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Chasing Clickable TV

6/20/2008 8:00 PM Eastern

Backchannelmedia is still trying to push the rock up the hill.

The interactive-TV advertising startup, founded in 2000, has lined up two more TV stations to test out its technology: Hearst-Argyle Television's WMUR in Manchester, N.H., and Media General's WJAR in Providence, R.I.

Those two stations join Hearst-Argyle's WCVB in Boston, which launched a trial last month.

Backchannel co-CEO Dan Hassan said the Boston-based company has “45 to 50 TV stations in the pipeline” that are interested in trying the system.

But Backchannel faces some possibly insurmountable challenges in getting its technology deployed in consumers' homes.

As the startup has been cooking up its platform, the cable industry's six biggest operators have teamed to form Canoe Ventures LLC — which is intending to do pretty much what Backchannel does, on a national basis.

Asked about Canoe, Hassan maintained that Backchannel is different because it's “a two-screen approach” that provides consumers additional information through a Web site.

In addition, he said, “We think this market will need a third-party offering to spur change. And we think there's room for more than one player.”

Here's how the Backchannel system works: Broadcasters or cable programmers embed a 64-digit ID into the MPEG video stream that identifies an interactive element — like an on-screen button to request more information on an advertiser's product. Ads are sold by either the local TV station or the programmer.

When viewers use their remote to respond to an ad, the set-top transmits its own address and the 64-digit ID to Backchannel (through the cable network or over the Internet). The product info is then available on a Web site, where a viewer can retrieve it later.

The hardest part for Backchannel will be getting its client deployed on cable boxes.

And Backchannel isn't offering a strong incentive for cable system operators to deploy the client to all their digital set-tops. Indeed, with Canoe, MSOs will undoubtedly favor their own platform.

According to Hassan, cable operators should be interested in Backchannel's system because “with the digital TV transition, we think it's important for cable to strengthen the relationship with broadcasters.”

In the tests with the three TV stations in the Northeast, Backchannel is using its own over-the-air set-top boxes — at $95 apiece — which transmit clicks over the Internet through a Wi-Fi gateway.

Hassan said it's too soon to measure click-through rates on Backchannel's ads.

“Our consumer research is still a few months away from getting something really scientific,” he said.

The WCVB trial has included interactive commercials for the MGM Grand at Foxwoods casino, which is not paying any fees to Backchannel during the test period.

September