using television in the first place, Wieser said the larger advertisers likely will find it difficult to justify advanced TV advertising buys in their media plans.

"For better or worse, this is because reach and frequency - as proxies for broader branding/marketing objectives - are typically optimized against cost. As a result, problems will arise if higher CPM-equivalent pricing is expected for these sub-scale media, as long as incumbent alternatives continue to offer high levels of reach and frequency, which they will for many years to come," he cautioned.

While it's unclear which large consumer advertising categories might be first to embrace Canoe, he said Magna's research into advertising expenditure data from the Internal Revenue Service has projects the most likely market for the emerging TV advertising platform is the nation's smallest TV advertisers - companies with less than $10 million in assets, including the kind of start-ups likely to experiment with newer media.

"Their needs and capabilities are very different from large advertisers, and very fragmented," Wieser explained. "Online search took hold with this class of advertiser, because of self-service options and because any business could cheaply produce 'creative' assets. Additionally, given the small size of these organizations, they may be well-positioned to identify causes and effects of advertising while focusing on the absolute dollar cost of a media execution (rather than a CPM) given their more tightly constrained budgets and smaller organization sizes."

In the end, Wieser said time will tell how well the marketplace embraces Canoe and which advertisers are likely to benefit most from its applications, but "as long as the cable industry focuses on identifying its unique value proposition to distinct groups of advertisers - and sets an appropriate time horizon for meaningful success in order to manage internal expectations among cable operators and programmers alike - we expect to see evolutionary progress in the years ahead."