Marketing

Where Canoe Goes From Here

7/18/2011 10:01 AM Eastern

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.

Multichannel News cover story image for the July 18 editionVerklin, previously CEO of advertising
agency Aegis Media Americas, steered Canoe
on an aggressive product-launch course.
But as he exits, the advanced-advertising
venture owned by the six largest U.S. cable
operators does not have significant progress
to show, despite strenuous efforts by Verklin
and his 150 crewmates to get cable operators,
networks and ad agencies rowing in the
same direction.

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.”

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