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Forum: A Better Way to Do What Comes Naturally

1/24/1999 7:00 PM Eastern

"Convergence: the act of converging, especially moving
toward union" -- Webster's New Collegiate Dictionary.

Today, we see Webster's definition of convergence in
play at virtually every point on the media-industry compass. The technology that is
enabling the convergence of television and the Internet is driving together companies that
are anxious to leverage the production and distribution of content, and to exploit
opportunities to promote programs, concepts and products.

Industry leaders are exploring audience preferences for
entertainment and information, and business plans and marketing buys are beginning to
reflect the inevitable union of television and the Internet.

Media convergence is real and powerful. A new media form is
coming on fast because it can reach mass audiences and an audience of one. The
technologists, producers, advertisers and financial backers that are behind the creation
of the new media are tapping into one of the most powerful forces in the marketplace --
convenience.

The powerful force is not just technology, or expanded
entertainment formats, or even crystal-clear images. Convergence is hurtling toward us
because the new converged media empower people -- consumers -- to do electronically,
efficiently and almost effortlessly what they have already proven they do naturally: buy
goods and services of every description from the convenience of their homes.

Converged media will deliver more than information and
entertainment. For me, direct marketing is the "killer app" that will propel the
development of converged media. The power of convergence is the power to make it easier,
faster, cheaper, less intrusive and more efficient to directly market to people in their
homes, and for people to conveniently buy books, computer products, games, movies,
tickets, clothing and hundreds of other products and services.

WHY DIRECT MARKETING?

How can we know today how direct marketing will shape media
convergence? The infrastructure is not yet fully in place. Consumers haven't
developed new buying habits.So how can we assertthat direct marketing will
be the force that molds the converged media?

We could (and should) ask consumers, but with the new media
in the formative stages, the answers would be largely theoretical. While we're
waiting for the shape of the new media to become better formed, we can learn much from
what consumers are already doing in response to direct marketing, and from how
they're using television and the Internet.

First, direct marketing: Every day, consumers are proving
that they will buy in response to direct-marketing overtures, and marketers are proving
that they are willing to invest in direct-marketing programs. According to the Direct
Marketing Association, in 1998, consumers spent more than $750 billion in response to
direct marketing of all kinds -- an increase of more than 46 percent in five years.

This year, marketers will spend more than $100 billion on
the two leading direct-marketing approaches -- direct-mail campaigns ($40 billion) and
telephone marketing ($62 billion). In comparison, television advertising is a $42 billion
business.

In short, using a jury-rigged system that's often
intrusive, awkward and slow, direct marketers are reaching and motivating people to buy.

Imagine what's possible when the television set --
already a familiar utility in nearly 100 million U.S. households -- is enhanced with
electronics and software to be both the gateway to entertainment and information and the
portal to goods and services of every description. Imagine what's possible with a
highly efficient system that contains within it the entire marketing chain in one
integrated, easy-to-use, familiar and convenient package.

The converged media being created today couples TV's
power to create awareness and the Internet's ability to deliver detailed product
information on specific items of interest to an individual. At the "back end" of
this new media will be a user-friendly order-entry system that feeds directly into
order-fulfillment and billing systems.

THE HOLY GRAIL

Converged media is the Holy Grail of direct marketing. With
it, direct marketers will be able to reach people in a receptive mood via a media that
informs and motivates, and that is directly linked and just a few clicks away from an
efficient order-entry and delivery system.

Will consumers respond to direct marketing via TV? The
number of infomercials and the success of shopping channels provide proof that television
has the power to effectively link direct marketers and consumers. No new thinking is
required for convergence to succeed. In a sense, all convergence is a faster, more
efficient, more familiar and more powerful way to use television to purchase from the
home.

There is ample evidence that people are willing to use the
Internet as both an information and sales vehicle. A June 1998 study by Nielsen Media
Research and CommerceNet found that 79 million people in the United States and Canada
regularly use the Internet. That number represents an astonishing 36 percent increase in
users above the number identified in a previous study in September 1997.

The study also showed that the number of people shopping
and buying on the Internet was experiencing similar explosive growth. The number of people
shopping on the Web had reached 48 million, an increase of 37 percent.

The pieces are almost in place for television and the
Internet to be seamlessly integrated, allowing the new buying paradigm to take root. With
leading media and Internet companies feverishly working on system design, and leading
advertisers such as Procter & Gamble Co. actively promoting the development of the
Internet as a marketing vehicle, the new business models to make it go won't take
long to develop.

RESHAPING THE INDUSTRY

The Internet is reshaping the playing field and
repositioning the players in virtually every industry, and the media industry is no
exception. The final shape of the industry is still to be determined, but the reasons for
the reshuffling are obvious.

With convergence, people can choose to watch a TV program,
surf the Web, or do both. They will be able to bookmark a commercial for later viewing, or
hyperlink immediately to a Web site for information or to place an order. They will no
longer just be changing channels -- they will also be changing roles. They will be a
viewer one second and a user the next.

Importantly, the "viewsers" of the new media will
take action when theywant to, and they will have in their hands the tool that lets
them create a unique media experience and customized buying experience.

How they use that tool will define the roles of every
player in the industry. New behaviors will be recognized and rewarded in new ways.
Advertisers will have new expectations, and marketing plans will reflect expanded
opportunities and goals. Programming and advertising creative will have new requirements,
and competition for audience attention will become more intense.

Measurement of the new environment will be far more
complex. Audience measurement will remain critical, but audience-behavior measurement --
what people do with the converged media -- will also be of great importance.

Convergence: It's real, it's near and it's
powerful. It will change everything.

Dave Harkness is senior vice president, planning and
development for Nielsen Media Research.

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