Ready for the Tidal Wave?

Mobile (especially location-based services) is obviously here to stay and will be the critical component to any integrated marketing campaign. Also, marketers seem to understand that augmented reality can be a useful and utility-based technology.

But the area about to explode? Internet-connected TVs with application stores. That is, TVs with the ability to both connect to the Internet and have interactive apps downloaded directly onto them by consumers.

There’s been lots of talk about the Battle for the Digital Living Room. Sony, Microsoft, Apple, Roku, Boxee and a host of other players are trying to rush out Internet-enabled boxes or gaming systems that will provide digital content and Internet connectivity on standard television sets. Cable providers are also trying to get into the game with partnerships with companies such as ActiveVideo that can stream content “from the cloud” to most standard consumer cable boxes. Even Google is trying to get into the game by modifying its Android OS for this new, connected digital living room market. 

(There’s a great three-minute video that shows just how disruptive Google’s entry into the connected-TV environment can and most likely will be.)

Not to be left out, many electronics manufacturers that create TV sets don’t want to be without a chair once the music stops playing. So now you have companies like LG, Panasonic, Samsung  and others also trying to bring Internet-enabled television sets to the digital living room as fast as possible.

Regardless, whether it’s the TV itself, a gaming system, set-top box or other connected peripheral, the Internet-enabled digital living room is upon us.

So with all this connectivity, what’s the end game for the consumer? Think of the still-exploding smartphone app market and apply that to your living room and TV set. It’s no secret that consumer electronic manufacturers are hoping to replicate the success of the iPhone app market by offering the same type of direct-to-consumer app ecosystem.

Consider these recent projections from In-Stat:

• U.S. shipments of Web-enabled consumer electronic (CE) devices that support TV applications will grow from 14.6 million in 2010 to 83.4 million by 2014.
• By 2014, over 59 million U.S. broadband households will own at least one CE device that supports TV applications.
• By 2014, the U.S. installed base of CE devices that support TV applications will be 136 million units.
As you can see, there’s a pretty high trajectory for this market.

But what of the potential pitfalls?

Well, similar to the entire mobile ecosystem, there might be app compatibility issues and, unlike “mobile Web optimization” that can act as a common bridge, the interactive television app market doesn’t appear to yet have a Plan B.

However, unlike mobile phones, most consumers don’t trade their TVs in every year or are tied to one carrier to determine what hardware they can buy. So, in this instance, you’ll probably see a few market leaders dominate the space and because of app purchases, stick with the same brand /compatibility for future purchases.

Content owners or brands that wish to create apps in this digital living room ecosystem will most likely need to go with the leaders or wait until standards are in place and uniformity exists (which is unlikely at this point, since every new emerging tech market seems to fragment).

You’ll also most likely see demographic splits where older viewers are more interested in passive viewing experiences versus younger audience viewers who are more apt to download apps that can create a more social, collaborative and interactive experience similar to online.

By replicating what already works for interactive online video on the Internet, “social TV” on connected sets will most likely start gaining traction. If you were at CES this past January, you might have also seen that almost every TV set manufacturer has a partnership with Skype to offer the service via sets with Webcam integrated into the hardware or ability to add Web cam via USB. I personally cannot wait to see connected apps take advantage of this video chat technology tied in with contextual information from shows people are watching.

Finally, there’s the whole mobile app market itself that is already offering TV-companion apps, remote control functionality and so on. It will be interesting to track how consumers will start using the sets, and where and how mobile apps will be used in relation to TV-connected apps or if they will most likely function together. I’m betting on the latter vs. the former.

However it plays out, there’s a good chance that you’ll soon “augment” your viewing experience with downloadable apps that can provide further context on a show, allow you to play games tied to content you’re watching, and create an overall interactive experience for your new customizable digital living room. The only question will be if the market dictates 99 cents for these connected apps as it did for mobile.

Matthew Szymczyk is CEO of Zugara. He can be reached at matt@zugara.com.