Exclusive: Canoe To Shutter Interactive TV Ad Business, Lay Off 120

Canoe Ventures is shutting down interactive TV advertising operations -- closing its New York office and laying off 120 employees, including CEO Kathy Timko -- leaving about 30 employees to focus on VOD ads as its sole product, the company confirmed.

The decision to abandon ITV ads and dramatically pare back Canoe's mission came after a review by its cable operator owners, according to a Canoe spokeswoman. "It's the result of what the marketplace told us," she said.

Canoe was formed in 2008 by the six largest U.S. cable operators: Comcast, Time Warner Cable, Cox Communications, Charter Communications, Cablevision Systems and Bright House Networks. The venture's original mandate was to enhance the value of cable TV ad inventory and programming with interactive and targeted technologies.

After three years of testing and development, Canoe had enabled the delivery of interactive TV ads to more than 25 million cable homes nationwide across eight cable networks: AMC, Bravo, Discovery, E! History, G4, Style and USA Network.

Canoe's "request for information" interactive overlays on top of 30-second ads let viewers opt to receive more information, coupons or product samples through the mail -- with just a few clicks of the remote.

But despite Canoe's technical achievements, Madison Avenue did not buy the promise of nationally delivered ITV ads in a significant way. Among the reasons were that Canoe's reach across households and networks simply wasn't broad enough for the biggest marketers, and that the complexity of executing interactive campaigns didn't justify the additional time and expense.

Canoe commercially launched its ITV ad product in 2010, but never identified any advertisers that used the service.

In addition to Timko, other senior executives leaving Canoe include chief product officer Arthur Orduña, chief marketing officer Vicki Lins, senior vice president of sales and distribution Jim Turner and general manager for interactive television solutions Jonathan Bokor.

Canoe, in its radically slimmed-down form, will now attempt to create a national VOD advertising platform that encompasses both traditional on-demand and eventually TV Everywhere. The company will be based in Denver and headed by newly appointed CEO Joel Hassell, who previously was chief technology officer.

"To succeed, we must prioritize and focus our resources," Hassell said in a prepared statement. "Therefore, Canoe will scale back its national interactive TV initiatives."

Hassell added that "cable's ITV business will continue, but through the ad sales teams and video business units at the individual MSOs as they pursue business opportunities with these capabilities within their own footprints."

Canoe's more narrow goal, at this point, will be to build a way for MSOs and national programmers to generate revenue from dynamically inserting ads into on-demand content across both VOD inside the home and TV Everywhere outside the home.

"To make cable on-demand ad inventory as valuable as traditional broadcast (linear) inventory and online video inventory, the industry needs a standard, ubiquitous way to steward on-demand advertising campaigns," Hassell said. "National standards and practices for dynamically inserting ads into cable's on-demand content will monetize and support the on-demand platform as well as the MSOs' investments in TV Everywhere deployments. Canoe is committed to making this happen."

Chris Pizzurro, Canoe's general manager of VOD advertising solutions, is expected to remain with the company.

Canoe's failure to realize its interactive TV advertising ambitions is its second strikeout. The company's first product launch in 2009, dubbed "Community Addressable Messaging," was an attempt to overlay targeted national spots onto existing cable zones. That would have let an advertiser target a different second spot to specific zones (for example, to high-income areas).

But the company abandoned Community Addressable Messaging in mid-2009 before it was fully launched. David Verklin, the energetic former CEO of Aegis Media Americas who led Canoe in its first three years, cited business process challenges and technical issues in upgrading ad-splicing equipment across MSOs.

In July 2011, Canoe announced that Verklin, whose contract expired last year, would be replaced by Timko, who previously was chief operating officer. 

Canoe's employees were notified Wednesday of the decision to pull the plug on the ITV ad business, which will eliminate 80% of the company's workforce. Staffers will receive severance packages and will be offered outplacement services as the ITV business winds down over the next several months, according to the Canoe spokeswoman.

"We thank all of our dedicated employees, programming partners, vendors and other supporters, as well as pioneering national advertisers and their agencies for their work with Canoe and the industry," Hassell said in the statement. "In particular, the members of the joint venture thank Kathy Timko for her outstanding leadership during her tenure as COO and, more recently, in the dual roles of COO and CEO."

Just days before Canoe's leadership team was informed of the board's decision to terminate the ITV business, the venture was touting the results of a year-long study conducted with the Association of National Advertisers to try to bolster the case for interactive TV ads.

According to the Canoe and ANA research, ITV ads improve effectiveness even if viewers don't ultimately opt to receive the offer, with 86% higher unaided brand recall for interactive-enabled spots versus non-interactive ones. And in aggregated survey results on behalf of Honda, Fidelity, GlaxoSmithKline, Kimberly-Clark and State Farm, 19% of adults 18 to 49 on average opted to receive the interactive TV offers, the study found.

The venture also had been promoting ExpandTV as the consumer-facing brand name for cable's interactive TV capabilities, which for Canoe's purposes relied on CableLabs' Enhanced TV Binary Interchange Format (EBIF).

Canoe ramped up hiring in 2010 -- roughly doubling its head count that year in anticipation of the full launch of its interactive TV products. To accommodate the larger staff, the company signed a lease for 40,000 square feet of Manhattan office space in 1251 Avenue of the Americas, a building owned by Japanese real-estate company Mitsui Fudosan. The office, previously occupied by Lloyds TSB Bank, occupied the entire 39th floor.

Canoe's technical facility in Denver is located in space leased from the Comcast Media Center in Centennial, Colo.

Hassell asserted that Canoe's founding MSOs are committed to the focus on dynamic VOD advertising.

"Once we establish the market for dynamic ad insertion within cable's VOD platform, our vision is to offer more robust reporting and data insights, introduce addressable VOD dynamic ad insertion, and support VOD ad insertion across a wide array of devices both inside and outside the home," he said.

Hassell joined Canoe in August 2010 as senior vice president, engineering and technical operations. He was formerly founder and CTO of cable technology consulting firm DigiForge, which was acquired by Rovi last year.