If nothing else, the seemingly schizophrenic strategy of TiVo (TIVO) is entertaining to watch. They are attempting to bolster their revenue by using that which they've taken away - ads, and then repackaging them to consumers in a more palatable way.
Here's one way they're trying to do it now ... TiVo CEO Tom Rogers said,: "The word out on the street for a while was that TiVo was a pariah ... that TiVo was ruining the advertising industry. So we decided to attack that sentiment straight on because it was increasingly clear ... you are going to see fast-forwarding 
through ads. We actually had a solution to the problem."
What TiVo is trying to do is being called "program placement." How it works is they simply display a message after a commercial-skipped show has been watched. Some of the message displays can be linked to a longer ad.
While this may work as far as technically being able to present ads on their device, I don't see how this can be much of a revenue stream to the company. Who in the world wants to watch ads from a machine that empowers you to skip them? Trying to be all things to all people has never worked for any business in the past. I'm not sure why TiVo would think it would work for them now.
The only thing I can think of is that there will be just enough people that may allow it that it brings in a small, but not insignificant amount of revenue that adds some to their bottom line.
What's really interesting to me is to see that here's a another technology that has taken away the "gatekeeper" status of television, and transferred it to somewhere else.
To project themselves as friends to consumers and marketing companies or departments, is pretty far-fetched. And yet some big companies have already signed up. I don't think over the long haul that this can sustain itself. But TiVo's goal may be to capture just a tiny percentage of the marketing and be content with that. If that's the case, it just might work.
I think that you are missing the real underlying trend here. TiVo never forces their ads on their customers, they are always opt in, so the real question becomes what will it take for a consumer to opt into an ad. I think it's two things, first it has to be targeted to the user. Program placement does this by attaching the ad to the show. If someone likes the Lifetime special, then they'll get a different ad then the one at the end of Sports Center. This gives TiVo inventory to sell, but also allows them to target their ads.
Personally, I think that they should go a step further and target according to the data that they can collect on users, but they are reluctant to upset the privacy tinfoil hat types.
The second characteristic of an opt in ad requires entertainment value. No matter how targeted you get, if an ad skipper can't be entertained they won't opt in. This is the real power of what TiVo is doing here. They are encouraging advertisers to bypass the studios and produce their own content. Because they aren't limited by time or space (ok technically program placement is 2 minutes or less, but this will change) they can encourage ad agencies to build their own programs.
We all know product placement is the future of television. It might be tough to naturally fit it in, but it's coming and the smart advertisers are going to get on board by creating content that people want to see. If you look at the what the Apprentice did for car advertisements, you can see how powerful this model is when it's successful. By giving advertisers access to their households, TiVo is created a new advertising dichotomy and one that the studios should be seriously concerned about. If technology can bypass their content, by not needing their content to begin with it will make their jobs all that much more tougher.
I think that it's only a matter of time before we see Budweiser or Coca Cola create their own 30 minute sitcom and then sell ads to their own partners. As long as it's entertaining consumers will tune in and without the requirement of having a cable channel, it will lower the barriers to entry.
TiVo can pretend to by anti-ad all they want, but the truth is that they really want to improve ads not eliminate them. Targeted opt in ads that are entertaining are a thousand times better then the 30 second blasts that their customers are fast forwarding past. Add to their their 100% monopoly on everything their customers watch and you've got a pretty powerful revenue stream once they hit crtical mass.
It's easy to dismiss this as neurotic thinking on TiVo's part, but I think that's a mistake. They are cunning, they are calculating and they're not out to kill advertising, they just want a piece of the action. Unfortunately for the studios, TiVo's small piece may end up costing them billions in revenue over the long run.
Posted by: davis freeberg | December 11, 2006 10:57 PM | Permalink to Comment