Today’s media companies are struggling to keep up with the quickly emerging and fast-growing expectations of digital savvy consumers and advertisers, and will need to fundamentally change the way they deliver information if they are to succeed, according to a global study from IBM.
The research, based on surveys of 2,800 consumers across six countries, and one-on-one interviews with global advertising industry professionals, reveals a growing rift between advertisers, agencies and content owners and media distributors. This chasm appears to be widening as advertisers aggressively shift their spend to more interactive, measurable formats, but leave providers struggling to move “beyond advertising” to new forms of communication that combine the ROI characteristics of direct marketing with the brand characteristics of traditional advertising.
In light of the explosive growth in online and digital media formats, and a corresponding decline in traditional advertising (such as print, TV and radio), the study suggests that companies must move closer to adopting an integrated, measurable marketing services model as they identify and adopt the next generation of digital formats.
“To succeed - especially in the current economic environment - media companies will need to develop a new set of capabilities to support the industry’s evolving demands which include micro targeting, real-time ROI measurement and cross-platform integration,” said Saul Berman, IBM’s global leader for strategy and change consulting services, and co-author of the study. “Now is the time for companies to move quickly to become more effective with their assets and build for the future.”
Results from the study - titled “Beyond Advertising: Choosing a Strategic Path to the Digital Consumer” - indicate that four important trends are emerging:
- Consumer adoption of new distribution formats
- A shift in advertising spend
- Digital migration of platforms
- Emergence of new capabilities because of moves by new entrants and existing players
Influence of the Digital Savvy Consumer
Consumers are accelerating their adoption of digital content services such as Twitter, YouTube, and Facebook with varying levels of engagement. Between 2007 and 2008, the adoption of social networking tools soared to 60% from 33%, while online/portable music services more than doubled to 46% (from 22%), mobile internet data plans nearly tripled to 41% (from 15%), and access to mobile music and video quadrupled to 35% (from 7%).
The study indicates that mass marketing faces many challenges as the audience becomes increasingly harder to target and fund from an integrated marketing perspective. Reaching diverse segments will require niche offerings and contextual search capabilities that are tailored for new platforms, new offerings and by geographic market, IBM said.
“Media, entertainment and advertising agencies must realize consumers are open to sharing information under the right conditions,” said Bill Battino, managing partner, Global Communications Sector, IBM Global Business Services, and co-author of the study. “Our research shows consumers are willing to trade knowledge about their usage and preferences for content and associated targeted marketing offers. Companies that excel in permission-based advertising will take share of marketing dollars.”
Shift in Ad Spending
Over the last decade, advertisers followed their audience and shifted to more interactive, measurable formats such as the internet and mobile - which are expected to gain 20% share of overall spend. The study indicates that 63% of global CMOs expect to increase interactive/online marketing spend while 65% expect to decrease traditional advertising. This shift to digital online formats will give advertisers more capabilities to measure and analyze campaign results.
Shift to “Brands-Actional” Advertising
The continued migration to digital platforms is blurring the traditional distinction between advertising and marketing and is enabling advertisers to pursue two format objectives simultaneously, the research found. In the past, platforms were aligned with either transaction or brand objectives. For example, phone, direct mail and promotions could address transaction objectives like targeting, ROI, measurement and response, while platforms such as TV, print, outdoor and radio made it easier to address brand objectives.
Now, new digital formats - such as social media, online video, mobile, gaming, branded entertainment and advanced TV - can be used to simultaneously address both transaction and brand requirements, a move to what the study calls “brands-actional” advertising. As a result, advertisers that previously focused on delivering either ROI-driven marketing or brand-oriented advertising to the market can now cater to both sets of objectives.
Suppliers Can’t Meet Demand
According to IBM, today’s suppliers - including agencies, content networks and distributors - are not yet ready to meet these demands of the digital consumer and advertiser. Four-fifths (80%) of ad-industry respondents say the industry is at least five years away from being able to deliver true cross-platform advertising, including sales, delivery, measurement and analysis.
The study emphasizes that advertisers must deliver consumer-centric marketing - which involves combining more granular targeting and measurement with cross-platform integration - in order to meet the growing digital demands of consumers.
About the survey: The study was developed by IBM Global Business Services’ Media and Entertainment practice and the IBM Institute for Business Value (IBV). The IBV used two primary forms of research: an online consumer survey and one-on-one interviews with industry professionals. The online survey was conducted during Q3 2008, generating 2,800 responses from six countries: Australia, Germany, India, Japan, the UK and the US. The respondent group was split 50/50 male/female, proportionately reaching demographic and economic groups age 13 years and over. To assess industry strategies, more than 70 one-on-one sessions were conducted with global participants across the advertising value chain, representing content owners, media distributors, agencies, advertisers, research organizations/analysts, advertising enablers, information providers and media networks.