Why Canoe Abandoned Ship With Interactive TV Ads

An ambitious effort by the cable industry to create unified standards for targeted and interactive television advertising has failed, the victim of competing business interests among its founders and apathy from advertisers. On Wednesday, the New York-based consortium Canoe Ventures announced it has given up its lofty plans for interactive TV and will instead focus on creating new ways to make money from video-on-demand and TV Everywhere.

Canoe’s New York office space will be shuttered within the next several months, and 120 employees will be let go, including Kathy Timko, who had served as CEO since last summer. A significantly slimmed-down operation that includes about 30 engineering-focused employees based in Denver will continue on and will be headed by Joel Hassell, who previously served as Canoe’s chief technology officer.

Canoe was formed in 2008 by six cable service providers — Comcast (NSDQ: CMCSA), Cox Communications, Charter Communications (NSDQ: CHTR), Cablevision (NYSE: CVC) Systems and Bright House Networks and Time Warner Cable (NYSE: TWC) — with the intention of using advanced cable set-top boxes to revolutionize TV advertising. The goal was to create technological standards for targeted ads that could be sold across cable systems so that, as one Canoe official said early on, “dog food commercials would only be seen by dog owners.” The standards would include interactive features, so that targeted cable subscribers could, say, ask for more information about a new car they just saw advertised with a click of their remote.

But three years into the project, Canoe could only render a scaled-down version of its plan involving only around 25 million homes — well shy of the 100 million-plus that it was targeting at the outset. And while the initial concept had called for Canoe to sell across different cable operators, Canoe’s competing cable owners, including Time Warner (NYSE: TWX) and Cablevision, wound up grabbing whatever interactive TV opportunities came their way and doing the selling themselves.

Meanwhile, tepid demand among advertisers and the programming partners of the major MSOs for interactive TV products also played a role in the decision to shift Canoe’s focus. A report issued by Deloitte Touche earlier this week put the current market for interactive TV ads in the U.S. at under $200 million — out of a TV ad market that’s collectively sized at around $60 billion. “This is very much in response to what the marketplace wants,” a Canoe spokesperson told us Wednesday.

The Deloitte report, which polled 50 senior media executives, summed it up this way: “The existing system is not broken.”

According to the Canoe spokesperson, the decision to give up on interactive ads was the result of meetings over the last several weeks that included Canoe management and executives from the MSO overlords that founded it four years ago.

“Today, Canoe Ventures is evolving to focus its business on providing a platform for MSOs and national programmers to monetize on-demand content across multiple platforms — both video-on-demand inside the home, and TV Everywhere outside the home,” Hassell said in a statement. “This is in line with Canoe’s founders’ original vision, which is to make cable television households the most attractive platform for advanced advertising. It also aligns with the priorities of Canoe’s direct clients – national programmers.”

While Canoe wasn’t able to get all its constituents on the same page, it did in some ways show proof of concept. Just last week, it released the results of a study it jointly conducted with the American Association of Advertisers, in which a panel of 4,200 cable subscribers revealed increased product acceptance when shown interactive ads from brands like Honda, Fidelity, GlaxoSmithKline and State Farm. According to the year-long study, 19 percent of adults 18-49 said “yes” to interactive offers, while 36 percent expressed a likelihood to purchase.