Impact of the Lack of IPTV Standards

Light Reading published an article describing the discussion at an IPTV World Forum panel discussion. The panelists said that the lack of IPTV standards is holding back investment in IPTV technology. They also said that there are tremendous opportunities for interactive advertising opportunities in IPTV if the industry would broadly support open standards.

This is an interesting perspective. The key is the middleware software, which is quite fragmented. Microsoft, Thomson, Alcatel-Lucent, Nokia Siemens, Cascade, and Minerva all have a significant share of this market. There is no commonality between them which has created a fragmented market. It is hard to see how a single market based on open standards will be created out of this. This may well be the Achilles heel that will cause over the to Internet delivered TV predominate in the end.

FTC Report on Self Regulation of Interactive Advertising

I have posted an article on my Telco 2020 blog on a new Federal Trade Commission (FTC) report on the effectiveness of self regulation for interactive advertising. The report outlines significant issues with self regulation. I think that we will need regulation in this area before long.

Harmonic Ad Splicer Passes Microsoft Testing

The Harmonic ProStream™ 2000 digital video splicer has successfully completed conformance testing for real-time splicing of national MPEG-4 AVC (H.264) video streams of the Microsoft Mediaroom IPTV system. The test for the ProStream 2000 platform was administered by Microsoft as part of the Microsoft Mediaroom Interoperability and Qualification Lab (IQ Lab) program.

The Harmonic splicer can be used to replace national ads and can be used to provide different ads to specific zones or to support unique ads to a limited number of demographic groups.

The Harmonic splicer supports the advertising strategy that Microsoft announced at IBC. Microsoft’s strategy also includes more highly targeted ads that are different using other techniques, including through the set-top box.

China Telecom Advertising Agreement with UTStarcom

Best Tone Information Service Corporation Ltd., a wholly-owned subsidiary of China Telecom Corporation Ltd., with the intent to deploy a video information distribution network in the Hunan province of China. This is the second large-scale interactive advertising system that UTStarcom’s RollingStream® IPTV platform will support in China.
Best Tone is working with UTStarcom to build and operate a Chinese-specific, building-based video system, with 3,500 iPAD1000 terminals scheduled to go live in office buildings, government facilities, supermarkets, hotels, hospitals and schools in the Hunan Province this year. The network, intended to stream commercial advertisements throughout Hunan Province, is expected to support a total of 10,000 terminals in the region upon completion of the project. The iPAD1000 is a complete advertising system that is akin to a kiosk.

This is an interesting application of IPTV technology to mass advertising. I expect that this approach should be adopted on a broad basis globally.

Alcatel-Lucent Targeted Ad System

Alcatel-Lucent introduced a targeted ad system based on its TPSDA 2.0 architecture that adds flash memory application storage to its access nodes, switches, and edge routers.

The targeted and interactive IPTV advertising system gives IPTV operators the ability to insert ads into TV programs that are aimed at particular communities of interest and even specific households. These ads are delivered using anonymous subscriber profiles based on service usage and demographic data authorized via an opt in process and retained in a protected repository by the service provider. The system incorporates subscriber data analysis and management capabilities to support ad targeting and audience measurement features to analyze the effectiveness and return on investment from particular campaigns.

The key elements in the system are:

• A targeted ad insertion splicer and targeted ad insertion agent integrated into its TPSDA
• 5930 Interactive Media Manager which enables interactive applications and advertising campaigns
• 8660 Datagridsuite, 8920 Service Quality Manager, and 5410 Presence Server which unify subscriber data and measure responses

Microsoft has introduced its own ad insertion system last month at IBC and has not announced any support for the Alcatel-Lucent system.

This looks like a comprehensive approach that will enhance its own MiView and OMP middleware packages. Service providers that adopt Alcatel-Lucent's TPSDA 2.0 architecture should be able use this system as well. I don't think that it is tightly coupled with the middleware.

Bigband Introduces Cable/IPTV Ad Insertion System

Bigband has introduced a chassis based ad insertion system that it is targeting at both the cable and Telco IPTV markets. This system can support 25,000 to 30,000 set-top boxes assuming a 50-50 mix of HD and SD for personalized advertising. It can support higher numbers of set-top boxes if larger groupings such as geographic groups are made.

For IPTV it can create additional multicast channels, one for each personalized add that is broadcast. It can also distribute some of the ads using unicast. It is currently running trials of this product with some Telco IPTV providers.

Bigband stated that it will have more announcements about the application of this product to Telco IPTV over the next several months including which middleware software companies will support its system.

This is an interesting announcement. Interactive advertising and interactive content will become increasingly important in differentiating IPTV from its cable and satellite competitors.

Changes in UK Consumer Behavor

Oxygen8, a UK new media advertising company, has released market research results that indicate that:

• Digital media now accounts for almost 50% of daily media consumption and is the preferred medium for receiving marketing messages
• 41% of consumers chose the Internet as the medium they could not live without
• Only 62% of TV is now watched in real time
• 75% of the UK population rarely watch TV adverts when viewing recorded programs

Two thirds of of the advertisers recognise that consumers are less receptive to traditional advertising, 76 per cent feel that Internet advertising is more effective than both TV and print. 83 per cent of the media companies feel that SMS and email is more effective than the traditional channels. 13 per cent of the media companies and 23 per cent of the advertisers believe that traditional media is still more important than digital media.

This research was performed by industry analyst Redshift Research for Oxygen8.

Oxygen8 clearly has an agenda here, but these results appear to be pretty good. The lesson here is that the IPTV companies have to position themselves as new media with interactive advertising rather than old line TV content delivery companies.

UTStarcom Video Advertising System in Guanxi

The Guanxi Telecom Company, a subsidiary of China Telecom, will use UTStarcom's RollingStream IPTV platform for a new interactive advertising system. The UTStarcom system will provide 3,600 concurrent IPTV streams in 14 cities initially. Set-top boxes will be deployed in supermarkets, department stores, office buildings, and in Guanxi Telecom's facilities.

UTStarcom stated that this system has two fundamental advantages. One is its ability to scale to a large number of screens. An IPTV system is designed to support hundreds of thousand of concurrent viewers, many more than the likely number of advertising screens.

The second advantage is its ability to provide unique streams to different groups of screens. Each stream is like a broadcast channel or a set of on demand content. IPTV systems are built so that each viewer can watch different programming, which enables the delivery of targeted content to each screen. This could be organized by store or even by department within a store.

UTStarcom has pointed out to the past that this kind of advertising is a big business with significant revenues attached to it.

UTStarcom is doing a lot of good work identifying other applications for IPTV systems. These applications can significantly enhance the revenue potential for these services.

Packet Vision & Tandberg TV Solve MPEG-4 Ad Insertion Problem

Packet Vision ran into a problem with its targeted ad insertion project with the Inuk PC-based Internet IPTV service that serves about 150 thousand college and university students in the UK due to the use of MPEG-4 compression.

MPEG-4 has a latency of one or two seconds between I-frames that contain an entire screen. Between the I-frames only the incremental changes are transmitted. The ad insertions start with the I-frame but the ad being over written may have already run up to two seconds before the inserted ad starts. This creates a rather jarring experience where the viewer sees the ad to be over written for a bit before seeing the new ad.

This was not as significant a problem with MPEG-2 because the latency between I-frames is about 1/2 second, which does not create as bothersome an overlap with the over written ad.

Packet Vision worked with Tandberg TV, the company providing the encoders to Inuk, to carefully encode the broadcast streams from Channel 4 in the UK and to mark the insertion points. Tandberg TV made sure that ads started with an I frame so that a clean splice is made. This has provided a much better viewing experience.

This looks like a problem that is inherent in MPEG-4 that all encoder and ad insertion systems will need to solve. Packet Vision and Tandberg TV have done pioneering work to get targeted advertising to work in Telco IPTV services.

Microsoft Releases Beta ADK for Mediaroom

Microsoft has released the beta version of its Microsoft Mediaroom Presentation Framework Application Development Kit (ADK) to nearly 150 companies globally. These companies included content providers, applications developers, as well as its service provider customers including ATT and BT.

This ADK is intended to provide service providers, content providers, and applications developers with the ability to create interactive programming and applications that enhance the basic capabilities of Mediaroom.

I met with Microsoft in Mountain View yesterday to get an idea of what this meant. They demonstrated three demos that were created for CES in January that were based on this ADK:

• NASCAR application that gives the viewer the ability to select the specific in car camera displayed in a window on the screen and the driver audio that he or she would like to view or hear. It also provides access to information about the race, previous races, and the drivers that can also be displayed on the TV. These displays brings content that is already available on the web to the TV screen.
• A boxing application that permits the user to select the microphone audio to be played on the TV. It provides audio from four microphones. All four audio tracks are recorded on the DVR when the program is broadcast and may be selected during later playback.
• A TV based social networking application that permits to set up and join groups. Group members can communicate with each other using text entered via the remote control. It is possible to find out who in a group is watching the show you are watching in order to chat about it.

Microsoft stated that it is working closely with the companies in the beta program and are using ideas that come back from this group to decide how to enhance this ADK. It has found that this group often comes up with good ideas that it had not thought of itself.

This kind of application capability is a good answer to what IPTV does better than cable (or satellite). Of course Microsoft and its service provider customers will have to work hard to stay ahead of the U.S. cable companies. It could also be used to enhance the advertising experience as well as the programming itself.

Comcast's new Addressable Advertising Trial

Comcast is preparing a second and larger trial of its addressable advertising technology that will include 8,000 homes in the Baltimore area. This technology provides the ability for the set-top box to select the most appropriate of a group of ads that are provided for a particular spot based on a demographic profile of the home.

Comcast appears to be serious about this form of targeted advertising to blunt a key advantage of IPTV systems. IPTV has more flexibility since it is not limited by the spectrum limitations that the cable systems have to face.

Comcast's Targeted Ads

Light Reading published an article describing trials of targeted ad technologies that Comcast is running. Comcast is using technology from OpenTV that sends four ads to the set-top box, which selects which ad will be shown to the viewer based on anonymous demographic data.

This is an interesting approach that fits the spectrum limitations of a cable network. A telco IPTV network can use a similar approach without a limit on the number of ad choices. This is another way that cable companies are developing technologies to address advantages of IPTV deliver.

Microsoft Mediaroom Application Environment

Light Reading published an article describing a new version of the Microsoft IPTV software called Milwaukee. Microsoft calls Milwaukee the Multimedia Applications Environment (MAE). the MAE facilitates the development of new IPTV applications and the ability to pull in existing data feeds, including real-time updates, from websites to run concurrently on-screen with video streams; and the ability to build recommendation and personalization tools.

Microsoft gave demonstration of the streamed TV/Website data at the IPTV World Forum, using feeds and relevant background data from Nascar's Website, alongside and/or overlaid with video footage of a NASCAR race.

BT has expressed strong interest in using the capabilities of the NAE. The NAE is planned for a beta release in May 2008 and general release in August.

This is the kind of capability that Microsoft will need to takes its service provider customers to the next level of IPTV capability. It is certainly the kind of thing that they were banking on when they selected Mediaroom.

Packet Vision Targeted Advertising Trial

Packet Vision ran a targeted, addressable advertising trial on the Inuk PC-based Internet IPTV service. Inuk provides TV services to about 150 thousand college and university students in the UK using a PC-based client.

The campaign featuring a Mediacom financial client ran daily on Channel 4 in the UK between 16 and 31 October. It was specifically targeted at university students across the UK so that during the same 40 seconds in which the ad spot ran, students saw an ad from a different brand to the rest of the general viewing population.

Packet Vision worked closely with Channel 4 to support the ad insertion trial. Local ad insertion is not generally available in the UK or the rest of Europe, so the programming that Channel 4 provided to Inuk had to be modified to provide the time slots for the ad insertions.

There were 44 ad insertions made during this two week period. The ads were targeted to students located in the UK but not in Scotland or Northern Ireland. Raw viewing data was provided by Inuk to Packet Vision. Packet Vision created reports for Mediacom that gave exact counts of viewers along with some demographic profiling. This is a more precise measure than the estimates ususally provided by viewer surveys.

Inuk and Packet Vision are working on a more extensive trial that will probably be five weeks long and provide more precise geographic and affinity group targeting. Packet Vision is also working with IPTV service providers in France and in Spain to set up similar trials. It is also working with Channel 4 in the UK to smooth out the sales and operational processes to support these targeted services.

Packet Vision stated that these targeting techiniques will be implement in North America, because there is already a well established infrastructure for ad insertion. The broadcasters already provide video streams that are prepared for ad insertion.

The techniques that Pacet Vision is pioneering in Europe are extremely important to IPTV. The revenue streams from advertising will be a significant addition to the IPTV business case. There is a lot of work to be done in Europe, but the potential returns are well worth it.

Accenture Digital Advertising Study Part 4

Accenture has issued Part 4 of its Digital Advertising Study. This part of the study focuses on how digital advertising will change the advertising value chain.

Accenture's study shows that 49 percent of those surveyed believed that digital medial will become the primary form of programming and advertising content within five years. Accenture believes that new digital media are set to undermine the current TV based structure in the next few years by turning advertising into a two-way interactive experience for each consumer, and by ruthlessly highlighting the real performance and returns generated by campaigns

The study also shows that 75 percent of the respondents believe that the advertising agencies and the broadcasters have the most to lose in this transition. Accenture believes that those most at risk are the companies that do not embrace the new technologies and business models.

This is an interesting series of reports that highlight what the Telco IPTV industry must do in order to reach its full potential.

Accenture Digital Advertising

Accenture has issued Part 3 of its series on The Future of Digital Advertising. It examines the degree that the advertising industry is prepared for the technological changes that are coming with the new digital techniques. The report finds that:

• The migration to digital technology will challenge the advertising industry in virtually all aspects of what it does — its business models, its culture, its customer relationships, and even how it is compensated.
• The advertising industry is not well prepared for the new technology.
• Advertising will move to three screen strategies that will encompass the TV, the PC, and the mobile handset.
• The new technology entrants such as the online search companies may have the most to gain from digital advertising.

This is an interesting set of reports that is well worth reading. All of this uncertainty is clearly creating opportunities for creative approaches and new entrants.

Accenture Reports on Digital Advertising

Accenture has published brief results of a survey on Digital Advertising in two parts at the following link. There were only a few results published, including:

• 79 percent say that advertising will become more performance based.
• 87 percent say that analytics will become more accurate and more critical to the business.
• 97 percent say that advertising relationships with customers will become more interactive.
• 52 percent of DVR users skip all ads and 36 percent skip most ads.

None of these results is surprising, but it is interesting to see them confirmed. The reports give some of the background behind these numbers.

KT to user IPTV Advertising

Korea Telecom the will acquire Nasmedia, an online advertisement agency for $US28 million. Nasmedia will sell ads for Korea Telecom's IPTV and mobile Internet platforms starting in 2008. The acquisition is a response to SK Telecom, the largest wireless carrier in Korea, which bought an ad company Aircross in 2000.

The purchase of Nasmedia is one of the steps Korea Telecom is taking to transform itself from a telecom operator into a media and entertainment company. It plans to provide tailored advertisements for new media outlets.

Korea Telecom believes that its IPTV subscribers will increase five fold to 1.5 million over the next 12 months and it will become a major source of advertising income.

Advertising is becoming a major emerging source of new revenues for mobile and IPTV services globally. This is a clear trend on a global basis.

Alcatel-Lucent Buys Tamblin for Interactive Advertising

Alcatel-Lucent has acquired Tamblin to strengthen its capability to provided interactive IPTV advertising. Tamblin is a UK company with 13 people that offers a software system called i-ZoneTV that allows TV service providers and broadcasters to build interactive advertising applications and audience response capabilities into their services. Its system is currently being used by the BBC, BskyB, and ITV in the UK. The company has also integrated its software into Microsoft's Mediaroom TelcoTV software package.

Alcatel-Lucent has been quite serious about the personalization of ITPV services and advertising for a long time. It has been working on its on personalization and audience measurements strategies. It looks like this acquisition is a real coup given Tamblin's key role in the very active UK interactive TV market.

Accenture Online Advertising Report

Accenture has released a new report on online advertising. It finds that the content providers are embracing the Internet and other new technologies that promise to change their industry. They expect that user control is becoming very important. These content companies expect they are in the best position to profit from these changes.

These people also expect that advertising support is going to remain the predominant means of monetizing their content; however the nature of this advertising will change. While they expect that audience measurement will be the primary way of pricing advertising, interactive approaches that include cost per click or cost per action will become nearly important.

This report is well worth downloading and reviewing. It shows that fundamental changes are actually starting to happen.