Just as the web disrupted print, and social and mobile disrupted the web, new technologies are poised to change the TV industry in a huge way. Despite the huge advances in digital interactivity, millions of people still consume TV as a one-way, static broadcast, lacking all the depth of engagement that the modern web offers.
Connected TVs will change this. Connected TV is a broad term that describes the convergence of television and the Internet. Including both set-top boxes and fully integrated devices, connected TVs bring web content to the living room.
This opens huge opportunities for consumers to access new content in new ways. It also presents digital marketers with the potential to tap into the multi-billion dollar TV advertising industry. In this post we’ll cover some of the major connected TV players, and how connected TVs are redefining traditional advertising.
Major Technology Players and Connected TV
The landscape of connected TV devices is fragmented, and because the industry is still in an early developmental phase, no one technology has yet emerged as the dominant player. Some of the key technologies include:
Google TV. Announced in May of 2010, Google TV uses Android and Chrome technologies to bring interactive features to traditional TV sets. While GTV launched with high expectations, it was met with mediocre reviews.
Many consider Google TV’s initial launch to have been a failure, including Google’s early partner Logitech, which reportedly lost over $100 million with last year’s GTV debacle. Despite this dramatic figure, some are still bullish on the future of Google TV, including Google chairman Eric Schmidt, who recently claimed that next summer, “the majority of the televisions you see in stores” will be equipped with Google TV.
Why the optimism? Despite losing Logitech, Google has a range of hardware partners that will be integrating GTV throughout 2012, including Vizio, Samsung, Sony, and LG. These companies may find Google’s technology appealing due to its flexibility. The GTV software is flexible, and allows electronics companies to apply their own interfaces, features, and customizations.
Google’s general philosophy of openness could play out in the TV market much the same way it did for smartphones and Android. Giving hardware partners the freedom to adapt Google’s software, while still offering access to Google’s rich content and app ecosystem, may prove to be a significant competitive edge compared to other systems.
Apple TV. In stark contrast to Google’s aggressive TV launch (and subsequent failure), Apple has been quietly building their smart TV hardware for years, continuing to describe it as merely a hobby.
Considering the hobby mindset, Apple TV has been performing extremely well. Analysts estimate that Apple will have sold 4 million units by the end of 2011, effectively giving it one-third of the set-top box market.
However, the set-top strategy may not be to be Apple’s endgame. Some are predicting that Apple may launch a full-fledged TV set, and not just an accessory. Reportedly, Apple thinks “people hate to plug in external gadgets”, and as such, will attempt to directly enter the TV market, with connected features built in.
Apple obviously has a lot of strengths in this capacity. Apart from their obvious mastery of consumer electronics, Apple’s content ecosystem through iTunes and apps is second to none. Not to mention that Apple reportedly has 200 million credit card accounts, the most of any web service.
Microsoft Xbox. Microsoft was late to the game with smartphones, and doesn’t seem to have much in the way of pure TV offerings. However, they may have something of a sleeper hit in the form of the Xbox.
With over 57 million units sold, and 37 million Xbox live users, Microsoft’s access to TVs actually dwarfs Apple and other competitors. And although the Xbox is positioned primarily as a gaming console, integration with Microsft web services like Bing, as well as the popular Xbox kinect extension, could prove to be a powerful asset.
Microsoft’s weakness in the market appears to be content. While Google has YouTube, and Apple has iTunes, MS doesn’t have a competitive source of owned content. However, they do have partners – lots of them – including Netflix, Hulu Plus, AT&T U-verse, and ESPN.
It’s interesting that although Microsoft has often seemed slow in adopting new technologies, they may already have a huge lead in the connected TV space. Microsoft is obviously ambitious in this space – a recent press release titled The Future of TV Begins Now on Xbox 360 outlines their hopes of dominating the industry.
The Future of Advertising
The growth of connected TV presents a massive opportunity for digital marketers. A recent study by ZenithOptimedia highlights the scope of this opportunity. Currently, the Internet represents 16% of global ad revenue. TV represents over 40%. Those numbers alone explain why marketers as well as technology companies are scrambling to carve a space in the connected TV industry.
It seems inevitable that the 40% of ad spend currently allocated to TV will gradually go digital. As TVs become smarter, so can advertising, and brands will have every incentive to redefine TV strategies to take advantage of modern capabilities. Some of the major benefits of smarter TV ads include:
Interactivity. A traditional TV ad is a one-way, static broadcast, that from a consumer’s perspective, is usually an unwanted interruption. Smarter ads can change that. Offering a consumer the ability to interact with an ad opens huge doors for brands to reach audiences much more directly.
Consider retailer advertising. While the retailer can tell consumers about products and offers, the conversation ends there, and the onus is on the watcher to actually visit a store. A smarter ad could allow the watcher to click-through straight from the ad, to an e-commerce destination, and shop directly from their TVs.
Similarly, restaurants and other location-dependant businesses can go beyond brand advertising, and offer watchers the ability to find a nearby restaurants, make reservations, or place an order, without leaving the couch.
Targeting and Analytics. Compare the accuracy of targeting and analytics offered by Google AdWords + Analytics, compared to that available to TV advertisers. The difference is massive. Connected TV offers the possibility of relevant, scalable, interest-based advertising far beyond basic TV spots.
Demographic precision and user profiling is another key factor. Connected TV targeted can go beyond just IP-based targeting, and segment audiences based on user account data. A consumer watching YouTube on a Google TV will probably be logged into a Google account. That account can contain a history of videos watched, keywords searched for, websites visited, and a general wealth of data that enables advertising accuracy like never before.
Format Diversity. As the devices, platforms, and content become more technically sophisticated, so too will the advertising.
Product placement is an obvious example. In the future, consumers may be able to directly interact with products shown in videos. A watcher who likes an actor’s clothing could pause the show, click the product, and be directed to an e-commerce destination.
Instead of the standard 30-second ad, we may see considerably more diverse formats. In-game, in-app, social, and search formats will be available to connected TV advertisers to connect with consumers at critical moments, where they may be more engaged than the usual disinterested watchers of analogue advertising.