More people surfing Web while watching TV

[Paul Jones <pjones@metalab.unc.edu>]

The bumpy path of media convergence is described below. Why to web surfers
watch TV and why do TV watchers surf? Would they do it on one
appliance? Or is this just Attention Deficit Disorder in action?


More people surfing Web while watching TV
By Jim Davis
February 15, 2000, 4:30 a.m. PT
http://home.cnet.com/category/0-1006-200-1549899.html

        There's a growing number of consumers who are in tune with how the
TV and Net feed off each other, according to a new study--and that trend
could someday have a huge impact on the industry.

      The move bodes particularly well for tech companies such as AOL-Time
Warner and Microsoft, who are hoping to someday cash in on the convergence
of the two mediums.

    How and when convergence occurs is another matter, but in the
meantime, Dataquest said that the number of adults who are integrating the
Internet and TV experience on their own increased from 8 million in 1998
to 27 million in 1999, according to its survey.

    They're being tagged with the nerdy moniker of "telewebbers," or
people who surf the Internet on a PC while watching a TV, but the name
isn't slowing the growth of this unusual pastime. Some 40 percent of these
"telewebbers"  interacted with a TV show's Web site at least once a week,
the survey found. Others are looking online to see what TV shows are on
while watching TV, still others just leave the TV on for background noise.
This is not to mention the hordes that send untold millions of email
messages each evening.

    Promises of access to Net content, e-commerce and other services, and
television programming via TVs have been hyped for years, but without much
tangible success. The poll results on telewebbing therefore come as good
news for companies such as AOL and Microsoft, which are promoting the
convergence of Internet access and television programming through a single
set-top box and entertainment that takes advantage of both technologies.

  "The fact that the number of telewebbers is increasing attests to the
potential for Internet functionality through television and interactivity
in TV programs," said Dataquest analyst Sujata Ramnarayan, who authored
the report.

  AOL's entrance into the market for interactive TV services, in
particular, will be the subject of much scrutiny. With the cost of the
Time Warner merger looming over its head for the next decade, AOL needs to
boost the bottom line with the new revenue promised by interactive
services.

  Merrill Lynch analyst Henry Blodget estimated in a new research note
that the forthcoming AOL TV service could add at least $200 million in
annual revenue for the combined AOL Time Warner. He based his number on an
estimated $10 service fee plus $2 per month from increased ad and commerce
fees if 10 percent of AOL's 22 million subscribers added the AOL TV
service. Blodget said he thinks the devices could eventually appear in 30
to 50 percent of AOL's households.

  Forrester Research thinks that interactive TV services could generate as
much as $7 billion in commerce and $2 billion in subscription revenues by
2004. Advertising on electronic TV program guides alone could generate
$3.2 billion in advertising revenue in the next five years.

  There are already ongoing experiments in the area of television-based
commerce, or what might be termed "t-commerce." New York-based
1-800-Flowers.com has been running interactive commercials on Echostar's
satellite broadcast network that enables viewers to hit a button on the
remote and order products from a special Web page downloaded by the
receiver. Early results are promising, but even advocates of the
technology say they have a long way to go.

  So far, "TV-Internet convergence is clunky, but it's a first step," said
Jim McCann, president of 1-800-Flowers.com. So-called "early adopters" are
responding to the ads favorably, but it's too early to tell with any
certainty if the mass market likes it, he said.

  Blame reluctance on habit. Those in the industry say consumer habits and
making interactive services easy to use remain key barriers.  The
TV-as-portal concept still also has yet to get a firm grip. WebTV has
about 1 million subscribers, which is significant compared to most other
ISPs, but AOL has 22 times that number accessing the Internet from
computers alone.

  Many of the several hundred orders received as a result of the ads may
have simply been placed for the sheer novelty of it. Nevertheless, McCann
believes that the technology does hold the promise to one day be a
significant sales channel for the company.

  "You can over-read the tea leaves," McCann said of both the Dataquest
report and response to his company's ads. "It really has to be simple
before you can reach a (mass market) audience."

  Steve Hoffman, CEO of Spiderdance, sees telewebbing as an "organic
convergence" that's grown purely out of people's Web surfing habits, and
doesn't indicate that they won't adapt to new devices. Spiderdance
provides server-based software that synchronizes TV broadcasts with
Web-based content on PCs, and sees in its future a market for convergence
devices like AOL TV and WebTV.

  "I think it's a mental barrier more than anything else. People like to
do things in patterns that they are comfortable with," Hoffman said.

  Until those habits change, a growing number of other technology and
service providers are targeting interactive, TV-like services exclusively
through the PC right now, instead of WebTV or a hybrid TV and PC
environment.

  "Right now it's an unnatural act to have video on one screen, and then
shift to a computer that's 18 to 12 inches away. That wreaks havoc on the
cranium,"  said Roger Keating, president and CEO of Zatso. Zatso teams
with local broadcast TV stations to offer video clips of news stories and
in-depth information on the PC.

  "What we are doing today is merging on the same computer screen video
that viewers would otherwise be watching on TV," Keating said. Doing so is
more a matter of practicality than anything; the PC audience is still
larger than the growing core of telewebbers. But once the market adopts a
device that can merge the Internet and TV, eventually Keating, too, sees
his service being offered on the TV.

  Dataquest's Ramnarayan, along with Blodget, said they think that
interactive services will take off once companies are able to offer
Internet access through multiple devices on a single bill.

  "We believe that consumers will not want to access a different online
service through each device but instead will want to access a single
online service through multiple devices," Blodget said in his report. So
far, he thinks, "(AOL) is in a good position to become the dominant
consumer interface to interactivity across all devices."

  If AOL TV, as well as the company's overall effort to offer service over
phones and handheld devices, is anywhere near as successful as its efforts
in the PC market, "We would regard it as analogous to Microsoft's control
of the PC operating system," he said.