INTERACTIVE TV ADVERTISING: Turning Viewers into Direct Leads without a Set-Top Box Ian Kingsford-Smith, iTV Specialist, Sydney,

Australia Premise In a global context the majority of TV viewers do not have access to interactive TV advertising using set-top box technology. The benefits of using interactive TV advertising is direct communication with the customer/viewer, personal targeting, localised messages, direct sales and can provide an ongoing relationship between the advertiser and customer/viewer. Response information and qualified leads are the key attraction for TV advertisers. The challenge for advertisers, advertising agencies and broadcasters/networks alike is how to achieve the significant benefits of interactive TV advertising using current consumer devices and platforms to communicate and engage with their customers/viewers. This paper examines the interactive TV advertising and TV advertising environment and initiates solutions to this challenge. Current Interactive TV Environment Interactive TV advertising can be delivered by analogue or digital platforms, a set-top box with middleware that supports interactivity and a delivery path of cable, satellite or terrestrial. The interactive advertising content can be delivered by forward-path (in-band) or by a return-path, for example, cable or PSTN or a mix of forward-path and return-path. A simple overview of how interactive TV advertising functions is that a bug will appear on-screen overlayed on TV commercial that the viewer clicks on to access the interactive features. The resulting interactive features can be displayed as an overlay on the TV commercial or the TV screen is scaled to say, or 1/8th and the interactive content fills the remaining TV screen real estate. The depth and functionality of these interactive features is defined by the advertising client and the platform/set-top box technology. Europe In Britain, the most advanced digital TV market in Europe, there is more than 80 channels offering either dedicated stand-alone interactive services or enhanced content with programmes. More than 10.2 million UK households have gone digital, equivalent to more than 41% of total households. A forthcoming survey by the London-based media analysis journal Screen Digest gives comparable figures of 71 interactive channels in France, 37 in Spain, 27 in Italy, and 11 in Germany. An advertising industry spokesman told the IBC that interactive TV was making an increasing contribution to the advertising industry. But many clients and advertising agencies are still cautious, especially in a weak market, and they complain that their creativity is stifled by technology. (Source: BBC News/IBC 12/9/03) Other European interactive enabled platforms include 5 in Netherlands, 2 in Belgium, 1 in Austria, 1 in Switzerland, 2 in Scandinavia, 1 in Norway, 2 in Sweden, 2 in Denmark, 1 in Finland and 2 in Poland, 2 in Turkey, 1 in Greece and 3 in Israel. (Source: Broadbandbannas.com 2003) The recent announcement by UKs leading commercial broadcaster the Independent Television Network (ITV) of working with BSkyB to launch interactive services across its 3 channels on the 6.5 million subscribers included interactive advertising. According to Jane Marshall, managing director of Carlton Active said that SkyDigital, due to its large subscriber base will be ITVs primary platform for interactivity, expect to see interactive advertising rollout in high numbers. (Source: itvt 19/2/03) Already more than 25% of viewers in satellite broadcaster Sky Digitals 6.3 million homes regularly push the red interactive button on their remote control to vote in news polls or for their favourite contestant on a reality show, order pizzas or product brochures or place a bet. (Source: OpenPerspectives Q3-2003) Interactive TV Advertising: Turning Viewers into Direct Leads without a Set-Top Box Ian Kingsford-Smith - 24/9/03 1

CanalSatellite usage statistics highlights for 2002 include 96% of its subscribers have used iTV services at least once, iTV services are accessed an average of 32.4 million times per month and the backchannel was used 16.2 million times, including 400,000 times for broadcast-synchronised enhanced TV applications and 4 million times for games (Source: itvt 19/2/03) Coty Inc. offered free Rimmel brand lipstick samples to BSkyB viewers who agreed to fill out a questionnaire. The response rate, at 3.2%, was more than twice the target set by Cotys European iTV agency BMPtvi. Also 63% of viewers opted to receive additional information about the brand. (Source: OpenPerspectives Q4 2002) North America In the US and Canadian markets there is a current domination of interactivity by the cable platform operators. Broadbandbananas.com (2003) reports that the US has 2 satellite operators and eight cable, Canada one satellite and two cable providers and Mexico one satellite provider, but when considered from a total TV audience perspective fewer than 5% of US homes have access to interactive TV. (OpenPerspective Issue 4 Q4 2002) Ford Motor Companys (USA) interactive advert for sports utility vehicle, the Explorer, 64% of viewers with access to it clicked their remotes to request a brochure. Wink was able to tell Ford that viewers predominantly family-orientated networks requested the brochure twice as often as those of predominantly male/business travellernetworks. (Source: OpenPerspectives Q4 2002) In the past eight months, Proctor and Gamble SC Johnson, and other CPG companies generated nearly 5 million Wink-enhanced impressions, 100,000 interactions, and 40,000 leads. (Source: Forrester Brief 6/8/01) Market Share in the US: Cable TV vs. Satellite TV 1998 Market Share 2003 Market Share (Source: CyberAtlas 25/8/03) The growth in digital TV households in the US continues to outpace broadband adoption, according to eMarketers report, Digital Television 2003: The Emergence of Advanced TV Services. eMarketer forecasts the number of US digital TV households to reach 56.5 million in 2005, up from 38.9 million at the end of 2002, according to the Digital Television report. This equates to a rise in digital TV penetration from 35.9% of households in 2002 to 50% in 2005. Total households in 2002 were 105.5 million growing to an estimated 113.1 million in 2005. (Source: eMarketer 12/8/03) Cable Industry Statistics for North America by country. End of 2002 (in millions and as a % of homes passed) Homes with TV Homes passed by cable Homes with cable TV Homes passed as a % of TV Homes Homes with cable as % of homes passed Digital cable customers Homes with access to cable high-speed internet Homes with cable high-speed internet Homes with cable high-speed internet as % of homes passed Canada 11.8 11.2 7.3 94.8% 65.4% 1.3 9.9 2.0 20.2% USA 106.6 103.7 71.9 97.3% 69.9% 20.0 85.0 12.0 14.1% North America 118.4 114.9 79.2 97.0% 66.9% 21.3 94.9 14.0 14.8% 2 Cable TV 68% 60% Satellite TV 7% 17%

Interactive TV Advertising: Turning Viewers into Direct Leads without a Set-Top Box Ian Kingsford-Smith - 24/9/03

Source: eMarketer 10/7/03 Asia Pacific As home to half the worlds television households some 500 million the Asia Pacific region is emerging as the next great interactive television market with the largest growth potential. (Source: Jeffery N. Brown, OpenTV, Japan, 2003) Cable is now connected to 90 million households in China, out of 320 million residents with televisions. Forecasts suggest that the number could swell to 150 million households by 2005. There are 1,200 municipal cable operators. The Chinese government has decided that all cable broadcasters must go digital by 2015. Goodman Sachs expects TV advertising revenues in China to grow from $2 billion today to $7 billion in 2010. OpenTV suggests an ARPU in a Chinese network is between $1 and $2 (US) per month. Currently approximately 25% of cable households are migrating to interactive digital platforms. Broadbandbananas.com (2003) reports that interactive platforms in the region include 1 in Japan, 1 in Korea, 9 in China, 1 in Philippines, 1 in Thailand, 2 in Malaysia, 1 in Indonesia, 1 in Singapore, 3 in Hong Kong, 2 in Australia and 1 in New Zealand. Interactive TV Advertising TV is already the primary brand-building environment for consumer-facing companies and will remain so as the development of iTV increases the power and flexibility of TV-based advertising. The strength of iTV advertising lays in its ability to target mass market, support a sophisticated audio-visual experience, personal targeting, and localised, direct sales and provide an ongoing relationship. Response information and qualified leads are the key attraction for advertisers. While interactivity increases the impact of advertising, it will also enable advertisers to closely monitor this and gain detailed customer information. As the iTV audiences have continued to grow, some interesting trends are developing. Viewers are about 50/50 male-female. They are roughly 16 to 34 years old. They are Internet and computer-savvy. And because of these demographics, they are a very attractive target audience for the advertiser. In fact, even in these early days of iTV, we are now seeing wellknown brands seeking the attention of these highly coveted eyeballs. The key needs from an advertisers perspective are that qualified leads are generated and the marketer and client are able to listen to the data they have collected and thus optimise the ROI during the course of the advertising campaign. Using the collected data during the campaign the advertiser is able to tweak the promotion, the offer, the creative, to target more closely the needs of the consumer. For example, the 1-800-FLOWERS (Adlink) campaign out of Los Angeles dynamically generated 93 versions of an advert by optimising the creative, changing offer codes, price points, etc., and targeted these according to zip codes. EURO RSCG advertising agency speaks of a mutual benefit point between the iTV viewer and the marketer. This is the point at which it is acceptable to use personal information from an interactive application or network perspective. Beyond this point becomes unacceptable to the iTV viewer. This mutual benefit point is important when developing interactive applications that request or use the viewers personal details. This mutual benefit point is flexible based upon what information is requested and what is offered in return as an incentive. The more personal the information requested the bigger the incentive has to be. The average interactive viewer tuned into enhanced promo features for between 4.5 and 5 minutes each. (OpenPerspectives Q1 2003) iTV advertising aired on the NTN network (USA) for the Battle of the Sexes board game increased sales by 80%. (itvt 19/8/02) Interactive TV Advertising: Turning Viewers into Direct Leads without a Set-Top Box Ian Kingsford-Smith - 24/9/03 3

30 40% subscribers interact with iTV adverts. (Microsoft/France 2001) 42% who clicked YES to an available iAd offer turned into a qualified lead for the advertiser. (Wink 2001) iAd viewers are 175% more likely to enter a competition. (Cylo/Volvo campaign 2001) Advertising lead costs are two thirds lower through iTV. 89% of marketers believe interactive advertising has a big future. (BMPtvi) Wink iAds response rates: 75% for contests, 62% for sample, 35% for brochures and 66% for research/polls. (iTV Addressable Advertising Realities conference 20th May 2002) GOOD iAds reinforce a brand and capture the audience. (Perception value response from the iTV audience research.) BAD iAds damage the brand. (Lesson One: Get it right the first time.) The ids Interactive Advertising Report 2003 states that on an average each campaign on ids channels generates over 3,000 responses, peaking at 30,000 for travel brochure requests or free samples and that interactive active response rates are 3 times those of DRTV response rates. The report goes on to say that categories such as FMCG, retail and travel tend to generate high response levels because of their direct calls to action and use of impulse overlays, FMCGs tend to offer free samples, for instance. In a recent family car campaign viewers spent an average of 4 minutes within the dedicated advertiser location (DAL), representing a significant extension of the brand experience. When relating the interactivity to the TV commercial duration ids findings follow traditional DRTV conclusions that the longer the commercial, the better the response efficiency. Sky Active estimates that the average time it takes viewers to press the red button is 17 seconds, so the longer the TV advert, the greater the chance of a viewer picking up their remote control. The ids report also shows that there is a consistent pattern of lower rating spots generating a higher rate of conversion. Advertising spots in lower rating breaks are +59% more responsive than the average. The research arm of media agency CARAT divides consumers into four groups; Ignorers, Rejectors, Reactors and Seekers. Rejectors and Ignorers are hard to connect with. One group rejects ads and the other takes no interest in them. The Reactors dont seek advertising but admit they find some enjoyable. The most highly-prized category is the Seekers who actively seek out new products. The UK research shows Seekers are twice as likely to buy a new product as the other groups, but typically account for only one in eight of a group targeted by advertisers. CARAT Insight also categories programmes according to consumers media needs states, whether they watch programmes to escape, to be informed, for inspiration or to be part of social glue when the programme is talked about in the office the next day. (The Australian 27/6/02) The Australian Association of National Advertisers (AANA) suggests that the current research methodologies to assess TV audiences via demographics (age, income, etc.) and psychographics (values, beliefs, opinions, etc) will need to be revised in the interactive TV environment. They suggest a new category called inter-graphics. Inter-graphics will examine what creates the predisposition to interact, at what level they engage in a direct sale, transaction, lead, etc. What motivates them to interact in a FTA versus pay TV environment, specific programme versus specific channel, repeat purchase versus first purchase options, take up a free sample or discounts? Demographics (removed), psychographics (personal) and inter-graphics (engaged). Also, from a TV advertising sales perspective AANA suggests that there will need to be a multilayer approach to pricing slots and campaigns. In the interactive environment the multi-layered deal can be valued as sales, transactions, leads, etc. No more one price ad slots.

Interactive TV Advertising: Turning Viewers into Direct Leads without a Set-Top Box Ian Kingsford-Smith - 24/9/03

Interactive TV Advertising Response Rates Network Discovery ABC TBS Discovery Discovery All Ads Programme Monster Garage According to Jim Jumanji The Most Dangerous Jobs in the World American Chopper Airings 3 1 1 1 2 8 Impressions 56,586 44,320 34,795 11,592 29,086 176,379 Interactions 1,190 676 509 119 293 2,787 Interaction Rate 2.10% 1.53% 1.46% 1.03% 1.01% 1.58%

NOTE: The Airings column indicates the number of interactive advert placements within the programme. The Impressions column identifies the number of people who actually engaged with the interactive advert. The Interactions column identifies how many people actually accepted the offer for a product, service, contest, etc. (Source: Proven Interactive Television Revenues through Interactive Advertising & Direct Marketing. Jeffery N. Brown, OpenTV, Japan, 2003) Interactive TV Advertising Case Studies: Procter & Gamble Campaign: SkyDigital February 2003 Procter & Gamble ran iTV enabled commercials for its Fairy Liquid dishwashing detergent and its Fairy Non-Bio washing powder, as part of a cross-promotion with the Disney movie, Treasure Planet. This campaign follows on the success of an earlier iTV enabled commercial for P&Gs Flash product, which was part of a cross-promotion with the Disney movie, Lilo & Stitch. According to Shuvo Saha, P&Gs interactive marketing manager for iDTV stated that the earlier commercials accompanying iTV application drove brand awareness, advertising awareness and purchase intent higher than what was generated by the 30 second TV commercial alone. There are two key advantages, he explained. The first is about targeting: iTV allows consumers who are interested in your brand or offer to self-select themselves and choose to engage further. The second advantage is about adding value and providing services for the consumer: interactive media can provide additional entertainment and fun like these Disney examples, or it can make the brand easier to try, and easier to buy, or provide more personalised information more relevant to the individual. Sacha also cited an additional reason why P&G employed iTV enabled advertising to promote its Flash, Fairy Liquid and Fairy Non-Bio brands; parents of small children (the class of consumer at which P&G targets the 3 products) are heavily represented among digital TV subscribers. (Source: itvt 19/2/03) Rimmel Campaign: SkyDigital October 2002 Rimmels Double Act Foundation product was targeted at women 16-34. Coty purchased airtime for the campaign on Sky and IDS channels, together with banner space on Sky Active. The campaigns ads invited viewers to use their remote controls to access a two page Dedicated Advertiser Location (DAL), where they could answer market research questions and provide their mobile numbers and other contact info in exchange for a free sample of the product. According to the company, the second campaign delivered a 14% volume improvement and a 27% improvement in cost-per-response over the earlier campaign. Viewers who navigated to the campaigns DAL spent a total of 1,719 hours interacting with brand information there. Cost per sample acquisition was 1.87 pounds, which OMDtvi says was lower than for any other sampling mechanism employed by Rimmel to date. The campaign generated 60,565 responses, with 63% of respondents (38,000) requesting additional information. Of those 38,000 respondents, 2/3rds provided their mobile phone number, allowing Rimmel to continue to Interactive TV Advertising: Turning Viewers into Direct Leads without a Set-Top Box Ian Kingsford-Smith - 24/9/03 5

market its product to them via SMS. OMDtvi says that data acquired by the iTV campaign will be used to improve Rimmels overall media planning by comparing respondents profiles by daypart, channel and programme. (Source: itvt 21/4/03) TV Advertising For free-to-air broadcasters their business model is advertising and TV advertisers require access to as many viewers as possible to support and promote their brands, products and services. Television as an advertising medium has many benefits for the advertiser including being able to reach nearly every household in each market, target a specific demographic associated with a TV programme, the message is delivered in the relaxed home environment, it can involve the viewer by communicating in human situational terms, the creativity includes sight, sound, colour, music, motion and emotion and it creates and multiplies face-to-face selling power. When devising a campaign the advertiser needs to define the campaign objectives and dates, product/service to be advertised, weight of activity, transmission area, time length and budget. The cost of a television campaign is affected by the transmission area, the time of year, the length of the TV commercial, time of day (daypart) and frequency. Television campaign response can be measured by television audience measurement by basing viewing habits on selected households using people meters. These households are chosen on the basis that they are representative of the population in terms of age, gender, number of children and income. Every commercial that is broadcast has a TVR (television rating) value attached to it. This allows advertisers to calculate the exact number of people who have watched their commercials and their socio-demographics profiles. From a viewer response perspective companies like Media Dynamics estimate that only 25% to 35% of viewers give their full attention to any given commercial. (Forrester Brief 6/8/01) Television networks are licensed and there are usually regulatory agencies that are responsible for the pre-transmission approval of all television advertisements. These agencies ensure that that there is nothing in an advertisement that is untrue, offensive or misleading in any way. The November 2002 Interactive Marketing: Stats, Strategies and Trends report from eMarketer states that companies looking to blend interactive channels and technologies into their marketing mix face five key issues: 1. Making it mainstream: While some traditional marketers readily include interactive in their media mix others shy away because they dont feel their dollars will be as well spent. 2. Measuring marketing: In response, the interactive ad industry is starting to adopt traditional metrics such as reach and frequency, gross rating points, and more and its learning how to blend those metric tools with onlines unique tracking capabilities. 3. Taking advantage of hot marketing vehicles: Even in this recession-driven market, online advertisers are finding success with search engine, classified ads, and rich media. Rich media includes wireless devices, mobiles and interactive television. 4. The expanding e-mail universe: More people use email, more marketers include email in their direct response and branding efforts, this leads to email overload for many consumers and business users. Along with the mounting threat of spam. 5. Too many, too much: Too many pop-up ads, too much spam, too many online ad formats, too much webpage clutter, too many research sources, and too much economic uncertainty all conspire to check the growth of interactive marketing.

Interactive TV Advertising: Turning Viewers into Direct Leads without a Set-Top Box Ian Kingsford-Smith - 24/9/03

TV advertisers are able to display a premium rate SMS short code (mobile) number in their television commercial (TVC) for viewers to respond to. These are short three to five digit call to action numbers that the viewer enters on their mobile phone and then, for example, is asked to answer a couple of simple questions on the product, service, advert, viewer response or viewer personal information. The participants who answer correctly win instant prizes. Other types of TVC/SMS competitions, quizzes or trivia are linked to latest release film and music promotions. This interactivity allows the advertiser to know the postcodes, sex and gender of their audience. The advertiser can also request specific information from the viewer/customer which will allow for personal targeting, response information and qualified leads. The response time of 17 seconds to an interactive advert using the set-top box remote control would be comparable with the ever present mobile phone. The possibilities offered by this type of interactive marketing using the mobile phone require the right fit between the brand and the consumer. Australian TV Audience Of the approximate 7.1 million households that have TV, 99% have at least one TV and 55% have a second set and the current pay TV penetration is approximately 22%. (Source: Paul Budde Communications) The audience measurement agency, OzTAM collects data from both free-to-air and pay TV channels using people meter boxes in 3000 homes. OzTAM estimates that in the 1.5 million homes connected to pay TV cable or satellite, the most watched pay channels are: Fox8, which offers wrestling, The Simpsons, and Worlds Wildest Police Videos (3.8 per cent of viewing); the Lifestyle channel, which offers antique valuations, renovation shows formerly on broadcast TV, and Neil Perry recipes (2.9 per cent); TV1, which offers Seinfeld, Hogans Heroes and every permutation of Star Trek (2.6 per cent); the Disney Channel (2.5 per cent); Fox Sport (2.3 per cent); UKTV, which offers old English soaps and comedies (2.2 per cent); and the movie channel Showtime (2.0 per cent). But in those homes, the vast majority of viewing still goes to free-to-air channels: Nine (19.6 per cent), Seven (16.9 per cent), Ten (12.8 per cent) and the ABC (6.2 per cent). When pays audiences are put in the context of all homes, including the 77 per cent that receive only broadcast channels, the percentages shrink dramatically, with the most popular pay station, Fox8, achieving just 1.1 per cent of all viewing, compared with SBSs 2.7 per cent. Pay gets the biggest audiences on weekends between 9am and noon, when children drive its share up to 28.2 per cent. In prime time (6pm to midnight) during the week, 40 pay channels attract only 9.7 per cent of all viewing. (Source: Sydney Morning Herald 13/8/03) Commercial TV channels are said to earn about $2.4 billion in advertising revenue a year while Foxtel and Austar last year earned less than $100 million in advertising, while collecting subscriptions and other fees worth about $1 billion from 1.4 million subscribers. Simon Francis, Seven Networks director of corporate development said that continued growth in advertising revenues by the US networks after 35 years of pay TV in that country, showed that network television was the advertisers preferred choice. (Source: The Australian 4/8/03) The recent audience ratings successes with Nine Networks home renovation/reality television series The Block illustrate the free-to-air broadcasters expertise in capturing the TV audience. The 90-minute finale of The Block, which showed the made-over flats being auctioned, drew an average national audience of 3,079,591 about 53% of all people watching TV at the time. At the peak, 3.37 million viewers tuned in, the biggest TV audience since the 2000 Olympics. Despite its seemingly quintessential Sydney themes of beachside living, DIY and property mania, The Blocks popularity crossed all borders. The final episode topped the ratings in every mainland capital city, lead by Melbourne (with an average audience of 1,052,151) and followed by Sydney (869,065), Brisbane (567,451), Perth (321,421) and Adelaide (269,503). (Source: The Australian 19/9/03) As a comparison the Big Brother finale was watched by 2.27 million and Australian Idol 1.65 million. (Source: Sydney Morning Herald 29/7/03)

Interactive TV Advertising: Turning Viewers into Direct Leads without a Set-Top Box Ian Kingsford-Smith - 24/9/03

Current Trends and Technical Innovations Globally free-to-air TV networks are using SMS, email, the land-line (toll-free) and web sites to communicate TV audience opinions to the programme producers. TV audiences are asked to vote out contestants in Big Brother, rate issues in news programmes, choose the top hits in video chart shows, enter competitions in lifestyle programming, etc. This audience information/opinion is either displayed in the programme if it is live or used in an ongoing context as in the case of a TV programme series. Further to these methods of communication with the TV viewer, there are recent consumer trends, technologies and practises that have exciting implications for TV networks, advertising agencies, advertisers and programme producers alike. These include: YooMedia to Test Mobile Tech that Enables Interactivity without a Set-Top Box UK-based iTV chat and games specialist, YooMedia, will later this month conduct an 8-day trial of a new broadcast-synchronised mobile-phone technology which the company calls Trigger TV. During broadcasts of the popular animated series, The Powerpuff Girls, on the Cartoon Network, viewers with SMS-enabled mobile phones will be able to take part in a quiz in which they will receive via SMS a series of multiple-choice questions, synchronised with the broadcast action on-screen. They will be able to answer the questions by keying in the number of the multiple-choice answers and sending it back via SMS. Each episodes high-scoring players will be eligible to take part in a prize draw. (Source: itvt 2/9/03) New Mobile Media Service to Cover Edinburgh Festival - 2003 Audiences at this years Edinburgh Festival Fringe (3rd 25th August) will be able to sample shows and catch up with the latest happenings via their mobile phones courtesy of Pocket Video a revolutionary new media network which offers exciting and original wireless video content. Coverage will include trailers for shows appearing at this years Fringe and snippets of comedy from the Festivals top comedians. Pocket Videos reportage team will also be hitting the Festival hotspots each weekend to record vox-pop clips from performers and audience members. People can access the service with affordable 2.5G phones using a GPRS connection. (Source: 3C Media Release 24/7/03) Point, Click and Send Gaining New Meaning Zelos Group projects that the transmission of photos from mobile devices will rise in popularity over the coming years, generating $10 million in revenues in the US this year and a whopping $438 million in 2008. Zelos also predicts that by 2008, one-third of mobile phone owners in the US will have camera phones. Strategy Analytics predicts that 147 million camera phones will be sold worldwide by the end of 2007, up from 16 million in 2002. (Source: eMarketer 22/8/03) BT Streams Videos Over GPRS BT Broadcast Services (BTBS) is to make it easier to deliver live streaming media feeds to mobile users courtesy of a technology deal with Vemotion. Vermotions technology includes the FastStart capability, which halves video start-up times; Layered Download, which improves quality with each viewing of a clip, and Mobile Aware features to enhance user experience in harsh network conditions. The technology is also the first in the world to meet the emerging H.264 international standard, which doubles video quality for the same data rate as MPEG-4. Interactive TV Advertising: Turning Viewers into Direct Leads without a Set-Top Box Ian Kingsford-Smith - 24/9/03 8

The most popular video applications currently available are music videos, cartoons, sports and news clips, video alerts and video greetings. Users pay from 30 pence to watch clips lasting between 20 seconds and four minutes. Vemations technology allows users to watch live events, access content on demand, or download clips for later viewing. (Source: The Register 11/9/03) Gamers Growing Up The Entertainment Software Association (ESA), formerly the Interactive Digital Software Association, found an increase in the number of aged 50 plus game players at 17 percent up from 13 percent in 2000 with average gaming age at 29. The average age of the gamer in 2000 was 28. Women over the age of 18 and older make up a larger percentage of the gaming population 26 percent than boys aged 6 to 17 (21 percent), and girls aged 6 to 17 for 12 percent of all gamers. Not surprisingly, males over the age of 18 represent the largest group of gamers at 38 percent. With half of all Americans playing computer and video games, the signs point to interactive entertainment as the entertainment choice of the 21 st century. (Source: CyberAtlas 29/8/03) Instant Messaging 76% of Online Population Use Instant Messenger Applications Nine in ten 13-17 year olds on the Internet instant message (93%), compared with 80% of 18-34 year olds and 71% of those 35 and older. Nearly three-quarters (71%) instant message at home, while 21% do so at work, 8% via a wireless device and 7% at school. About one in four (26%) use instant messaging features to share files and photos, 14% for customer service. Those using instant messaging have been doing so for an average of three and a half years (3.7) (Source: AOL Service 26/6/03) Interactive Advertising without a Set-Top Box These trends in consumer use and technology illustrate some exciting trends for TV advertisers on free-to-air platforms that want to capture and enjoy the benefits of interactive TV advertising. Currently using mobile devices users are able to download music, video, MMS, ringtones, games, applications, transfer money, pay bills, subscribe, receive gifts or free previews, etc, and these recent innovations and trends promote a real interactive ongoing relationship between the TV viewer/consumer and the advertiser. Key conclusions: 1. Interactivity without a set-top box: Interactive features can be synchronised to the TV broadcast stream and linked to mobile phone technology. For advertisers it means that interactive features can be synchronised to long form advertising content and that advertisers can request personal information from the viewer, answer questions on products, respond to multi-choice questions, poll opinions and voting, enter quizzes and competitions, etc and provide the advertiser with direct leads and an ongoing relationship with the viewer/consumer. In Australia over 290 million SMS are sent each month (Source: Australian Mobile Telecommunication Association 6/5/03) and approximately 60% of the population or 12 million Australians now have mobile phones. (Source: A Users Guide to Australian Telecommunications 2002)

Interactive TV Advertising: Turning Viewers into Direct Leads without a Set-Top Box Ian Kingsford-Smith - 24/9/03

2. Mobiles supporting streaming media: Advertisers will be able to send viewers/consumers short form video clips, pictures, cartoons, product and promotional information, etc and content relating to their products and services via 2.5G phones using a GPRS connection. Advertisers have had considerable success using short form advertising clips downloaded to PVR-enabled set-top box. The average interactive viewer tuned into these enhanced promo features for between 4.5 and 5 minutes each. (OpenPerspectives Q1 2003) Also in the interactive TV space using a set-top box, viewers are able to access a Dedicated Advertiser Location (DAL) where these short form advertising clips can be viewed. For example, Honda used this methodology in their recent COG campaign across the UKs terrestrial, cable and satellite networks. Advertisers can also request responses from the viewer/customer in the form of pictures for competitions, for example, to run in conjunction with a product launch and in building the customer relationship. 3. Gamers grow up: The trends that 26% of gamers are women and gamers generally are growing up with 17% in the 50 plus age group indicate that advertisers can use games, trivia games, game-type interfaces, game-type navigation, etc using mobile phones to capture and target the wider audience demographic. 4. Instant messaging: The high overall usage of instant messaging plus the wide demographic breakdown indicates that there is a high acceptance rate of this type of messaging technology, that it is not limited to a younger demographic or by early adopters but is widely understood by a three quarters of the online community. This is a benefit when designing interfaces and navigation methodologies for wireless devices and also in understanding how to target and customise interactive elements in television commercials, the mobile interface and information structures Between 64 68% of Australian households have a PC. (Source: Nielsen Media Research 2001). Summary Advertising agencies and TV networks can now provide a mass market penetration solution for their advertisers and clients using interactive television. This is achieved by: 1. Linking interactivity to a television commercial by SMS short code numbers 2. Synchronise interactivity to a television commercial using Trigger TV-type technology. Using SMS short code or Trigger TV-type technology allows advertisers to contact and engage with their viewers/customers across free-to-air TV platforms. Advertisers are able to establish and manage a personalised customer relationship with the viewer/customer providing the advertiser with response reporting, direct leads and accountability for promotional budgets. Advertisers are able to link their campaign to free samples, promotional offers, entry to promotional events, competitions, quizzes, etc, related to their products and services via the mobile phone. If an advertiser chooses to use SMS short code numbers in their television commercial the same number can be used across all media promotions including newspaper, magazine and outdoor advertising. In television marketplaces that support both pay TV platforms using set-top box technology and free-to-air networks this interactive solution provides TV advertisers with cross-platform options including wireless devices, mobiles and set-top box interactivity.

Ian Kingsford-Smith, Interactive TV Specialist Sydney, Australia Email: ikingsfo@hotmail.com Interactive TV Advertising: Turning Viewers into Direct Leads without a Set-Top Box Ian Kingsford-Smith - 24/9/03 10