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interactive local media

Interactive Local Media White Paper

From Reach to Targeting: The Transformation of TV in the Internet Age
Michael Boland , 11/1/2005

From Reach to Targeting:
The Transformation of TV in the Internet Age

Executive Summary

The Internet Protocol Television (IPTV) revolution is upon us. The transformation of television that began with the VCR and gained significant momentum with TiVo is now accelerating dramatically with on-demand cable, video search and IPTV. Billions of dollars are at stake, and a complex and competitive landscape is also starting to emerge. It includes traditional media companies (News Corp., Viacom), Internet search engines and portals (America Online, Google, Yahoo!), telcos (BellSouth, SBC, Verizon) and the cable companies themselves (Comcast, Cox Communications).

Why is all this happening now? While there was a great deal of hype in the 1990s about TV-Internet convergence, or interactive TV, previous attempts failed in part because of low broadband penetration, costly storage and inferior video-streaming technologies. All this has now significantly changed.

In addition, an unrelated but mutually reinforcing set of market dynamics has come together to potentially alter TV viewing habits (and advertising), perhaps forever. These include a developing on-demand media culture, increased penetration of high-speed Internet access, the success and accountability of online advertising, and the emergence of Voice over Internet Protocol (VoIP) telephony as a threat to traditional telco revenues. These factors are all but forcing the changes discussed in this report.

The Kelsey Group believes on-demand video, video search and IPTV will accelerate the fragmentation of the TV viewing audience that began with the introduction of cable television. How will this affect the ability of advertisers and content producers to reach the mass audiences that have always been the hallmark and attraction of television? And what impact will viewer choice have on advertising models and the broader economics of TV?

In one version of the future, which National Public Radios Bob Garfield has called the chaos scenario, the entire economic model of television is undermined. In another version, which we explore in this report, the pulling of content by viewers offers enormously valuable targeting and contextual advertising opportunities for marketers and, potentially, new types and quantities of ad inventory.

These factors will combine to create a tremendous opportunity for national and potentially local advertisers to produce geographically and demographically relevant campaigns that are targeted down to the set-top box level. Indeed, on-demand programming and related interactivity make IPTV much more like a directional medium such as classifieds, search or Yellow Pages and thus a potential distribution platform for the content that now appears in those media. And when the Internets targeting capability is married to the emotional and dramatic power of television, the result is much more powerful than either by itself.

Amid the grandiose predictions and new hype, however, a healthy dose of skepticism is in order. At this stage it is not clear whether audiences will receive the Internet over TV or watch online video at the expense of traditional television. The future will probably include some version of both. But as TVs ad model moves inevitably from reach to targeting, we all but guarantee its future will be much more challenging and complex than its past.

Copyright � 2005 The Kelsey Group. All Rights Reserved.
This published material is for internal client use only. It may not be duplicated or distributed in any manner not permitted by contract. Any unauthorized distribution could result in termination of the client relationship, fines and other civil or criminal penalties under Federal law. The Kelsey Group disclaims all warranties regarding the accuracy of the information herein and similarly disclaims any liability for direct, indirect or consequential damages that may result from the use or interpretation of this information.

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Copyright© 2006 The Kelsey Group. All Rights Reserved.