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@Home seeks blended ads, commerce

Buying ad firm Narrative Communications is intended to help @Home win on the tops of America's TV sets.

    @Home's decision to buy Narrative Communications has as much to do with the future of television advertising and e-commerce as it does with the future of the Net.

    Narrative's whiz-bang, highly functional advertising technologies are perfectly suited for @Home's high-bandwidth Net service, which in coming years will blend with television on digital TV set-top computers, enabling new opportunities for multimedia advertising and electronic commerce.

    Narrative's aim is "to blur the line between advertising and e-commerce," said CEO Hilmi Ozguc. The company?s Enliven technology already shades that line, allowing multimedia ad messages and enabling Web users to find information and make purchases within advertisements without having to leave the site they are viewing.

    Such capabilities are well-suited for a future when viewers can make purchases straight from their television sets.

    Shortly, Narrative will become the Enliven Business Network unit of @Home. The all-stock deal, worth about $90 million, will close within a few weeks, the company said.

    Controlled by several of the country's biggest cable operators, a group led by Tele-Communications Incorporated, @Home has exclusive rights to provide high-speed Internet access on cable systems, giving it the power to push standards that the rest of the industry is likely to follow.

    For @Home, the Narrative acquisition is "a long-term play to own the standard for their environment," said Evan Neufeld, senior advertising analyst for Jupiter Communications.

    @Home made the move not only to acquire Narrative's technology and ad revenues, but also to bring its software designers into the @Home fold, Neufeld said. "They're getting people who are leaders in the field."

    Narrative's technology creates far more active advertisements than standard banner ads. Amazon.com, Proctor & Gamble, and Toyota's Lexus unit use Enliven's animation, streaming technology, and interactivity. Enliven also makes possible detailed tracking of ad usage and offers advertisers the ability to gather information on users.

    Interestingly, Narrative?s capabilities are premised on low-bandwidth connections, which Neufeld said is the one somewhat puzzling aspect of the deal. "Narrative's raison d'etre is to work in a low-bandwidth world," he said.

    But Charles Moldow, a marketing vice president for @Home, cites two reasons why that benefits @Home. First, high bandwidth is far from ubiquitous, and Narrative's ability to squeeze its technology through slower connections will be useful on slower networks for years, he said.

    Second, even with broadband connections, most set-top boxes will still run on lightweight operating systems such as Microsoft's Windows CE, so those devices will still need to conserve bandwidth.

    "The same streaming environment will still be in play," Moldow said. "And these capabilities will need to fit easily on the set-top box."

    Strategically, @Home is trying to increase demand for high-bandwidth connections, and encouraging advertisers to move from simple banners to highly interactive multimedia ads is one way to do that.

    "We're trying to help the expansion of the industry," Moldow said. "This is much more about building the pie than it is about taking anyone else's piece of the pie."

    Although @Home is best known for providing high-speed Internet access, its ultimate goal is digital television. "That's the long-term play," said Neufeld. "They want to control the set-top boxes--they're not as interested in cable modems on PCs."

    The shift from PCs to TVs, Moldow said, requires moving away from banner ads by employing functionality such as Enliven's. "Interactive advertising has to continue to evolve to compete with TV, radio, and print," he said. "Rich media like Narrative's is the clear evolution."