20 Minutes into the Future
I love the show Mad Men, and I remember an episode in the second season that prominently featured Heineken. In addition to the in-show placement, the episode was sponsored by the brand and featured limited commercial breaks with text ads that played up the advertising history of the product.
Well-executed product placement works because advertising is most effective when it is seamlessly integrated into content, 30 Rock has also been good at this. Product placement changes consumer perceptions; it's not advertising, it's just something that exists within the context of media they already like.
Internet TV could maximize this effect because web ads are more interactive. The Huffington Post sums up the implications of this benefit nicely: "With an internet connection viewers will be able to click on a particular actor's shirt and find a list of online retailers to buy the shirt from." The ad content you would consume would be self-directed and would simultaneously direct you to a purchasing center. It could eventually add a PPC element to the current CPM model of television in a way that even Hulu with its Ad Tailor couldn't have imagined. This wouldn't really work for most apps but it could significantly impact the ad market for television in the future.
I don't think this type of advertising would ever supplant current methods, but would most likely supplement existing ad efforts. Catalyzed by TiVo, the industry is already using product placement more heavily. Though spending on product placement dropped briefly in 2009, it is expected to grow 5% in 2010. PQ Media CEO Patrick Quinn asserts: " the secular shift to paid placements from the non-paid model will continue in the forecast period, as changing consumer behaviors, new technology and the increased penetration of DVRs drives up the value of branded entertainment marketing strategies."
We are less and less likely to sit through commercials because we keep finding ways to avoid them and are no longer accustomed to passively consuming advertising. Internet TV both adds to this problem and provides its solution, which is the same solution it has always been: Make ads more relevant. Either through product placement as we know it now, or in the scenario described by the Huffington Post.
People want to interact with brands, as the recent Old Spice campaign expertly pointed out. We want to cultivate relationships with brands, and we want to feel like we chose those brands by ourselves. The internet lets us do that, and now, our TV's will too.