Where Canoe Goes From Here

With Exit of CEO Verklin, Industry Reasseses Cable’s Advanced-Ad Venture

By Todd Spangler -- Multichannel News, 7/18/2011 12:01:00 AM

David Verklin spent three years hammering together Canoe Ventures — but as a business concern, it has barely left the dock.

The charismatic Madison Avenue executive with a zeal for Canoe’s mission will depart as CEO at the end of August, and will be replaced by chief operating officer Kathy Timko, the company announced last week.


The company was officially formed in mid- 2008 by Comcast, Time Warner Cable, Cox Communications, Charter Communications, Cablevision Systems and Bright House Networks. The mission: to create a national footprint for advanced forms of TV advertising, including interactive, addressable and dynamic video-on-demand ads.

To be sure, Canoe has accomplished some technical heavy lifting, putting in place the necessary infrastructure and standards to allow advanced forms of TV advertising and interactivity. The venture has led cable operators to enable a lightweight interactive specification across more than 20 million households, allowing millions of digital settops to receive Canoe-delivered interactive ads and other apps.

And even Canoe’s most vocal critics agree that, in concept, the strategy is a good one. It makes sense for cable try to use its two-way capabilities to make cable-TV advertising more effective and valuable to big advertisers, to let MSOs and cable networks grow their take from national TV ad spending.

“Quite honestly, if I can get [interactive ads] into 100 million homes on ESPN — that’s great,” said Mitch Oscar, executive vice president of televisual applications at media agency MPG, a unit of Havas Media.

Oscar, an outspoken Canoe skeptic, said he is, in fact, rooting for its success: “I hope they’re like a phoenix and can grow.”

So far, however, Canoe has launched a single interactive-TV advertising product. Its biggest shortcoming is that it has not been able to convince mass marketers that it’s worth the time and expense to execute the ITV add-on on a national basis.

In his first year, after energetically proselytizing Canoe’s vision, the gung-ho Verklin ended up sidelining his first product. That was an attempt to let advertisers deliver two different spots based on demographic data overlaid on cable’s local ad zones, an idea Verklin conceded was simply too complicated to pull off .

Verklin did not respond to a request for comment. Canoe spokesman David Grabert said Verklin and Timko were not granting interviews.

IT’S COMPLICATED

Some observers chalk up Canoe’s relative lack of progress to the immense complexity of its goal. There are numerous moving parts that must synch up for Canoe’s business plan to succeed. Not only must the venture get the hundreds of headends operated by its MSO members working in concert, Canoe has to get buy-in from cable networks — which are the parties actually selling the Canoe-enabled capabilities — as well as ad agencies and their marketing clients.

Most important, Canoe needs to get the OK to move forward from the six different cable operators, which don’t share exactly the same priorities.

“While the problems that Canoe was created to solve for are certainly real and persist, despite its efforts to date, progress appears to have been hampered by the need to gain agreement from all owners,” Jane Clarke, managing director of the Coalition for Innovative Media Measurement, said. CIMM was created in 2009 by large media companies, agencies and advertisers as a means to promote research into video-audience metrics.

At the same time, Clarke said, technologies for “over-the-top TV and enhanced interactivity on companion devices have moved ahead more rapidly.”

In other words, if Canoe doesn’t move forward fast enough, advertisers will find other ways to achieve higher engagement, better targeting and interactivity on TV (see “Interactive TV Moves to Second Screen,”).

According to MPG’s Oscar, the main difficulty for Canoe is a cultural one on the part of its ultimate customers. National ad buyers and sales reps are not familiar with the interactive or targeted features, whereas those advanced ad formats have worked well on a local level, he said.

For example, Cablevision has touted some success with its own request-for-information and VOD ad products in the New York metro area, and Comcast Spotlight has sold several hundred interactive campaigns. Operators control that local ad inventory, whereas Canoe’s model is indirect, relying on cable networks to close sales.

Moreover, Oscar said, some advertisers and agencies aren’t sure how much value Canoe adds. “Because there is so much money spent on national TV, when you add the Canoe RFI piece, the national buyers were saying, ‘Well, I want that as added value,’ ” he said. “If I’m spending $20 million dollars with you, the attitude is, ‘Hey, you should be enhancing what I’m already spending with you.’ ”

Others believe Canoe’s biggest challenge is that media agencies are loath to embrace change or new technologies. Putting together a nontraditional TV advertising campaign requires more work. To some ad buyers, it seems like more trouble than it’s worth, said Craig Woerz, co-founder and managing partner of Media Storm LLC, a media planning and buying agency specializing in interactive advertising.

“The traditional agency mindset is to come up with any number of objections about why they shouldn’t place advanced ads,” Woerz said.

Media Storm spends about eight times the amount of work and time to create an interactive spot, compared with developing a traditional 30-second spot. Woerz maintains that the effort delivers a return almost every single time — something risk-averse agencies don’t understand, he maintained. “That’s sometimes the difference between satisfying a flowchart and actually having our ad remembered,” he said.

Verklin was hired by the cable joint venture with a three-year contract in August 2008. When he was CEO of Carat Americas, his annual salary was about $1.5 million, according to the Aegis Group’s 2005 annual report. Verklin received a commensurate salary at Canoe, according to industry sources. Steve Burke, then chief operating officer of Comcast and president of Comcast Cable, led the effort to recruit Verklin.

Woerz said he wouldn’t have been surprised if Canoe had extended Verklin’s contract. “Canoe needs a visionary like David,” he said. “It’s going to be very easy for people to say, ‘David is gone, they’ve lost their vision.’ ”

‘BUSINESS AS USUAL’

Canoe chief marketing officer Vicki Lins said Verklin’s departure will change nothing in the company’s road map or operations. “We’re not going to miss a beat,” she said. “Aside from people being sorry to see David go, it’s very much business as usual.”

She pointed out that Timko is already running Canoe’s day-to-day operations. “What we are doing is operationally complex,” Lins said. “I think this change in leadership is refl ective of the operational demands that we will be facing in the next phase.”

Rob Marcus, a Canoe board member and president and chief operating officer of Time Warner Cable, issued a statement thanking Verklin for his service during Canoe’s startup phase.

“David’s passion for media and advertising is contagious,” he said. “He and the team at Canoe have helped the industry to reach new levels of collaboration that support the growth of our business, the enhancement of services to our customers, and the advancement of new marketing solutions for television advertisers.”

Verklin officially started as CEO of Canoe Ventures LLC, based in New York, on Aug. 4, 2008. Initially, the six MSOs funded the company with about $150 million, with ownership stakes based on the proportion of subscribers each operator contributes.

“Call me a dreamer or say I have a screw loose, but I believe this is an opportunity to change the way America uses and watches television,” Verklin said in an interview with Multichannel News after he was hired.

Under Verklin, Canoe’s first product launch was Community Addressable Messaging, an attempt to overlay targeted national spots onto existing cable zones. The company scrapped “CAM 1.0” in mid- 2009, with Verklin citing business process challenges and technical issues in upgrading ad-splicing equipment across MSOs.

Last year, Canoe launched a request for information interactive TV ad product, which lets an advertiser present an overlay on a 30-second ad prompting viewers to request more info. It expected to have enabled the RFI capability across seven cable networks this spring: Discovery Channel; NBC Universal’s Bravo and USA Network; A&E Television Networks’ History, Comcast Networks’ E! and Style; and AMC Networks’ AMC.

COMING SOON: MORE RFI

In the immediate future, Canoe’s plans for the remainder of 2011 are to continue to push the RFI capabilities. The company this year will roll out interactive polling and voting capabilities, available for networks to use within their shows to reach those 20 million Canoe-enabled homes, Lins said.

On a separate track, Canoe chief technology officer Arthur Orduña is leading efforts to test the venture’s second product: dynamic videoon- demand ad insertion across multiple cable operators.

Timko, who takes over the captain’s chair on an interim basis, joined the company as COO in June 2009. Officially, Timko is the interim CEO, but Canoe’s board has indicated there is no imminent plan to conduct a CEO search, according to Lins.

Timko most recently was the COO of carrier services at telecommunications provider IDT, after joining the company in 1998 as vice president of engineering and operations. Before joining IDT, Timko worked for Call Sciences, a startup developing personal number services, as well as Bellcore and Bolt, Beranak and Newman (BBN).

“The business skill Kathy has demonstrated at Canoe over the last two years has been pivotal in helping the industry’s national interactive television platform to surpass 20 million households and has led the company to its go-to-market phase,” Comcast Cable president Neil Smit said in a statement. At this point, industry executives said, Canoe must work to deliver real proof points to help its partners sell its services.

“Canoe needs to stay very true to its mission — to be an aid to the national networks’ sales forces,” Woerz said. “Canoe needs to be an innovator about how to solve business challenges.”