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September 08, 2004

Tivo and Advertising

Alex at Tivoblog.com, one of our favorite websites, dug up some research from Forrester Research that suggests that Tivo users skip past 92% of the commercials while they are watching recorded programming. While some advertisers might see Tivo as a threat, here is why I think they are wrong.

First, my own experience with Tivo is that we actually watch more broadcast television since we hooked up our Tivo. With small children, I wouldn't say that the number of total television viewing hours has changed, but rather the number of video rentals has gone down and the amount of broadcast programming has gone up. That's a bad thing for Blockbuster, but a good thing for Budweiser.

Second, channel surfing has basically been eliminated in our household. I would argue that much of our viewing time was basically sifting through the channel line-up to find something that we both found interesting. When we settled on one show, we'd still likely channel surf between commercials. This not only reduces the number of commercials we viewed, but also the likelihood that the bits of commercials we did see did not fit in the demographic that the commercial had originally been targeted. For example, we may have been watching 60 Minutes but as soon as there was a commercial break, we'd flip through other channels and possibly see bits of ads from Cartoon Network or MTV, targeted commercials that don't appeal to the 60 Minutes viewer.

With Tivo or another PVR, you have to watch the ads to fast-forward past them. That obviously is not ideal for advertisers, but in the game of brand recognition, flashes of brands over time make a difference. Furthermore, I've at times stopped or hit the rewind button on a commercial that might have caught my eye, particularly if the image had been intriguing.

DigitalMerging.LA weighs in that advertisers need to form relationships with companies like Tivo because in the world of the future, they will be the gatekeepers of advertising. I agree with that sentiment, but in the short term, this is more of a threat than an opportunity to Tivo since it adds another hurdle to getting bundled with other service providers. Companies like Comcast realize the threat and think of themselves as the future gatekeepers so it is easier to create and bundle a knock-off instead of bundling Tivo. That puts Tivo in a bit of a tough spot trying to grow the business.

I’d also not be the first company to try this strategy out. Spyware provider, Gator.com tried something similar on the Internet. They tried, in effect, to replace a website's banner ad with their own, opening up the door to slap a Ford banner on a Volvo website, and all legal hell fell upon them. Given the comparative money involved in television advertising versus banner ads, the first company to insert a different television ad as a replacement for a broadcast is going to have a few legal battles to fight.

I'd suggest that in the short run, advertisers play the game to see if they can work with the current system. What does that mean? First, I'd keep brand images on the screen longer which is counter to the MTV quick-cut style we're all now familiar, but in fast-forward, these images will appear longer and have more of an impact. I'd also tailor ads to be more visual, and try to have the biggest impact at the end of spot. Much as I'd personally hate it, I'd also try to trick viewers into thinking the break had ended by making my commercial look visually similar to the show I'm watching. The news channels always “trick” me into stopping the fast forward when actually they are advertising a news show by showing a video clip of it.

In the short term, I think the television remote and movie rentals have had a bigger influence on ad viewing than Tivo, and I hope advertisers see the silver lining in the storm clouds.

Posted on September 08, 2004

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