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Last week, Ian Shepherd was appointed as the first dedicated managing director of Sky Interactive. This was part of an internal restructure designed to realign all the interactive elements within Sky Active in order to cross-sell its products to consumers and advertisers.

The move is a strong indication that, after a slow start, Sky Interactive is beginning to make headway. It is armed with the right technology to extract the massive commercial potential available through Sky Active and its associated services.

Shepherd, who has spent the past four-and-a-half years as Sky's customer marketing director, says his main challenge is to pull in more punters by offering new services that customers feel compelled to buy. "A vast one-third of Sky customers went online or pressed the red button and did something in the past quarter. The challenge is to work out how frequently they use the service and make it easy for them to come, have a look and be seduced by another offer," he says.

According to Rob Leach, Sky's head of interactive services, the company is confident it can increase the profitability of its interactive offer.

"We merged the text portal with the interactive portal and are looking at how the revenue streams that come under Shepherd can be cross-sold in order to give both areas a boost," he says.

But what is Sky Active and how does it work? Using the interactive button on the Sky remote, viewers can select Sky Active while watching any Sky channel. This will take them straight to the interactive services, but will keep the programme running in a quarter of the screen. Viewers can gain access to four Sky Active sites of their choice.

Sky Movies Active offers viewers a cinema-booking service, movie news and film previews. Sky News Active allows viewers to air their views on a news item or to view eight screen video reports of their choice. Sky One Active offers viewers the chance to interact with flagship programmes through voting and quiz competitions. Sky Sports Active allows viewers to swap between alternative camera angles of games, view match highlights, player statistics and watch competition games simultaneously.

On top of the core Sky Active services, there are: the games site Gamestar; Sky Bet, the betting service, and mobile, offering text messaging and e-mail. In addition, Sky Buy and Marketplace offer a virtual department store.

But the biggest revenue generators are the betting sites. In fact, betting and games has been the cash cow since Sky launched its interactive services back in the early days of Open. Text messaging is now taking off, with 1.6 million messages sent a year, but it still has some way to go.

Interactive ads are becoming a good revenue stream for Sky: more than 340 "push the red button" ads have gone live.

But back in the first days of Open, there were so many teething problems it's a wonder that the interactive services have taken off the way they have. BSkyB's recent annual results showed a turnover of £218 million for Sky Interactive, up 17 per cent.

Open initially launched in 1999 as a virtual shopping mall. A few games and the experimental interactive ads service launched at the same time.

Shopping facilities were hailed as the future by Sky but failed so miserably on Open because the viewers preferred to use the platform to play games. Sky bought out Open's other shareholders in 2001, closed the service and Sky Active was born.

Since then, things have evolved at a rapid rate, thanks to faster, cheaper technology and a change in focus in terms of the services on offer.

Sky's websites, all accessible through the main portal Sky.com, are another profitable revenue stream for the broadcaster, but are still a different commercial proposition from the rest of the interactive business. Sky Sports, Sky News Active Online and Sky One continue to be the most popular sites.

"We see a time when text, interactive television and websites will all be linked, but we are not quite there at the moment," Leach says.

Damien Burns, the head of digital at Zed Media, says Sky.com has been a stronger proposition since the introduction of broadband this July. "Thanks to the improvement of the technology, online services have become more attractive to the type of early adopting customers our clients are interested in."

Shepherd will also focus on selling Sky's technology to other broadcasters. While most third-party broadcasters are using the Sky platform, they don't use Sky's new technology, WML, an efficient, web-based technology that is far cheaper and less clunky than the old technology of Sky's Open platform. ITV should be up and running and using the Sky technology soon. The long-awaited deal has not yet been signed, but it expected to take place within the month.

Most importantly, Shepherd intends to oversee the building of more interactive sites. Phil Nunn, the director of digital channels at Manning Gottlieb OMD, suggests that Sky would do well to think beyond the red button. By this he means allowing agencies and advertisers to get closer to consumers by tapping into Sky's consumer insight.

"There must be a way of achieving a greater level of interaction with our client's customers than we do at the moment," he says.

Overall, agencies have high praise for Sky Active and view its consumer interactive offering as streets ahead of anything else in the market.

However, they say that most of the advanced activity is still seen on programme content, rather than the commercial side.

In the short-term, Shepherd's challenge will be to push Sky to keep up with consumer demand. As Toby Hack, the head of interactive media at OMD UK, warns: "The way that services will progress is completely dictated by customer demands. Television will soon change, and reality TV will have to go away eventually. Sky needs to be ready for that change."