Interactive TV commercials are not just a gimmick - they really sell products and they are here to stay. Kate Bulkley reports

Last month, a simple 20-second advertisement for the new album by the Chemical Brothers prompted some astonishing interactive statistics. The ad ran on Sky channels and on Channel 4 over 10 days and only aired a limited number of times and yet 280,000 fans pushed the red button to hear some snippets of the songs and then an amazing 22% of them went on to buy the album. That means 61,000 people bought the Virgin EMI record, clearly part of the reason why the appropriately named Push the Button hit number one in the album charts.

"It is the first album previewed on interactive TV, and that hasn't really been done before," says Simon Smith, creative partner at Weapon 7, the creative agency that made the interactive application. "This is placing interactivity where it should be. The creative was good and the results were good as well. In fact, the label didn't expect it to be number one so they had quite a party."

The overwhelming response for The Chemical Brothers interactive advert (or i-ad) confirmed the growing trend - TV advertising in 2005 is going interactive. From just 17 i-ads in 2000, there were nearly 200 last year, and already this year 45 i-ads have run, according to BSkyB. Sky ran its first interactive advert in March 2000 for Chicken Tonight, offering those who pushed the red button a menu of different recipes in which to use the sauces. Since then i-ads have become increasingly sophisticated: last month those who pushed the red button during the Honda Diesel ad were offered several options: they could sing along karaoke-style with the commercial's song, record a complaint, watch a director's cut, get more information about diesel or arrange for a test drive.

"I think we are seeing a transition period, moving from response-based ads to more of a brand experience built on creating a relationship with the viewer," says Fran Patey, head of interactive ads at Iburbia, a digital research agency. "Interactive advertising is becoming more parallel to the 30-second spot, using a lot of the same values, but offering a lot more."

Since 2000, there have been over 600 interactive campaigns on Sky. "Over that period of time, advertisers have tested it and discovered that interactive advertising works," says Robert Leach, Sky's head of interactive services. Three quarters of the UK's top 50 advertisers have used interactive advertising, and some 75% of the brands that have used interactive ads have used them more than once, he says.

Not surprisingly, the market for i-ads is still relatively tiny, at £10-14m in 2004, compared with the billions in revenues from traditional TV ads, but most industry observers predict exponential growth during 2005. Toby Hack, head of OMDtvi, the interactive arm of OMD and the Omnicom advertising group, says the interactive ad market could grow 40% this year. Sky's Leach predicts growth could be higher because Sky's revenues from interactive ads grew 65% just in the last half of 2004; January was the busiest month ever in the UK for i-ads with 45 live campaigns, says Leach. That is 40% more than the number of interactive ads that ran in January 2004.

Sky pioneered i-ads, but now that all the terrestrial broadcasters also allow interactive applications behind ads there is the potential for far more demand from advertisers. ITV ran its first interactive campaigns in November 2003; Channel 4 and Five embraced i-ads last autumn. This January, ITV ran 28 interactive campaigns. "Interactive advertising has now reached some kind of critical mass," says Peter Birch, head of interactive sales at ITV Plc. "It's not just in geeky homes any more."

Another spur to the business is that the cost of buying the interactive bandwidth needed to run i-ads has dropped. Sky cut these bandwidth costs by a third early last year. "Cost used to be a problem because if you were spending £200,000 to buy airtime on Sky, and the interactive site cost another £50,000, it looked pretty expensive," says Sky's Leach. "But now that you can get your i-ad on all the big channels the cost doesn't seem like that much."

Creating and buying bandwidth for an interactive application for an advert can cost anywhere from £30,000 to £250,000, says Hack. Compared to the cost of creating a traditional 30-second spot, which starts at £100,000 and can go to £1m or more, the interactive cost looks cheap, but OMDtvi's Hack says there are still big hurdles to making i-ads mainstream. "For a lot of the creative agencies, interactive adverts go in the 'too hard to do' box, because it means a shift in their business that they aren't ready for yet."

This is an attitude that ITV has decided it needs to help change. The commercial broadcaster sent out 20 letters this month to the top 10 creative agencies in London asking for an audience to explain the benefits of interactive advertising.

BBC Broadcast, which is the arm of the BBC that creates promos and advertising spots and recently designed the interactivity behind the Honda Diesel "Grrr" advertising campaign, will co-present with ITV and offer its creative services to the agencies at a substantial discount. "The focus has been on the technology with interactive advertising and we need to change that," says ITV's Birch.

Christian Reuland, creative director at BBC Broadcast, says that educating the creative agencies about i-ads will help to move interactive content and applications up the ladder of importance, which should result in better consumer experiences. "The creative agencies still put all their energy into the linear 30-second spot first, which makes the interactive production process a bit tricky," says Reuland.

Sky, ITV and the BBC typically do not have a lot of nice things to say about each other because they are fierce competitors, but interactive advertising is giving them some common ground. "This is about growing the market and raising the creative bar," says ITV's Birch.

Interactive advertising will not only grow in 2005 but it will also become more sophisticated. For example, there are likely to be more onscreen prompts to encourage viewers to press red. Sky is also considering enabling its Sky+ PVRs to record the data stream (which is where interactive applications sit) as well as the TV video stream. Today, a programme recorded on Sky+ does not include the interactive elements. "We know this is important to the future, because i-ads and PVRs really go hand in hand," says Leach. Cable operators may also begin to add the technology necessary to allow interactive advertising.

At the height of the award season, it is fitting that acceptance speeches for 2005 i-ads are already being written. In May, the D&AD Awards will for the first time feature a Pencil award for the best interactive ad.

"The new interactive Pencil will be a key driver in getting creative agencies to think more about interactive TV," says Hack of OMDtvi.

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