By: nilyab $$
Reply To: 76567 by nilyab $$ Sunday, 29 Jul 2001 at 9:04 PM EDT
Post # of 76581
Worldgate (WGAT) Versus ACTV (IATV)
I thought it is time to update my thoughts on this subject. My conclusions are essentially the same, but some of the details have changed. I have divided this into two sections. The first deals with Worldgate, the second with ACTV.
A/ WORLDGATE
The basic reasons why WGAT's prospects do look weak are:
1) Systems sales: For TVG, there may be some new sales, but TVG in itself does not make much money for WGAT. TVG has now been proven to be a money-losing proposition, so much so that WGAT has said it will pour no more money into it. It is only a matter of time before the TVG bargaining chip dissipates into nothingness. Some money will be made from sales of WGAT proper systems on the DCT-2000 STB.
2) Subscriber revenues: Although the 2000 (lower end) STB will continue to be favoured for some time, even AT&T is de-emphasizing web access. So, although there may be more WGAT systems given the recent news, the prospects for subscriber revenues continue to look fairly pitiful in light of the cash needs of WGAT by mid 2002. The new European and Latin American contracts, and the others that are to be expected (and that have been indicated by Hal in the shareholders meeting) were not sufficient to lead to a raise in WGAT's target price, which has in fact be lowered since the conference call by at least one analyst.
3) Advertising revenues: No one is making much from these, and channel hyperlinking does not look poised for anything too much in the next year or two. In fact CH is not being used in a targeted way, but is instead being restricted to use for local neighbourhood, walled garden advertising. Yet, there are several competitors for such walled garden approaches, including WINK, which has many more subscribers than does CH. Of course, if combined with targeting the passive TV viewer, it may be a different story. The latter is the intellectual property of ACTV (IATV), and even the targeting of the active (hyperlinker) viewer is much better with SpotOn. More details of the advantages of SpotOn over channel hyperlinking as a method of allowing the TV viewer to access advertising on the web are contained in a separate section below.
Overall, unlike ACTV, which has a strong cash position and very valuable intellectual property, WGAT's assets are fleeting in nature. Sure, WGAT has a lead in Internet access with the lower end STB's, but Liberate, ICTV, and even Microsoft are also there in the lower end STB's. To keep up as the technology evolves, WGAT's has to spend huge R&D bucks, since they have no really valuable IP (intellectual property) to fall back on.
Lastly, unlike IATV and Gemstar, for example, WGAT has painted itself into a corner by restricting itself to TV via cable. It is widely predicted that about two-thirds of digital TV by 2004 will be by satellite. However, I believe that using copper phone wires will become predominant in MDU's (multi-dwelling units), which account for about 30% of the world's TV's. In fact, if the technology outlined in an article I posted as of late comes to fruition, copper wires, satellite, and fibre optic to the TV will perhaps cut even more severely into the use of cable, and maybe even almost eliminate it (short of HFC going straight to the TV set).
ACTV
The implementation of ACTV's products has been delayed, and the market is not responding well, so much so that it may be that the ACTV stock price may actually go to around $2 flat in the near future. But, for insightful long-term investors, ACTV should be a spectacularly rewarding investment in the longer term. Note that ACTV has an excellent balance sheet, and enough cash to likely last two more years. One important risk with respect to this cash surplus is the litigation needed to support ACTV’s IP (intellectual property). Fortunately, ACTV has on its staff a full-time patent lawyer, namely, the lawyer who developed those patents.
ACTV has a considerably wider array of product lines than does Worldgate, and these products are protected by patents. While much of the present attention is on ACTV's SpotOn product for targeted national and international advertising, ACTV is slowly making headway in the area of its HyperTV product, which allows TV viewers to "dialogue" with the TV program itself. This product will also be used in future education. To quote from the ACTV prospectus: “The Company does not believe that there are currently any competitors offering products comparable to SpotOn and One To One TV. But there are a number of companies, including NDS Group plc, that market products and services that have limited functionalities in common with One To One TV. In the same way, although SpotOn has no competitors that offer its range of applications and services, companies such as SeaChange International and Wink Communications market products that compete with certain SpotOn offerings.”
Let us deal with SpotOn in the rest of this “manuscript.” There are two basic ways of targeting ads: 1) targeting the passive viewer, as is done in current television (the “push” method); and 2) targeting the active viewer hyperlinking to an advertiser's site (the “pull” method). First, note that the SpotOn product has a small footprint, and no credible analyst has suggested that the software be removed from the core offering contained in the low-end STB’s. From a technological viewpoint, it is easy, quick, and cheap for the MSO to implement. The delays in implementation are due to the following:
- For the “active” targeting, “pull” method (see below) to work fully, web access is needed, so the delays in the MSO’s implementing web access software have delayed usage of that part of the product. However, it would seem that a makeshift bypass of this restriction is available by using the extra channels within channels used to push alternative advertising to viewers to broadcast the web pages to which the viewer would hyperlink. The program would then be coded to seamlessly link to these multiplexor-created extra channels, using ACTV’s patented method for such seamless switching between channels.
- Collaboration of the advertising community is needed to make SpotOn the national and international advertising method of choice. At present, of course, it is the ONLY choice around for ITV targeted advertising.
The issue of privacy invasion has often been mentioned as a problem with targeted advertising. However, SpotOn does not collect information about an individual’s name or street address, but just about the hardware identification number of the viewer’s STB. Moreover, it seems that requiring permission from the TV viewer may be made standard policy before data is collected from a viewer’s STB.
From targeting and hyperlinking perspectives, SpotOn is superior to Wordgate’s patented channel hyperlinking, as explained next:
Spoton Versus Channel Hyperlinking
I suggest that the push method for targeting advertising is more important, and will be forever, since viewers basically try to avoid advertising, and this is more in line with traditional practice. Only SpotOn targets the passive viewer, i.e., uses the push method; channel hyperlinking does not, but is restricted to the pull method. That's the most important point. Second, SpotOn's method of active viewer targeting (when the viewer pulls information from web pages) is superior to channel hyperlinking for the following reasons:
1) Great economies of scale for national and international advertising are achieved by synthesizing active and passive targeting, since the same advertisers are involved. This is connected with obtaining national and international advertising, as well as obtaining advertising from local commercial establishments (like you local pizza shop).
2) The viewer does not have to interrupt the current program, since the advertiser's site can be bookmarked without leaving the program. This is very, very important to television network producers. Remember that there will be more and more advertisers per program with targeted advertising, so that targeting becomes possible (need this explained any one?). Therefore, if you interrupt a program to branch to one advertiser's site, you incur the wrath of the other program advertisers.
3) Hyperlinking is more direct with Spoton, in the sense that several hyperlinking icons can appear on the screen at the same time. Thus, the viewer can avoid having to make another level of hyperlinking choices.
Certain advantages of CH over SpotOn’s method of active targeting have been claimed. However:
1) With Spoton, as with channel hyperlinking, it is possible to code hyperlinks that are flexible into a program. By "flexible," I mean that it doesn't matter if the advertiser or advertiser's site changes at some point after the program has been produced, since it can be arranged for a viewer by having the viewing link to a website where a "link table" is kept. Only the hyperlinks in the link table need be changed if the advertiser or advertiser web details change. Although this link table, which is polled to detect any changes, is kept somewhere on the web, while the Worldgate link table is kept at the cable company head-end, .the linking done by Worldgate is not more efficient, as the local head-end is treated as a conduit rather than as a server location.
2) It takes no longer to code hyperlinks into a TV program than it does to set up hyperlinks with channel hyperlinking. This issue has been discussed on this board at length, and Worldgate investors are kidding themselves if they think that they have a point here.
3) The intrusion into an individual viewer’s privacy is not greater with SpotOn than with channel hyperlinking, even if the latter were some day to be used for targeting individual households rather than neighbourhoods. In fact the privacy obtained by SpotOn is arguably better, since data on individual viewers is kept at the viewer's site, in the viewer's own STB. |
