Delivering
targeted advertising to home viewers who remain anonymous
could resolve some key consumer privacy concerns, and
that's the promise behind a partnership announced in June
between Predictive Networks and OpenTV, which provides
the middleware in 16 million digital set-top boxes on 43
digital cable, satellite and terrestrial TV networks in
more than 50 countries.
OpenTV is licensing
Predictive's advertising management and targeted
advertising delivery tools for integration into the
OpenTV Service Platform Suite, which offers viewer
profiling and transaction management capabilities.
Predictive will develop a set of application interface
(API) tools for iTV content developers to
"advertising-enable" any application running on the
OpenTV platform.
Predictive systems
initially will be integrated into the OpenTV trial on the
Motorola DCT2000 boxes deployed by USA Media Cable in
Half Moon Bay, Ca. Targeted ad insertion may begin by
third quarter 2001, and a cable advertising management
system is expected to be in place by second quarter 2002.
No other OpenTV customers have yet openly committed to
adopting Predictive ad systems.
"We want to give TV
operators an easy way to seamlessly integrate interactive
ads into all applications," says Vince Lesch, VP for
product management at Predictive Networks. "This includes
supporting the ad sales team in scheduling insertion
orders."
Predictive Network
customers until now have been Internet service providers
and content distribution networks, which either license
the technology or else use Predictive as an application
service provider (ASP). The OpenTV deal is Predictive's
first foray into the interactive television
business.
"The name of the
game among middleware vendors today is to provide as much
value to television operators as possible," explains
analyst Sean Badding at The Carmel Group. "Making deals
with third party application providers &emdash; either
acquiring them like OpenTV did with SpyGlass, or else
partnering with them as with Predictive &emdash; can help
a middleware vendor look more valuable than the
competition."
Predictive's main
customer so far has been AT&T Worldnet, which
licenses Predictive systems for incremental revenues from
its "i495" dial-up Internet service (PCs only) at just
$4.95 per month. Subscriber benefits, reads the i495
website, include "offers tailored to your preferences
whenever you're online."
Now offering only
server-based solutions across the Internet, Predictive is
porting its technology to television for OpenTV, which
plans to offer Predictive ad targeting tools to TV
operators worldwide as a box-based solution for satellite
and terrestrial broadcasters and a server-based solution
for two-way cable systems.
Founded in 1999 and
based in Cambridge, Mass., privately-held Predictive
Networks is backed by strategic investments from Advent,
Battery Ventures, Net2Phone, NetRatings, NTT, and
Unterberg Towbin. Predictive has back-end relationships
with MasterCard and other financial service providers.
Akamai is working with Predictive, too, but products for
the content delivery network are not yet
ready.
Licensing
The technology
being licensed to OpenTV centers on Predictive's
patent-pending "Digital Silhouette," an application of
artificial intelligence (AI). Individuals' Silhouette
profiles are based on inferences drawn from observed
behavior, preferences and affinities spotted by tracking
successive discreet selections.
Predictive claims
its AI engine has developed more than a million highly
detailed yet anonymous profiles of individual users on
the World Wide Web and virtual private networks.
Anonymity is assured, explains Predictive literature, "by
assigning random ID numbers to households... and by
discarding all clickstream data after analysis." Key
encryption protects profiles from hackers.
"We do not collect
personally identifiable information," says Lesch. For the
OpenTV implementation, he promises, "We won't store any
raw data on the shows watched. We'll make inferences and
then throw the viewing data away. If Nickelodeon is
watched a lot, we can infer children live in the
household. If the profile says no children, we won't
insert any commercials aimed at children or their
parents."
"The idea is to
watch people, make inferences, and allow advertisers to
select people based on their interests," says Richard M.
Smith, chief technology officer of The Privacy Foundation
in Denver, which documented TiVo's viewer data reporting
problems.
"On the Worldcom
i495 Internet service," he says, "the browser history is
shipped to servers where search engines turn the data
into the profiles used to select which ads appear in the
browser bar. In this regard, Predictive is no different
from DoubleClick or the others doing ad
targeting."
Privacy
Perspective
From a privacy
perspective regarding interactive television, he says,
"it makes a difference whether the profile is stored on a
remote network server or the box at home. Viewers may
feel uncomfortable with being observed and targeted by
their televisions, but I think people will feel more
comfortable if they know their viewing data never leaves
their homes."
Targeted
advertising is a dangerous two-edge sword for the
television industry, warns Badding. "Data mining is good
for sending ads to people for something they truly want,
but it risks a public backlash against Big Brother that
could have a very negative impact on all interactive TV
services."
Lesch says
Predictive favors opt-in, but is leaving permission
marketing choices to OpenTV and other customers. His
stance is that operators could offer opt-in on-screen
with a check box, through the signed service agreement,
or with a notice in the billing statement.
Where the
Silhouette profile is stored, along with all opt-in or
opt-out policies, will be left to TV operators, says Alec
Livingstone, senior VP for application engineering at
OpenTV, based in Mountain View, Ca., and owned by South
Afrikaan MHP Holdings. "OpenTV is agnostic about how our
customers deploy the Predictive systems. We sell
technology, and so long as it's not illegal, we do not
care what our customers do with the tools we
provide."
Profiling and ad
targeting help prove the business case for interactive
TV, he says. "The only two significant ways of making
money on a [salable] subscription iTV service are
commerce and advertising. The volume of both increases
with ad targeting, which reduces the cost of
ownership."
"My impression is
that the advertising industry is not yet ready for
targeted ads," says Smith. "Look at all the free or cheap
Internet service providers like Juno that have either
merged or gone out of business. That's because the
low-income people drawn to such targeted advertising
services, such as college students, simply ignore
advertising for things they can't afford."
Given the low
traction of targeted advertising on the Internet, he
asks, "what do television operators bring to the party as
far as the advertisers are concerned? We'll need hard
products out in the field before we can talk about
targeted TV advertising as something real. Right now it
looks like all Predictive and OpenTV have in existence is
a press release and a PowerPoint presentation."
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