Since joining Media Experts as the new VP of its iTV lab in July, veteran broadcaster Ian MacLean has spent every working hour studying interactive television as well as its impact on advertising.

MacLean, whose last 22 years have been with CHUM Ltd., most recently as director of programming, has witnessed first-hand the development of digital technology in the broadcast market.

But while Personal Video Recorders (PVRs), such as the TiVo, offer consumers the ability to skip commercials, the iTV lab technology is geared toward increasing TV viewing. This is especially true for light television viewers – a high-income, professional demographic group – since iTV enables them to customize content and allows advertisers to zone in on their market more specifically.

Since North America is a year-and-a-half behind Europe when it comes to iTV, the lab has been tuned into what is happening overseas, but MacLean cautions that the time gap between the two markets is shrinking. He talks to Strategy about the state of iTV deployment in Canada and the major issues that need to be addressed before the technology begins to take off this fall.

Q: What is the mandate of the lab?

A: At this stage, it’s very much exploratory and experimental. It is projected that by September, Canada will have well over 2.5 million households receiving digital television.

Q: How are advertisers in Europe and the States utilizing the new technology effectively?

A: I saw interesting things from Virgin Mobile, which had a 30-second TV spot called ‘See Red.’ While it is playing, you have an interactive icon on the screen. When you click on that enhancement, it takes you to a separate site. It enables you to interact with Virgin and find out all about their phones. In the U.S., Ford did a Wink-enabled campaign that saw some dramatic click-through rates. Of the people that clicked through, 40% went through to the end of the presentation. We’re leveraging the power of television, the strongest branding medium we know, and marrying it to technology that permits us to go deeper into our association with the brand.

Q: How difficult is to keep up with the new technology?

A: It’s like buying a computer. The one you bring home is obsolete in a week. This is why we’re constantly talking to people abroad. We need to stay abreast of what’s out there. I think this 18-month gap between the European and North American experiences is going to become narrower as we get new services. We’re going to begin to see a widespread consumer interest in PVR because it enables you to have control, customization and content on demand.

Q: Where do we stand in Canada?

A: Agencies have to rethink how they approach TV. It does provide great opportunities to extend branding and the relationship you have with your client. There are certain elements similar to direct marketing. I think the cable and satellite companies need to work together on some standardization of platforms. There are a lot of hardware and software manufacturers, but it’s sort of like the Wild Wild West. A few key players are emerging, and I think for us to effectively deliver national ad campaigns across interactive TV space, there has to be a unified business model to let advertisers reach all the digital subscribers regardless of what form they’re receiving their signals through.

Q: Are there any concerns among advertisers?

A: Television is in the process of morphing from a mass to a niche medium. That has some worried that the audience is too fragmented. We look at it from a positive viewpoint. If you were to go on a vertical channel like FashionTelevision, you may have a smaller audience but they’re all pre-disposed to fashion. So they’re receptive. If the creative is done right, and there’s a compelling offer that’s relevant, then you’ve won half the battle.

Q: Has there been research indicating how consumers will respond to iTV?

A: In homes with PVRs, TV-viewing per week jumped from 15 to 18 hours. The amount of programming people were recording jumped from four to 11 hours. But the most interesting part is that when asked if they are satisfied with television, prior to PVR, only 20% were. But 77% of those with PVRs are satisfied. So it really increases the experience. People who don’t have the time to watch TV comprise one of the most attractive demographic segments: the highly mobile, high-income, light TV viewer. Now that person will have access to the ease of PVR, so that sought-after demographic segment is going to watch more television and be more exposed to advertising.

Q: What do Canadian advertisers have to do to prepare for iTV?

A: Ask themselves the following question: Do I want to be in this space when the audience arrives in mass numbers, or do I want to spend the next five years playing catch up? They need to speak to agencies like ours who have experience in iTV, who have been monitoring what’s going on in the landscape and know the key players. I think we need a few pioneering campaigns to show the rest of the community how powerful this could be. That’s how it’s been rolling out in other countries.

Q: What major issues still need to be resolved?

A: Digital rights management, particularly when video on demand becomes a reality. We will have to decide the worth of catalogues of movies and how the individual rights holders of that material are going to be compensated, because they have to be. Another major issue is privacy. One of the great advantages of iTV is ‘addressability.’ It would be of particular interest to an advertiser such as Pampers if they knew Teletubbies was being watched in a household. But this has to happen without compromising people’s privacy. The cable and satellite industry has looked long and hard at this question because the last thing it wants to do is rile consumers. It wants a ubiquitous deployment of iTV, and the only way you can get that is if consumers feel there’s a benefit and they haven’t traded away their privacy to get it. You can deliver addressable, meaningful advertising without compromising privacy.

Q: How can marketers do so?

A: I think there’s a way to build audience segments based on viewing. I don’t think we need to know that John Smith lives in that house, but we can know that there might be someone with an interest in music living there.

Q: Many advertisers jumped on the Internet bandwagon and for some it was a disaster. Are there risks to coming onboard early with iTV?

A: The companies that get involved with us early learn how consumers react to the product. That’s valuable information, because it will come months ahead of their competitors.

Q: When it comes to the actual advertising models, should they always be interactive?

A: If we’re talking specifically about interactive advertising, that may take different forms. One example is couponing. If you have a detergent, it might be simple enough to do a Wink application, where there’s an enhanced overlay that is triggered when you click on the interactive icon. Up comes a special card that offers 30% off your next box of Tide. That’s an example of direct marketing that has moved to the screen. It’s an amalgamation of the Internet surfing techniques we’ve all become accustomed to as Canadians, and the richness of television with all the humor and great creative. I would love to see the creative community actively participate and create interactive TV practices within agencies, because creative content providers are sorely needed in the space right now.

Q: What’s your advice to advertisers?

A: Make sure that there’s a benefit to consumers, that the message is relevant and that it takes advantage of the television space. Allow consumers to opt in. I strongly suggest having a clearly defined, well-documented privacy compliance program in place. I consider privacy to be an opportunity to reinforce your brand image, because it’s respectful of your customer. I think that friendly glowing box in the corner has to remain trustworthy.