Targeted TV ads: silver bullet or privacy nightmare?

"People always fear change. People feared electricity when it was invented, didn't they? People feared coal, they feared gas-powered engines... There will always be ignorance, and ignorance leads to fear. But with time, people will come to accept their silicon masters."
--Bill Gates

While the above statement was made during a spoof interview for the no longer existing pwot.com (Pointless Waste of Time) Website in February of 2000, it sounds much less like a joke over a decade later. Recently, there has been a flurry of activity -- by technology companies -- to bring television into the digital age. Ultimately, these companies, which include such names as Apple, Google and Microsoft are striving to create new ways in which consumers and advertisers can interact by improving the personal relevance of advertisements.

The effectiveness of television, as an advertising medium and as a return on investment (ROI), has been constantly questioned since the arrival of the "digital marketing age." Not surprisingly, those who are loudest with this concern are mainly high-tech technology companies that are either strong proponents of online advertising -- like Google -- and/or device hardware manufacturers -- like Apple. These organizations hope to "improve the user experience" by introducing proprietary technologies - usually their own - that can integrate within the existing television environment.

Targeted advertisements have become commonplace on the Internet, but the television advertising model has not changed much in recent years. Some companies, such as Chipotle, even refuse to advertise on television, believing it to be an inauthentic approach to connecting with consumers. Others opt out because people don't have the attention spans or interest to pay attention to the ads.

And they're right, depending on your perspective. It is true that many people channel surf, fast forward, leave the room, or stare blankly through commercials. However, because television ownership is common -- everyone does indeed own at least one, and in many cases, multiple televisions -- it makes it difficult to refute the television advertising axiom that the size of the audience matters. The success of television advertising, like all advertising, can be tied to the size of the viewing audience. Therefore, the larger the audience, the greater the probability of finding an interested party. This so-called methodology is frowned upon by many in the online advertising world because while it may have a common sense component based on scale, it is also highly dependent on a lot of luck and chance.

Technology companies, while recognizing the importance of scale, are interested in improving the quality of the interaction between advertisers and potential customers, not just the numbers.

For example, Microsoft plans to launch a new advertising program called NUads that aims to get viewers to actually participate in advertisements. The ads will be featured on Xbox Live and will allow users to interact with them by speaking into the microphone or waving their hands to choose answers to questions through the Kinect. Some brands who have signed on to use the platform include Toyota, Axe (by Unilever) and Samsung Mobile. Ross Honey, general manager of Xbox LIVE Entertainment and Advertising, says that the main goal of NUads is to create "the one thing traditional TV advertising is missing -- engagement.”

NUads not only make advertisements less boring for viewers, they also allow companies to receive real-time feedback on how many people are watching and interacting with the ads. Spots will be 30 seconds long and the first round will have polling capabilities, where the user chooses an answer to a multiple choice question. In Toyota's campaign, called "Reinvented," users will be asked what they would like to see reinvented.

While Microsoft's approach to modernizing television advertising sounds harmless and fun, Intel recently announced a plan that has been met with a considerable amount of backlash. The company has been trying to "unbundle" networks and offer a pick-and-choose option for customers, but cable and satellite providers have been less than willing to comply, which comes as no surprise, especially when you look at lawsuits such as Fox's against Dish Network for giving viewers the option to skip commercials automatically. This would be done through a set-top box using Intel technology. If this were the end of the story, consumers would be thrilled with the money they would save. However, the aforementioned box is not as innocent as it sounds.

As a way to lure media content providers, Intel wants to integrate facial-recognition technology into the box so that it can target advertisements to viewers based on characteristics like age and gender. The company argues that the current Nielsen rating system is ineffective and outdated and aims to offer a better approach. The higher goal is to expand the use of Intel's chips in markets outside of the PC, including smartphones, tablets and, of course, televisions. Comcast agreed to gradually introduce the technology into its "X1" platform that users control with smartphones.

Predictably, people are very wary of installing a box in their living rooms that watches them while they watch television. Many have compared it to the dystopia portrayed in the movie "Minority Report." Reuters commenter Durrant Kellogg said, "This is so gross. When your TV starts using facial recognition to advertise to you its time to get rid of your TV.” Even though Intel says that the box will only be able to recognize characteristics, not identify specific people, the majority of consumers have expressed that this would make them very uncomfortable.

It seems that even though Microsoft's NUads also aim to gather information about users, there is a disconnect between how the different platforms have been received. People are understandably much more at ease with giving a company information by interacting with its product than being passively observed.

Regardless of their personal feelings, companies want to create a dialogue -- an ongoing feedback loop -- between advertisers and customers that has not traditionally existed in the past. This means that technical excellence in the television manufacturing space will move beyond hardware specifications outlining the display capabilities of that system. In the future, televisions will mirror the recent evolution of cell phones. Mobile phones, once simple devices for making telephone calls, now behave more like computers. Television will have a similar fate, but on the way there -- much like the current developments in social media and mobile technologies -- consumers can vote on such changes by using their wallets to support products that fit their lifestyle while protecting their privacy.