Microsoft is buying interactive television company Navic Networks to gain an addressable advertising system. Navic Networks is a pioneer of interactive television and has developed an advertising management system known as Admira. Meanwhile Microsoft says its Mediaroom platform is now powering over two million television sets worldwide.

Having apparently failed to buy Yahoo!, Microsoft is still advancing its advertising platform in competition with Google. With the addition of Navic Networks it gains a nascent network for targeted interactive television advertising. Navic is currently working with cable companies like Time Warner, Cox and Charter and has an early deployment with Comcast.

Its addressable advertising system allows media buyers to target television commercials based on data gathered from set-top boxes, as well as additional demographic data. These spots can potentially include interactive overlays and links through to long form commercials and the ability to request further information.

Such interactive advertising has been available in the United Kingdom since the turn of the century and has generally failed to engage either advertisers or audiences so far, but it continues to excite the advertising executives of Madison Avenue.

The real potential comes with cable and broadband video services, which unlike satellite have the potential to target commercials based on previous viewing behaviour, which could revolutionise the currently inefficient media buying process.

“Television media represents the largest percentage of advertisers and agencies’ media budget today,” said Brian McAndrews of the Advertiser and Publisher Solutions Group at Microsoft. It represents a market of over $70 billion in the United States alone.

“Together, Navic and Microsoft will deliver addressable television advertising solutions to help our partners better manage media spend by increasing advertiser reach and ROI, and maximizing publisher yield on television advertising.”

Navic Networks is a privately held company based in Waltham, Massachusetts. So far it has raised about $40 million in venture capital. It will become a wholly owned Microsoft subsidiary within the advertising group that spans all digital media. Terms of the deal were not disclosed.

“Viewers across North America are engaging with relevant advertising and interacting with their TVs in ways never before possible,” said Chet Kanojia, the chief executive of Navic Networks. “Joining forces with Microsoft will enable our common vision of addressable television advertising solutions to continue to flourish and better meet the needs of our industry partners.”

Last year Microsoft acquired online marketing and advertising company aQuantive for around $6 billion. Among its assets were the Atlas system for online advertising.

Microsoft is positioning itself to provide a comprehensive advertising platform across online and video media. The company is clearly competing directly with Google, which dominates the online market, but Microsoft is well-placed in video, with its MSN, Xbox, and Mediaroom platforms. Gaining access to the conventional cable television market will significantly increase this scope.

Whether the cable companies will be prepared to see this lucrative opportunity go to Microsoft is another matter. They are currently working on their own system, codenamed Canoe, to provide addressable advertising.

Microsoft Mediaroom
Meanwhile, Microsoft is slowly gaining traction with the Mediaroom platform it provides for IPTV services. Microsoft says that is now used on 2 million television sets worldwide, up from 1 million subscriber homes in the first quarter of 2008. Microsoft has not provided an operator breakdown of these figures, or indeed said how many of those televisions represent secondary sets within subscriber homes.