TiVo's new strategy a boon to advertisers

By Gina Piccalo
Los Angeles Times

When it debuted in 1999, TiVo revolutionized the TV experience by wresting control of screen time from advertisers, allowing viewers to record shows and skip commercials. TiVo's slogan said it all: "TV your way."

Behind the scenes, though, TiVo was courting advertisers, selling inroads to a universe most customers saw as commercial-free. The result is a groundbreaking new business strategy, developed with more than 30 of the United States' largest advertisers, that in key ways circumvents the very technology that made TiVo famous. TV "your way" is quickly becoming TV "their way, too."

By March, TiVo viewers will see "billboards," or small logos, popping up over TV commercials as they fast-forward through them, offering contest entries, giveaways or links to other ads. If a viewer "opts in" to the ad, their contact information will be downloaded to that advertiser — exclusively and by permission only — so even more direct marketing can take place. By late 2005, TiVo expects to roll out "couch commerce," a system that enables viewers to purchase products and participate in surveys using their remote control.

Perhaps even more significant, though, is TiVo's new role in market research. As viewers watch, TiVo records their collective habits — second by second — and sells that information to advertisers and networks. (It was TiVo that quantified the effect of Janet Jackson's Super Bowl "wardrobe malfunction," reporting a 180 percent spike as viewers replayed the breast exposure.)

For advertisers it's an extraordinary boon, a quicker and more effective way than they've ever had of measuring the effects of their TV commercials. For viewers though, TiVo's new strategy means the technology famously christened "God's machine" by Federal Communications Commission Chairman Michael K. Powell is rapidly becoming a marketer's best friend, proving that try as they might consumers cannot hide from marketing.

"TiVo looked like it was going to be the weapon of mass destruction of Madison Avenue," says Robert Thompson, Syracuse University professor of television and pop culture. "However, we knew that the (TV) spot ad would not go gently into the night, and this is the next battle strategy."

This shift underscores what industry observers have been saying since TiVo started — that TV advertising and programming must change dramatically to survive.

These are anxious times for marketers who are faced with commercial-busting technology that's evolving faster than they can keep up. Broadcast-ready cell phones, hyper-real video games, interactive DVDs and the Internet give consumers the on-demand, often commercial-free entertainment they crave. Traditional network television viewing, by comparison, can seem antiquated. The number of American households with a TiVo or TiVo-like recording system is expected to increase from 5 percent to 41 percent in five years, according to Forrester Research, which studies technology's effect on business.

For this reason, ad agency executives who initially ignored TiVo and its DVR (digital video recorder) technology are now lauding it as an industry savior. "I look at TiVo being first generation of the TV advertising of the future," says Tim Hanlon, a vice president at Starcom MediaVest Group, one of the world's largest media-buying companies, with clients including General Motors Corp., Procter & Gamble Co. and Best Buy Co. "There's a whole witch's brew of change coming to the linear television form."

But what about TiVo's devotees, those folks who send the company fan mail and photos of their pets posed with TiVo boxes, and act as missionaries, converting their friends to the technology? Some say they don't mind a little pop-up advertising — just so long as they can fast-forward through it — because it could help keep TiVo in business. (A September report from Forrester shows that DVR owners typically fast-forward through 92 percent of commercials.) Others are wary of these changes and concerned the company's priorities may be shifting away from the consumer. "A company can get too big for its britches, you know?" says Bill Calogero, a Chicago computer business analyst and TiVo subscriber since 1999.

"I just don't want them to interfere with the experience. If it isn't broke, don't fix it."

Yet from its inception, TiVo engineered its system with advertisers and networks in mind. While competitor ReplayTV had allowed its subscribers to skip commercials entirely — TiVo restricted its fast-forward capabilities so viewers could still see the commercial, albeit eight times faster than intended. (ReplayTV last year was forced by litigious studios and networks to adopt a more TiVo-like system.)

TiVo also sold space on its main menu to advertisers as a venue for commercials that ran longer than the usual 30- or 60-second spots. And the company developed "tagging" technology as a way for networks to advertise TV shows by embedding a green thumbs-up sign in the corner of the screen during a show's promo, reminding the viewer to record it. Advertisers saw tagging as an opportunity and jumped at it.