Study: iTV Ad Revenues To Remain Sluggish for Years

Interactive TV might be seeing renewed interest by ad technology firms as of late, but a new study from Jupiter Media Metrix suggests that the medium still has years to go before it sees significant advertising revenues.

While the New York-based research firm is bullish on interactive TV for its e-commerce potential — which the group expects will generate almost half of total domestic TV-based shopping revenue by 2005 — it said iTV-enhanced advertising will make up only about seven percent of commercials at the same time.

Jupiter senior analyst David Card pointed to several problems with the industry that would hamper its progress for years.

“Even though our research shows that there’s money to be made in the iTV space, carriers, programmers, advertisers and merchants are struggling with models to justify iTV deployment,” Card said. “Advertising won’t account for more revenues than shopping until 2005, due in part to current U.S. economic conditions, Internet advertising’s seeming ineffectiveness and the lack of a common national iTV technology platform.”

According to Jupiter, iTV advertising is too fragmented across networks, carriers and third-party response networks for quick growth.

In contrast to the Internet’s relatively stable set of technologies and platforms, iTV ad deployment will be broken up by geography and technology for the next 18 to 24 months, Card said. But once that hurdle is passed, Jupiter is expecting iTV ads to comprise 2 percent of TV advertising revenues in 2003, double that in 2004, and seven percent in 2005.

While the near-term iTV ad revenue picture is fairly gloomy, Card said programmers, advertisers and agencies will benefit from current experimentation with the new medium, since revenues will top both iTV commerce and Internet advertising revenues beginning in 2005.

“At that point, iTV advertising should start to grow dramatically,” Card said, anticipating interactive television advertising to bring in $4.5 billion that year.

In the meantime, Jupiter analysts said they believe the current fragmentation presents a big opportunity for Web ad networks: their third-party ad serving partnerships with different players in the fragmented cable carrier space will mean they’re some of the few players that can handle national iTV campaigns.

That’s exactly what several Web ad networks are betting on. Earlier this week, DoubleClick unveiled the new version of its DART ad serving ASP technology, which it said is expandable to serve various forms of iTV advertising. Other players too, like ACTV, Predictive Networks and everstream are throwing their hats into the iTV ad ring with recent upgrades to their product offerings.

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