Speech Summaries

Josh Bernoff Vice President Forrester Research, Inc.

The Cure For The Incredible Shrinking Commercial

Josh Bernoff, Principal Analyst, Forrester Research, talked about how new technology will affect television advertising. In five years' time commercials will reach only 26% of the audience, and this number will decrease as personal video recorders become more popular.

Current advertising assumes that people have to sit and watch commercials, but with PVR penetration reaching 42 million US households by 2006, the consumer can easily skip through the ads. Companies need to start "auditioning" their ads for viewers instead. This entails adding a level of interactivity (such as coupons or special offers) that has been shown to slow down the rate at which people flip through commercials.

Wink, with a 2% click-through rate, is the best way to implement this. It allows interactivity and will reach 6 million people by the end of the year. Using Wink will tell companies who their consumers are, what kind of ads they respond to, and which networks are the most effective for advertisers.

Now is the time to switch over to interactive commercials. Companies should spend the money on this immediately to gain market share from their competitors. In a world of on-demand television, companies can no longer assume that they are in charge. Interactivity is the key to bringing the customer back.

Questions And Answers

Q: How do consumers interact with ads if they use PVRs to skip them, and if they don't want to watch ads why would interactivity help?
A: Regarding ad skipping, you have to make people want to interact with you. Interactivity has high penetration -- you have to train people to see value in interactivity.

Q: When someone clicks on a coupon how does a CPG company know who clicked, and are they dealing with privacy implications?
A: You can't know who in a household has clicked on an ad. It is possible to add the ability to know who is clicking but that would get in the way of ease of interactivity. You are not allowed to continue marketing to people once you have their name and address -- providers have to be very careful with privacy issues. In general the cable industry has been sensitive about this.

Q: To what degree does the cost serve as a barrier?
A: Cost is not an enormous barrier; anyone who has a cable box will likely have a digital one in five years' time.