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Report: Interactive TV a slow sell

Jupiter Media Metrix predicts that interactive TV will be more attractive to shoppers than advertisers for the next several years.

Interactive TV will be more attractive to shoppers than advertisers for the next several years, Jupiter Media Metrix predicted in a report Thursday.

The New York-based market researcher projected that by 2005, interactive TV will account for 44 percent of US sales via infomercials and TV shopping networks. Meanwhile, the report predicts, advertising on the emerging media will account for just 7 percent of TV ads in the United States by 2005.

The figures are similar to last year's projections, Jupiter Media Metrix analyst David Card said. However, the company pushed the forecast back a year from 2004 to 2005 because of the slowing economy and the industry's failure to agree on standards.

The complicated nature of the interactive TV market, in which different cable operators use different set-top boxes with different operating systems, is hindering the spread of shopping and advertising via that format, Card said. The data underscores the difficulty cable carriers, advertisers and TV networks have faced in figuring out how to make interactive TV pay.

"A lack of standards means that advertisers and shopping networks have to have slightly different plans depending on which cable company they are dealing with," Card said. "Trying to deploy services on interactive TV should almost count as an R&D expense."

Just last week AT&T, one of the biggest cable operators in the United States, changed its interactive TV plans, revealing the fickle nature of the market and suggesting that even the top players remain uncertain about it.

The Jupiter report also predicts that interactive TV will be in 8 percent of US households by year end, rising to 42 percent by 2005.

Revenue from shopping is expected to total US$4.3 billion by 2005 and will come mostly from shopping programs, where impulse buying will be more tempting than ever because viewers can buy using their remote control to place an order instead of having to make a phone call, according to the report. Total revenue from TV shoppers is US$6.1 billion now and will grow to US$9.9 billion by 2005, Jupiter predicts.

Advertising on interactive TV will reach US$4.5 billion by 2005. Total advertising on television is a US$58 billion market now and will grow to US$65.5 billion by 2005.

Card added that advertising on interactive TV could eclipse online advertising if the companies in the market are able to figure out how to best deal with the challenges.