Boston Startup Brings Back Interactive TV—By Marrying It to the Internet

11/16/07Follow @wroush

Interactive television is the hottest technology that never was. Broadcasters and cable companies have been tinkering with the idea since at least 1977, when Warner Communications rolled out a two-way service called Qube that allowed subscribers in Columbus, OH, to participate in game shows and electronic town meetings through their set-top boxes. Though it was popular and technically successful, Qube was too expensive to maintain and was eventually phased out. Countless other schemes attempted in the United States, Canada, and Britain have met similar fates. Today, ordering a movie on demand or phoning in your vote on American Idol is pretty much the limit of “interactivity” on TV. (Microsoft’s WebTV, now called MSNTV, doesn’t count—it’s just a way to surf Web pages over a dialup, DSL, or cable connection without a PC.)

But now there’s a company in Boston that wants to take another run at interactive TV—this time, coordinating it with the interactive media that really did succeed, the Internet and the World Wide Web. Backchannelmedia—which announced today that it’s completed a $9.5 million seed funding round—makes software that runs on set-top boxes and cable companies’ distribution networks. The software allows programmers to show interactive pop-up ads during TV shows; viewers can “tag” or “bookmark” this content using the OK button on their normal remote control, and the information is then forwarded to a customized location on the Web, where viewers can act on it later via their computers.

“Say you’re watching the Grammies and the Dixie Chicks are on,” explains Daniel Hassan, Backchannelmedia’s chairman and co-CEO. “You have a consumer sitting at home watching when they win the award, and they see an ad that says ‘Go to iTunes now to download this song.’ The consumer clicks the OK button and a link to that exact song is deposited into their iTunes account. Or they’re watching Oprah’s book-of-the-month club—one click and that book is not only dropped into their Web portal inbox, but if they’ve set it up through our Web services, it can be dropped into their personal Amazon shopping cart. It’s all about using a TV property to drive clicks to the Internet.”

The system even works when consumers are viewing shows they recorded on their DVRs. But while people viewing Backchannelmedia’s ads are busy shopping and requesting information and content downloads, the real action will be going on behind the scenes. The company’s pitch to its potential licensing partners—cable companies, TV producers, networks, media sellers, and advertisers—is all about bringing Internet-style measurability and accountability to the world of TV advertising.

The Backchannelmedia Research DashboardFor conventional television ads, ratings from organizations such as Nielsen Media Research are the only way to get an idea of an ad’s impact—and even then, the data measure only impressions, not actions. Backchannelmedia’s software, by contrast, counts consumers’ “click-throughs” and produces an exact return-on-investment breakdown for each interactive ad. “Our goal is to supply real-time response data and allow advertisers to make better decisions about their media buying,” says Hassan.

The company, which has been around since 2000, has raised nearly $10 million over the past two years from unnamed angel investors. It’s now preparing to mount a trial version of the service in the Boston area in the first and second quarters of 2008. But what makes Hassan think that interactive television’s day has finally come? “The reason it became such an expense to roll out [an interactive TV system] in the 1990s was the need to consolidate the cable system” around a smaller number of providers and set-top-box technologies, he says.

“The conversion to digital has ushered in new technologies and delivery systems that allow for a better interactive platform,” says Hassan. “The hardware heavy lifting has been done, including consumers’ existing remote controls and set-top boxes. We consider ourselves the finishing touch—the advertising layer.”

Backchannelmedia’s ability to work with existing television technology—and the fact that its service capitalizes on existing TV viewing habits, rather than requiring consumers to develop new ones—may be its biggest strengths. Though there’s been much hand-wringing among producers and advertisers about the defection of audiences from television to the Internet, surveys show that there are still 196 million people in the United States who watch television every day, for an average of 4.5 hours a day. Equally important, more and more people are watching TV and using their computers at the same time; 58 percent of Internet users surveyed in October by Burlington, MA-based Burst Media said that they watch TV while they’re online.

Numbers like that point to a rather large upside if Backchannelmedia’s interactive ads were ever to catch on. “If we can entice consumers to click even once per hour, that’s 27 billion clicks from the TV to the Internet per month, which far surpasses the click-through rates anybody has managed in the search business,” Hassan points out.

Google, are you watching?

Wade Roush is Chief Correspondent and Editor At Large at Xconomy. You can subscribe to his Google Group or e-mail him at wroush@xconomy.com. Follow @wroush

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  • http://klopfens.myweb.uga.edu Dr. Bruce Klopfenstein

    If you would like a copy of a University of Georgia interactive television forecast, please email me at drbrucek@gmail.com You will become part of the panel (this is not a survey, just a panel of experts from the iTV industries). Your input will be invaluable, but will not require much of your time.

    See http://klopfens.myweb.uga.edu for the official invitation. Once I have an email address for you, I will add you to the panel. The questions are online at http://armstrong.wharton.upenn.edu/delphi2/expert.php and your userid is the email address you use to contact me.