Zacks_Analysts' Blog : TiVo Launches Free Website - Analyst Blog

A provider of interactive advertising solutions and developer of digital video recorder (DVR), TiVo Inc. (TIVO) recently launched a free interactive website that measures and compares the effectiveness of commercial advertising.

The free website uses TiVo’s pioneering research tool Stop||Watch ratings service to analyze the effectiveness of a brand’s television commercials in retaining viewers. The service also compares the performance of the brand relative to competing brands.

TiVo Stop||Watch ratings service data is derived from a daily, aggregate, anonymous, stratified random sample of 100,000 TiVo subscribers. The service collects second-by-second behavior and viewership data and analyses the same for the purpose of ratings. The Stop||Watch service uses ad occurrence data from TNS Media Intelligence to identify commercial spots.

Brand managers or Chief Marketing Officers (CMO) are the primary target audience of this interactive website. The website allows comparisons between three brands with national broadcast and cable television spots to determine the one that effectively retains viewers over a timeframe ranging from one week to three months.

The website also displays the weekly performance for each brand with the help of graphical charts, making the measurement more granular and easy to interpret.

We believe this free website will boost TiVo’s subscriber base going forward, as marketers and brand managers become more aware of TiVo's second-by-second measurement capabilities and their effectiveness over the current industry standard.

Advertising remains a key growth driver for TiVo. According to media company Nielsen, contrary to fears that DVR would wipe out the value of commercials because of viewers fast-forwarding through advertisements, DVR actually contribute significantly to commercial viewing.

In the U.S., DVR playback added a 16% lift to the average minute of prime-time commercials. The DVR gives advertisers a way to more precisely target viewer demographics.

TiVo currently has research partnerships with NBC and CBS Corp. (CBS) and six of the world's largest advertising companies such as WPP Group Plc, Interpublic Group (IPG), Publicis, Havas, Carat, and Omnicom Media Group (OMC).

We believe that in the long term, advertising revenue could provide a significant revenue stream for TiVo. DVR viewing is becoming a more crucial part of the advertisement buying equation as DVR penetration is expected to grow to 50% in the next 3 to 4 years.

Our Take

We expect new customer wins and partnerships, new cable deals, gradual roll out of distribution deals, product launches and international diversification to drive long-term growth. However, increasing competition offerings from cable and satellite providers such as Comcast Corp. (CMCSA), Cox, Dish Network Corp. (DISH) and DirecTV (DTV) are threatening its DVR business, resulting in reduced subscriber additions.

We maintain our Neutral recommendation on the stock over the long term. Currently, TiVo has a Zacks #4 Rank, which implies a Sell rating over the short term.