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Unlike existing interactive TV ads, which require users to leave the broadcast to call a phone number or log on to a separate interactive shopping section, Channel 4's system allows users to make a cash transaction on-screen - while still watching a broadcast (see Revolution, 6 November, p3).

The British Red Cross charity was the first advertiser to test the service, which debuted during an afternoon screening on Channel 4 of the Burt Lancaster film From Here to Eternity.

Although Channel 4 is coy about other advertisers set to use the service, its development offers potential for direct sales to viewers watching via Sky digital, which is the only format where it is possible, because of the existence of a return path.

Using technology developed by Sony's stand-alone iTV agency GOiNTERACTtv, Channel 4 can provide advertisers with off-the-shelf services to manage the return path, credit card verification and order processing.

Neil Cashman, chief technology officer at GOiNTERACTtv, says: "With the back end catered for, the creatives no longer have to factor in the capital expenditure and hassle of building and managing their own transaction infrastructure. This will encourage them to focus on the front end, creating on-screen offers for viewers."

But Daniel Salem, commercial director at Viacom Brand Solutions, the ad sales arm of music broadcaster MTV's parent firm Viacom, is cautious about the new service's potential.

"As far as I know, this is a first for TV," acknowledges Salem. "But will people who are being entertained while watching TV really want to shop? TV remains an entertainment technology, and people are reluctant to interact with it for anything else. People still aren't comfortable shopping online, but it depends on the product. With items like DVD boxed sets, there is huge potential for an impulse buy."

It remains to be seen what products sell well via the ads, but Merlin Inkley, head of airtime management at Channel 4, is positive about its value.

"I can't see people buying a car using this system, but we could see people buying videos or CDs," he says. "With programmes like Six Feet Under, you could buy the series. It would be an impulse purchase. I've approached the people who do our merchandising about it."

Although broadcasters will have to maintain a clear definition between ads and programming, the power of such services has also been realised by MTV. According to Chris Sice, vice-president and general manager of digital channels and interactive at MTV Networks UK & Ireland, the channel is looking at how it can enhance its interactive TV services during 2003.

"TV ads are starting to bridge the gap between brand awareness ads and direct marketing," says Sice. "Most iTV ads have not been contextualised with the broadcast stream. This is the next stage for MTV, so you can watch a J-Lo video and buy the album, as the database will know J-Lo is playing."

Channel 4's service utilises Sky digital's return-path capability via normal phone lines. It has emphasised the limitations of other digital TV platforms.

So while Sainsbury's has re-affirmed its commitment to iTV by launching what is claimed to be the largest iTV store of its kind on ntl, cable platform shoppers here and on Telewest must visit each service's walled-garden shopping area.

However, both operators are developing their platforms and allowing broadcasters such as MTV to offer on-screen interactive services across all major platforms for events such as its 2002 European Music Awards.

As there is no technological reason preventing the system being rolled out to other platforms, GOiNTERACTtv's Cashman believes advertisers could "bash heads together" to get the service rolled out over cable and digital terrestrial TV (DTT).

"From the advertisers' point of view, a single solution across all platforms is cost-effective and desirable," he points out.

Freeview, the new DTT platform backed by the BBC, BSkyB and wireless technology firm Crown Castle International, promises to deliver digital TV to the masses now that ITV Digital has fallen by the wayside.

Launched in October, the free-to-view service could go some way to helping the Government achieve its analogue signal switch-off target of 2010.

A spokesman for BBC New Media says Freeview will let users choose between different tennis courts during Wimbledon broadcasts thanks to multi-streaming.

But it won't offer interactivity such as on-screen voting during shows like the BBC's Fame Academy, because of the lack of a return path.

So interactive ads are a no for Freeview channels such as MTV's Music Factory, Emap's Smash Hits and even Channel 4.

MTV's Sice prefers subscription-based platforms such as Telewest, because Freeview's mandate to be accessible and subscription-free could prevent it from developing interactive return-path services.

"Digital terrestrial will always have a handicap," he explains. "As with ITV Digital, it is not plugged into the phone - unlike Sky digital, which makes it compulsory as part of the subscription package. In the latter case you can use the return path and make revenues from it."

But Salem suggests that the jury is still out on whether interactive services will unlock a desire to buy goods via TV.

"Just because new platforms are available does not mean brands will necessarily increase their budgets," he says. "They may just split up the allocation across the platforms."