Though IPTV hasn’t been the primary focus of a blog post in a while, we’ve mentioned it here and there as a local search medium to start thinking about. The thinking goes that the IP architecture of the technology will allow more precise targeting with content and ad delivery, as well as a two-way street for content pull (which has its own set of implications for behavioral targeting).

This will enable lots of cool mashups and product placement opportunities that allow users to telescope in to learn where to buy products locally. One locally relevant scenario we’ve submitted in the past involves supplies or ingredients used in cooking or home improvement shows. Meanwhile we get a glimpse of some of the decidedly more fun features of IPTV, such as switching camera angles or sound feeds during sporting events.

But one big question mark in all this, explored in a TKG White Paper a while back, is hardware. Given all this great interactivity, will the bottleneck be hardware constraints? In other words, a traditional TV remote won’t do justice to all this functionality and to the way we’re accustomed to searching. Sure, browse functionality is possible using directional buttons, but we’re conditioned by search engines to utilize the full potential of typing queries at 62 words per minute, refining queries by quotes, geographic modifiers, and zeroing in with a mouse.

With a keyboard this is relatively seamless. But search on IPTV will require a new conditioning that is perhaps more reliant on browse functionality, given the presumption that we won’t immediately undergo a cultural shift that puts a keyboard and mouse on every living room coffee table in America. Or will we? This is definitely a dilemma, and perhaps a bottleneck to all the other technological issues on which the IPTV discussion seems to focus.

But we’re starting to see some hints at what could be developed. There are whispers of an Apple remote control to rule over the digital home, including iTunes music, movies, etc. Apple has been on a clear path to the living room over the past few years, including AppleTV which proved ahead of its time, like many other great products that were commercial failures. Netflix’s set-top box, launched this week, allows immediate access to its growing digital library, which could all but kill AppleTV. For now.

But when thinking of how this IPTV interface and hardware dilemma will be worked out, my money is on Apple to be the one to design something that is functionally sound and elegant enough to enter the living room. In true Apple form, it likely won’t be a mass market device at the onset at least, but neither will IPTV. This will be prime fodder for Apple in its ongoing transition to a digital media company. It is definitely thinking about this already, as it knows it’s in the best position to solve this issue, where a major potential market eventually exists.

I’m not really going out on a limb here by picking this horse, I know. But the point is, keep an eye on what the company develops in the coming months, with an eye toward possibilities for IPTV hardware. Clues can be found everywhere, even the iPhone.

       

All right, this isn’t directly tied to local search, but it’s really cool. This morning, at the Macworld expo, Steve Jobs introduced the newest addition to the Apple family, the MacBook Air.

It’s small enough to fit into an interoffice envelope and gets five hours of battery life — significantly raising the bar for laptop mobility standards. More details and specs are here. Other Macworld announcements, including an iTunes rental service and new AppleTV, are here.

       

A handful of articles came out today that together triangulate some interesting points on the future of IPTV and local.

The New York Times examines a few automated ad platforms and services that are following the trail blazed by Spot Runner. We’ve always recognized Spot Runner as a game changer for bringing television ad creation and placement within the grasp of small businesses, but it’s also interesting to note how it can allow national advertisers a more cost-effective way to reach local audiences (Spot Runner CEO Nick Grouf will keynote at The Kelsey Group’s upcoming Drilling Down on Local conference).

According to the article:

“The new systems threaten some of the roles that advertising agencies have traditionally played. National advertisers, mainly in the retail, real estate and auto industries, are using the systems to make their messages more relevant on the local level.”

This is the logic behind some of the deals Spot Runner has formed with national Realtors such as Coldwell Banker that gives its far-flung Realtors and constituents these ad creation and placement capabilities.

“They can automatically add names of local sales agents or dealership addresses, and they can change the content of the ad, depending on where it is showing, to appeal to various demographic groups. Among the companies that have used these services are Wendy’s, Ford Motor, Coldwell Banker and Warner Independent Pictures.”

The article also talks about Fort Lauderdale-based Zimmerman Advertising, a subsidiary of Omnicom Group that seems to be a smaller Spot Runner-type play. Its automated ad creation engine, called Pick-n-Click, is currently only available for automotive advertisers, but it has many of the customization features of Spot Runner, such as voice-overs and text.

Targeting Local Audiences

The automation and cost effectiveness of creating ads is only half the battle; the ad targeting we’ve come to expect from online search will take this to the next level.

“If there’s a man and a woman watching television in two different houses and you are Procter & Gamble, it would be more efficient to show one of them an ad for a Gillette’s men’s razor and the other a woman’s ad,” said Mark Read, director of strategy at the WPP Group, an advertising holding company that has invested in Visible World and Spot Runner. To customize ads, the companies, to a varying degree, link ZIP codes with census and other third-party data to develop local demographic profiles, isolating viewers more finely than typical cable operators.”

Still, this misses the point. Yes targeting will be possible, but the potential here will be much greater than using ZIP codes and census data. This is where the technology exists today, but the real story is where IPTV could take this (referring to telco-delivered IPTV service packages). The “switched video” architecture of IPTV will be much like the Web. Every time a viewer switches the channel, it will be like clicking on a Web link  that channel will be called up from a server. This contrasts with cable’s architecture, which crams into one pipe 300 channels that are there all the time for users to surf.

Long story short, IPTV’s architecture will let us go from ZIP code targeting to IP targeting. In other words, the question of what ads come on and when will come down to the set-top box level rather than the neighborhood level (no more Craftmatic adjustable bed commercials because of your geriatric neighbors). There are many other legal, organizational and cultural hurdles to cross before this scenario is realized, but this is where we’re headed with IPTV.

The other wild card here is looking at what IPTV’s architecture could do for the economics of ad inventory. Because one channel is called up at a time, as mentioned above, there are no technical limitations on the amount of channels you can have  unlike with cable. This opens up lots of space for content and thus ad inventory. An increased supply could yeild falling prices and a long-tail effect that will make television ad inventory more affordable for small businesses and more efficient for national brands (eMarketer reports today on an Accenture study showing the growing enthusiasm among executives for the idea of IPTV targeted advertising). Combine that with the lowering cost of video ad creation and distribution, a la Spot Runner, and this starts to get very relevant to local.

Of course there are other factors preventing the creation of thousands of TV stations, such as content creation, licensing and the control that IPTV providers such as AT&T will no doubt exert. But this could change over time as some consumers sidestep the telcos and watch Web-delivered video (the jerky, low-res quality of YouTube-like video clips will improve with higher broadband speeds, and adoption will rise when you can watch this content on your television set  see AppleTV). Regardless of these other factors, if you look at IPTV’s technical specifications and the possibilities they bring, it starts to get interesting. We’re not there yet, of course, but it’s certainly time to start talking about it.

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Related: B&C reports that local television revenues are up 41 percent. This is attributed to strong growth in local advertising and more SMEs in auto and real estate verticals coming around to the idea of television advertising to augment or replace newspaper and Yellow Pages ad spends.

       

Recently I had the chance to catch up with Mark Sigal, CEO of online video distribution platform provider vSocial. The company provides a platform for advertisers and video publishers to publish and brand videos on existing Web sites, social networks or customized video channels. The key is that it bakes in the functionality to monetize video content with in-video advertising. In this way, it has similarities to Brightcove.

So far it has signed deals with local CBS TV affiliates to bring their content online and is targeting other entities conducive to this form of marketing, such as bands and real estate agents. It also has an online destination with a library of 50,000 videos and about 4.5 million monthly unique visitors, placing it within the top 10 online video sites.

VSocial and other start-ups are beginning to fill in the blanks of the overall online video content and advertising distribution picture. Other companies worth looking at are Kiptronic, a video and audio podcast advertising platform that raised US$4 million in Series A funding last week, and Nexidia, a speech recognition software provider that can contextualize ads to online video content, forming the basis of an AdSense-like publisher network for video ads. These were both recently profiled by GigaOm spin-off NewTeeVee blog here and here.

As we pointed out in the White Paper “From Reach to Targeting: The Transformation of TV in the Internet Age” and in past blog coverage, online video and IPTV have a lot of interesting implications for local in the way that their volume of content and IP targeting abilities will open up advertising opportunities  similar to the search-based text advertising we’ve seen flourish on the Web. Rather than the reach characteristic of cable and broadcast advertising, IPTV and online video channels reach smaller and more contextually and geographically targeted audiences. This could have a long-tail effect that brings ad inventory within the price range of some SME and local advertisers.

Combine this with the fact that video production technologies are coming down in price and companies such as Spot Runner offer custom-made video ads at a traditionally elusive price point for SMEs (about $500). This has proven traction in the real estate vertical where Spot Runner has partnered with Coldwell Banker to offer all its agents this capability. It will take a long time for a critical mass of small businesses to make this leap since many are still averse to search advertising or even a Web site. But it is clear that the first steps are being taken toward offering affordable online advertising (inventory and production capability) to SMEs.

“Spot Runner is an important part of this equation,” says Sigal. “My other mantra on this subject is PowerPoint. Someone is going to get it right by creating a tool that build ads using a PowerPoint-type interface. You have a whole marketplace of people that know how to use those types of tools. If Microsoft was smart, it would come up with a Microsoft Live version of PowerPoint for creating ads.”

An interesting thought but, of course, easier said than done. Many question marks still remain. Hollywood’s aversion to a competitive new medium and its resulting hesitance to license its content for online distribution will slow down online video adoption. But increased consumer demand and adoption of popular long-form video distribution outlets such as iTunes will eventually break down these barriers. This is already starting to happen. Until then, user-generated content will continue to rule online video, a la short YouTube-type clips. This affects the quality and quantity of ad inventory available

“If you look at what made Google AdWords so successful [it] was that any business of any size could plug in and create an ad without human intervention,” says Sigal, “but it’s a step order function more complex and expensive when you talk about video advertising; and logic suggests that that’s not just about tools but a function of the stock inventory.”

Questions also surround the ad delivery formats that consumers will prefer in online video, such as pre-roll or post-roll ads.

“I think the short answer is that there isn’t one answer,” says Sigal. “More important is that the line between ad and content is becoming blurred and the closer an ad is to content the more likely a user is going to click.” Sigal believes that initially we are more likely to see text and display advertising accompanying online video, but video ads will slowly but surely be tested and deployed.

A big theme at TKG’s ILM:06 conference in November was that we are in an experimental stage in many forms of online media and advertising. Online video is a big example; mobile local search is another. Some are finding in this experimental stage that social networking, user-generated content and online video have many synergies. YouTube is an obvious example, and vSocial has built its model on the intersection of the three.

Many local businesses have leveraged social networks such as MySpace to market themselves. This, however, must be carefully done to embrace the viral aspects of such a campaign without spoiling it with a forced marketing message. This was done to much criticism by a few national brands such as Sony and Wal-Mart, which both underestimated their audience’s ability to sniff out an egregious marketing intent.

Still many local businesses have done this successfully with the creation of MySpace profiles. Integrating video ads into these and other channels is the next evolutionary step.

Google’s US$1.65 billion purchase of YouTube in October was a defining moment in the growth of online video. Increasing competition and investment levels among telecommunications giants to bring us movies and television programming over high-speed fiber networks is another emblematic sign of the times. And most recently, Apple’s launch of AppleTV at the Macworld Expo earlier this month will signal a turning point in online video, given its ability to bring online video to television sets. This will be a fast moving and interesting area to watch over the next few years.

       

As mentioned briefly yesterday, we expect much of the product innovation unveiled at CES to deal with device convergence  particularly with sharing content between Web, mobile and TV.

Bill Gates’ keynote had this theme, but it showed little difference from the messages he tried to send last year and the year before (that Xbox will be the center of the connected living room). A focus on Windows Vista gave it a slightly new twist though.

Other convergence will happen between Web and TV. With flat panel monitors coming down in price and becoming such hot items during the recent holiday season, they are taking center stage at CES. The timing is also right for devices that bring Web content to televisions. Apple brought this idea to the masses in September with the introduction of iTV, which today received an official launch, a closer look and a new name (Apple TV) at Macworld.

In short, the device will jibe well with Apple’s efforts to get users to download more content from iTunes (Steve Jobs in his keynote today made a point to emphasize the 2 billion songs and 1.3 million movies sold on iTunes, and the 250 movie titles and 350 TV shows currently available). The device will cost US$299 and will ship in February.

This user adoption will hit a wall at a certain point if the use case requires watching movies on your computer screen. This is why the seamless transition of content to television sets could affect overall interest and adoption of downloading movies and TV shows  especially in the case of Apple TV, given its elegant user interface and sleek controller (pics here).

In general this bridge between the PC and TV, once it reaches mainstream status, will push forward a much greater adoption of online video in all shapes and sizes (beyond user-generated amateur content that currently rules the medium). We have more analysis of the advertising and local aspects to all this here.

AT CES, we are also starting to see the first signs of a mainstream push for these “bridge” devices. A few were introduced today from Sling Media (maker of the Slingbox) and networking hardware provider Netgear. CNET has more details and also has a nice roundup of overall CES coverage.