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Interactive television advertising has suffered confusion since its infancy. There are a confusing number of platforms, each offering a confusing number of ad formats. The way the ads are bought is perplexing and marketers are perplexed as to whether they are using a direct-response, data-gathering platform or one resembling traditional TV.

But interactive TV, or iTV as we shall call it, is becoming a lot less confusing. The differences between platforms are becoming more clear cut, sales houses are making it easier for agencies and clients to plan and buy campaigns, and, crucially, companies like Press Red are producing templates enabling creative agencies to build their own iTV ads, rather than having to rely on the platforms to do it for them.

"There will be a significant rise in interactive advertising in the next year as creatives and advertisers figure out what works," says Neil McDonald, managing director of DITG. "The huge power of TV has now been coupled with great technical, interactive capability."

Platforms and channels

There are three types of digital TV: digital terrestrial (Freeview), digital cable (Telewest and NTL) and digital satellite (Sky Digital).

The latter is the most advanced and is the only platform that lets marketers run broadcast ads which, when clicked on, take viewers to an interactive area. Sky offers marketing opportunities in its walled garden area, Sky Active, as does digital cable, but viewers can only interact with Freeview via phone and SMS.

When people think of iTV advertising, they tend to think of press-the-red-button broadcast ads. Channels currently offering these ads on Sky Digital are: all Sky channels (such as Sky 1); Channel 4; E4; UK Gold; Living; Bravo; Play UK; UK Style; UK Food; Challenge TV; Trouble; UK Horizons and UK Drama. ITV recently joined this group, after two years of negotiations between Sky, Carlton and Granada, and has broadcast interactive ads for Honda, Ford and Sky.

When buying press-the-red-button broadcast ads, advertisers need to do a deal with a channel for the airtime and with an interactive service for the interactive content. Sky Sales is the saleshouse for all Sky channels, Channel 4 sells its own ads (interactive ads always appearing last in an ad break), and Interactive Digital Sales (former saleshouse of Flextech Television) is the saleshouse for the others.

Granada Enterprises and Carlton's interactive arm, Carlton Active, jointly sell and manage interactive airtime for ITV. The budget should include the cost of airtime, the interactive application, content design (£10,000-£20,000, according to the DMA), banner ads in the Sky Active walled garden (if desired) and data gathering (Sky charges 50p per lead).

When viewers click through a red-button ad, there are several options for advertisers to choose from. "The DAL (dedicated advertiser location) and mini-DAL are richer formats than the microsite or Impulse Response, allowing for video and audio," says David Hughes, sales and marketing director at Press Red. Impulse Response provides a data-capture area at the bottom of the screen while the ad plays in the background. This costs about £5,000 a campaign. The microsite shrinks the video down to a quarter screen with a three-quarter screen wraparound and costs about £7,500 a campaign. The mini-DAL, at £15,000, does the same thing, but the quarter-screen video can also be used by the advertisers.

Creative design

The DAL jumps viewers from a broadcast ad to a dedicated video channel, which firms can use to show a full-length version of a shorter ad, as Honda did with its Cog ad campaign recently. Adidas also used a DAL to show a five-minute loop of out-takes from its ad starring David Beckham and Jonny Wilkinson. DAL prices vary: the most expensive can cost £15,000-£30,000 for the software build and then £40,000-£100,000 a month to run, according to the DMA.

When it comes to creative, things have been made a lot easier with the development of the BlackBox Designer from technology firm Press Red. Agencies can use the template tool to create the interactive element of their iTV campaign. "When creating an iTV ad, you can choose the position of the red button - when Sky allows this - the format you want to run the ad in, the colour and the text to populate the data fields," says Hughes.

"Previously, Sky would do it, so the BlackBox Designer has opened the market up."

There is no charge for the development and speculative work. When the campaign goes live, Press Red charges a submission fee, but this is discounted from the overall cost of the campaign by Sky, in an effort to incentivise agencies to create their iTV ads themselves. Press Red has also partnered with Dublin-based emuse technologies to market its Modelstream, which will be licensed at £10,000 a year. It will help agencies to create DAL and mini-DAL ads in the same way that BlackBox Designer assists with Impulse Response and microsite design.

The DMA puts the cost of a typical four-week campaign on Sky - using interactive broadcast ads leading to a microsite that doesn't incorporate video, including banners and buying in 40,000-50,000 names and addresses - at something like £75,000-£100,000. "Come the New Year, the bandwidth costs should come down by 30 per cent," predicts Tony Hack, head of iTV at OMD.

One major opportunity that is offered by interactive advertising is data gathering. Sky Digital can pinpoint the respondents to your ad by household, without asking them to input their addresses, and it charges advertisers 50p for each lead. Alternatively, if advertisers just want the information they asked respondents for directly, that costs 25p a lead. Sky also charges £25 a day to process the leads. Advertisers can ask Sky and the IDS channels for the day and time of each interaction, where it occurred and the response to up to eight questions, as well as the names, titles and addresses.

Channel 4 requires viewers to input their names and addresses when they first interact and serves them with pre-populated address fields, which can be changed if incorrect. It allows five extra questions.

Sky and IDS ask viewers to opt-in to receive further marketing from the advertiser (such as direct mail) while Channel 4 only allows viewers to be mailed for one-off fulfilment purposes, such as delivering a specific brochure or sample that has been requested. With Sky and IDS, the address data remains the property of Sky, but is licensed to the advertiser. With Channel 4, the address data is held by Go Interact, the channel's technology partner, and is only handed over to an advertiser for fulfilment purposes.

New opportunities

Sky offers further opportunities to marketers in its walled-garden service, Sky Active. Companies can have a permanent presence in this area, offering a service or selling products (like Friends Reunited or Fish4), or they can run banner ads to drive people to their DAL. Banners can support an iTV campaign by driving visitors to the DAL between broadcast slots.

However, banners are no good if an advertiser is running Impulse Response ads as this mechanism is only available when the broadcast ad is running.

Banners can run on Sky Active and Gamestar (Sky's games service) and are sold by Sky Sales. Viewers can access the walled garden by pressing red on their Sky remote while tuned to Sky One, Sky Sports, Sky News or Sky Movies, or by pressing the Interactive button on their Sky remote.

Although cable digital TV doesn't offer broadcast ads that can be clicked through, it does have a few advantages over satellite: viewers interact via the cable rather than the phone line, so the return path is always on and doesn't tie up the phone. As with Sky's walled garden, companies can either buy a long-term presence or a microsite with several pages of advertising content, which must be created according to specific templates.

Banners can be bought to drive viewers to a site. Digital cable uses a technology language compatible with html, making it cost-effective for companies that already have web sites.

Another option is enhanced sponsorship, whereby a company provides interactive content around the programme it is sponsoring, as well as receiving the traditional idents at either side of the ad break. The ITC has a few things to say about enhanced sponsorship and highlights the 'two-click' rule.

"A choice to interact is not the same as a choice to receive advertising or offers for sale," it states. "No choice to interact with editorial programming may take a viewer at the first click to a site dedicated wholly to advertising content. When the viewer first chooses to interact with editorial, the destination must therefore offer some editorial programme enhancements. These may be coupled with links to commercial content, E but there should be a clear indication that the next click will take the viewer to ads or offers for sale."

Procter & Gamble snack-brand Pringles used enhanced sponsorship to interact with its target 16- to 34-year-old market in February 2003, when it sponsored the interactive coverage of the Brit Awards on ITV1. Digital satellite viewers could access all nomination and award details, read articles about the awards, and answer an online quiz to gain entry to a prize draw to win a jukebox worth £1,500. Viewers could also vote for their favourite past Brit winners through the 'Pringles Popularity Poll'.

Branded channels

Another option that is becoming a reality for marketers is the opportunity offered by digital TV to run your own branded channel. "Confining yourself to the walled garden area is OK, but it isn't tapping into the real power of television," says DITG's McDonald.

It seems like an expensive option and high-profile failures in this arena, such as Boot's Wellbeing and Sainsbury's Taste Network, may have put some marketers off, but McDonald points out that it is easier and cheaper to launch your own TV channel than ever before. "To set up a channel costs only £1 million a year," he claims. "The time is right for a brand to get serious on iTV and I predict that major brands will launch a channel on Sky in the next few months."

Companies that have their own TV channel include Thomas Cook (see feature, p30) and Exchange & Mart (the classified ad business owned by United Advertising Publications). Exchange & Mart TV transmits on channel 696 on Sky Digital and uses technology from the Digital Interactive Television Group (DITG) to enable users to obtain details of the product or service they require by using the red button on their remote control. Viewers of the channel, which is free to air, gain access to a searchable database of more than 200,000 ads for items including used cars, holidays, and property and businesses for sale.

The channel approach allows Exchange & Mart to offer viewers a more TV-like experience than it could if it had a presence in the walled garden area of Sky Active, like Friends Reunited and Lastminute.com have. The channel also has a presenter who explains the service to viewers. "The presenter format helps users to understand the service itself and the benefits it has for them, thereby giving us a competitive edge," explains Tim Brown, business development manager at Exchange & Mart. "Maximising digital-distribution channels also enables us to increase response for our advertisers at no additional cost to them."

Interactive TV one-stop-shop Zip Television set up Consortium4TV in June 2003 with the objective of determining the potential benefits of advertisers collaborating to launch an advertiser TV channel. To date, the consortium members of the scheme include P&G, Unilever, Reckitt Benckiser, BT, Honda, Gillette and Orange. Zip TV was expected to report on its findings as Revolution went to press.

Interactive ad campaigns must comply with the regulations of the Independent Television Commission (www.itc.org.uk) and Data Protection Act.

There are a number of helpful information sources for marketers seeking further information on iTV advertising. The Direct Marketing Association has an Interactive TV Council, chaired by Mike Colling, the founder of Mike Colling & Company, which includes representatives from Channel 4, Sky, Carlton Active, Zip TV, Claritas, WWAV Rapp Collins, HHM and Granada. The organisation published a detailed and helpful Guide to Understanding Interactive Television in June 2002, which can be accessed through its web site (www.dma.org.uk).

It is also working on the development of a responsible and ethical approach to marketing to children using iTV, building on the existing DMA Online Code of Practice.

Helpful sources

Zip TV (www.ziptelevision.com) has also published a report on interactive TV, iTV - Coming Of Age, which is available on its web site. More than 250 marketers took part in the survey, which was sponsored by the DMA, Sky, Channel 4, IDS, Diss Promotional Marketing and Claritas. Finally, Interactive TV Today (www. itvt.com) provides links to relevant research papers.

There have been several false starts in iTV advertising, but the consolidation and activity going on in the sector is making it increasingly look like a viable opportunity for advertisers in 2004.

Masterclass panel

David Hughes is sales and marketing director at Press Red; a services company that offers iTV ad (i-Ad) content creation and campaign management tools to the ad industry.

It developed i-Ad creation tool BlackBox Designer, accredited by Sky.

Toby Hack is head of iTV at media agency OMD and heads up specialist interactive TV agency OMDtvi, a full-service iTV agency renowned for being a market leader. The agency's clients have included Rimmel, Reckitt Benckiser, Nicorette, Peugeot and Vodafone.

Neil McDonald is managing director of DITG (Digital Interactive Television Group). He was previously chief executive of Sportal and led it through launch and expansion in Europe. Earlier, he was general manager of internet services at BT, dealing with clients like Tesco.

First Direct boosts response with three iTV campaigns

Telephone and internet bank First Direct ran three iTV campaigns on Sky Digital in 2002 to boost take-up of its smart mortgage.

The first promotion, early in 2002, used the Impulse Response format, while the next two used DALs. The campaigns were created by digital creative agency de:construct and interactive marketing agency PHDiq.

"Interactive activity had to be an extension of the TV ad first and foremost," says Dan Douglas, business development director at de:construct. "The brand and direct-response side had to work together, and we wanted to provide entertainment."

The TV ads starred Vic Reeves. In one broadcast campaign, passers-by were challenged to choose which toy cat was stuffed with £30,000 while another contrasted real people with robots. In the first campaign, an on-screen prompt in the broadcast ad invited viewers to take the challenge at home for the chance to win a holiday to Prague. The second had a competition to win a trip to Copenhagen.

Viewers who clicked the ad were taken to a DAL, which asked them to navigate through several screens. Those who didn't wish to could apply for a brochure.

The first DAL campaign asked users to choose between ridiculous and obvious answers, and all were offered entry into the holiday prize draw. The second asked viewers to decide which robot was most like their current bank.

De:construct claims the iTV activity had a positive effect on brand as well as direct response. The impulse response activity had the lowest response but highest conversion to customers, at 4.7 per cent. The cat promo generated 2,447 requests for user packs via the dedicated ad location, with a 1.6 per cent conversion. Viewers spent an average of 45 seconds on the quiz and some up to 1.5 minutes.

De:construct also claims customers acquired from the iTV promo were a lot higher in value than the bank's average new customer. "The robot campaign had similar results," adds Douglas.

TOP TIPS ON ITV ADVERTISING

1 Don't try to simply transfer your web site to TV as viewers approach TV in a more passive frame of mind and sit further away from the screen.

2 Avoid using text - use graphics, soundtracks, animation or video - but, if you do use it, make sure it is at least 18 points in size.

3 Remember, TV is an entertainment medium and your ads should entertain.

4 If you're providing a 'call-back' button, make sure you can deliver the call promptly.

5 If you're launching your own TV channel, bear in mind that the rules differ: entertainment channels, for example, can only run three hours of home shopping a day and must commit to showing 12 hours of original entertainment.

6 A remote control and the red button isn't the only way to add interactivity to programming and advertising. SMS allows viewers without digital TV to interact with your brand or show.

7 As well as gathering leads, you can use the data gathered from your campaign to find out which channels and time of day/week get the most response, and use this information in future.

8 Games channels like Avago and Playjam let advertisers create games themed around their product or brand.

9 According to the Institute of Practitioners in Advertising, children are mastering iTV faster than adults and are often the 'resident experts'. Even brands not targeting kids directly can do well by targeting their iTV ads to them. See Procter & Gamble's Treasure Planet activity.

10 iTV can be the hub of a campaign, rather than an add-on. P&G is leading the way again, replicating its Treasure Planet activity online.

CHECKLIST

Questions that should be asked when thinking about iTV advertising

- Is my agency qualified to carry out an iTV campaign? Would a multiple-agency approach be better?

- Which platform is best suited to fulfil my campaign objectives - satellite (Sky Digital), digital cable (Telewest and NTL) or digital terrestrial (Freeview)?

- Which ad format is likely to fulfil my objectives - a permanent presence within the walled garden, a DAL, mini-DAL or Impulse Response?

- How will I drive traffic to my content? Banners or broadcast ads with a red-button facility?

- Have I tested the campaign for functionality and content?

- Have I produced a forecast against which I can track actual performance, such as rate of response?

- What kind of data do I wish to gather from the respondents to this campaign?