Why social TV will be a multi-billion dollar business

Posted by CORY BERGMAN on June 27, 2011

The former CEO of Endemol, the world’s largest independent production house, says social TV is “going to be huge.” The CEO of Hulu calls it a game-changer. And the research firm Futurescape says social TV has “radical implications for the future of television viewing.” Is it just hyperbole, or are real economics in play? There are three arenas where social TV is quickly gaining traction, and all three have the potential to become billion dollar businesses by themselves.

1. Interactive TV at last

Last April, Yahoo snapped up IntoNow for $20 to $30 million, just three months after the TV-listening app made its debut. By encouraging viewers to “tag” TV shows and commercials for rewards, IntoNow is beginning to bridge the last mile of television, bringing interactivity to TV commercials — a task that interactive TV companies have tried for a decade. This month the music-listening app Shazam landed a $32 million funding round to expand its push into TV to reward users for tagging commercials, and other startups, like WiO, are quickly pushing into the space.

TV check-in companies like GetGlue and Miso, for example, also have potential if they can move beyond the mobile check-in. “(The) check-in is just the starting point of a conversation about TV but it is not the be-all end-all,” says Miso CEO Somrat Niyogi, who recently opened an app store for Miso’s API. “We believe the social TV experience can exist everywhere.”

Xbox, too, is making strides at connecting viewers to commercials in innovative ways. Last week Xboxannounced that will voice and motion interactivity to commercials — called NUads — for users with the Kinect attachment. “I’m here to say that it will change television as we know it — forever,” explains Mark Kroese, a GM at Microsoft. “I say this because NUads — specifically the Kinect voice and gesture technology that enables them — finally unties the Gordian knot of interactive television, and by extension, interactive advertising.”

Advertisers, programmers and distributors have dreamed of untying the knot — or whatever metaphor you want to use — because billions of dollars are at stake. Imagine knowing who interacted with a commercial and who took action on it. Until now, the only real metric has been TV ratings, and the promise of interactive TV has never reached scale. Too many technologies, set top boxes, cable/satellite operators. But as mobile apps grow in scale, they live seamlessly away from the traditional confines of TV technology and competitive lines. And gaming platforms have crept into living rooms in massive numbers — Xbox Live is television’s largest social network, claiming 35 million members. Mobile apps and gaming platforms have become the bridge.

2. Social TV guides will make you watch even more

That alone is worth billions, but there’s another big economic driver to social TV. Just as DVRs increased television viewing — much to the surprise of many — social TV guides will empower viewers to make smarter choices and discover shows they never knew existed. By measuring what you’ve watched, what you’ve liked, what your friends have recommended and what’s trending overall, social TV guides will make surprisingly-accurate suggestions. Matcha.tv (below) is an example of a social TV guide that’s starting to get close, but it’s just one of as many as a dozen startups in this space.

Just look at how Netflix has increased its business to the tune of millions of dollars through behavioral recommendation algorithms — just wait until they roll out an “extensive” Facebook integration in the months to come, adding social recommendations to the mix. Facebook says its users have “liked” TV shows 1.65 billion times, becoming a natural recommendation engine for TV. Last week, Netflix CEO Reed Hastings even joined Facebook’s board to “take advantage of all the opportunities ahead.”

Beyond Netflix, imagine social TV guides built into every cable and satellite service, every set top box, every connected TV set. They’ll suggest new episodes of your favorite shows, available instantly on demand. Shows your friends recommend. And algorithmic suggestions that make Netflix and TiVo’s current picks look like child’s play. No need to record anything — everything exists instantly. Comcast just previewed (above) a new cable experience that’s the first step in the direction of reinventing TV guides and channel surfing. It’s likely when viewers turn on their TV sets (and tablets) in 3 years, they’ll see a social TV guide startup screen, not a live TV channel.

3. Second-screens become a natural viewing extension

iPad owners spend more time in front of TV with their tablet than any other activity, a Nielsen study found. And tablets are predicted to continue to grow like wildfire, reaching 23% of the U.S. internet population by next year.

No wonder why cable companies, broadcasters, programmers and sports leagues are scrambling to roll out “second screen” apps that tie to TV. Fueled in part by Twitter’s role in providing a real-time social layer over television, these apps are becoming a natural extension of TV programming, both live and on demand. Imagine, for example, downloading an NFL app that provides a rich game program — the same you’d receive at the stadium — along with real-time stats, Twitter chat and multiple live cameras. (The NFL offered something similar, but scaled down, for the Super Bowl.) Second-screen apps are also becoming remote controls, like Xfinity’s new iPad app (above), making your tablet a natural extension of TV viewing.

While there have been anecdotal examples that Twitter has helped drive ratings around TV shows — like Piers Morgan’s last-minute interview with Charlie Sheen — the bigger opportunity will be second-screen advertisements that tie with the broadcast. One of my favorite sponsored apps was the Master’s golf app(above), sponsored by IBM, and there are dozens more. Second Screen Network is an example of a company that’s moving ahead with an ad network that spans all kinds of second screen apps. For viewers who aren’t tagging, checking in, or clicking on TV commercials, second screen ads add another path of interactivity.

That’s why former Endemol CEO Ynon Kreiz told attendees of a TV conference earlier this year to “get up, leave this room” and run to their garages to get to work designing the future of social TV. “Whoever figures it out, will be the next Steve Jobs of this generation,” he said.