ARMONK, NY - 23 Mar 2009: According to a major new global IBM (NYSE: IBM) study released today, media companies are falling behind in meeting the growing expectations of digital savvy consumers and the advertisers looking to reach them. Based on surveys of 2,800 consumers across six countries and extensive one-on-one interviews with advertising industry professionals around the globe, the study indicates a growing rift between advertisers and content owners, media distributors and agencies.
Advertisers are aggressively shifting their spend to even more interactive, measurable formats, as providers struggle to move "beyond advertising" to new forms of communication that combine the ROI characteristics of direct marketing with the brand characteristics of traditional advertising.
To compete in this new era of advertising, media companies and content suppliers will have to fundamentally change the way they deliver information to their audiences. Given the explosive growth in online and digital media formats, and the decline in traditional advertising (such as print, TV and radio), the study suggests that companies are placing their growth strategies at risk if they cannot evolve into more of a 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 Global Leader for Strategy and Change Consulting Services, and co-author of the new study. "Now is the time for companies to move quickly to become more effective with their assets and build for the future."
The study titled "Beyond Advertising: Choosing a Strategic Path to the Digital Consumer" was developed by IBM Global Business Services' Media and Entertainment practice and the IBM Institute for Business Value (IBV). The results indicate that four important trends are emerging: consumer adoption of new distribution formats, a shift in advertising spend, digital migration of platforms and the emergence of new capabilities due to 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 percent from 33 percent; online/portable music services more than doubled to 46 percent from 22 percent; mobile internet data plans nearly tripled to 41 percent from 15 percent; and access to mobile music and video quadrupled to 35 percent from seven percent.
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.
"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 Advertising 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 percent share of overall spend, even in this economy. The study indicates that 63 percent of global Chief Marketing Officers expect to increase interactive/online marketing spend while 65 percent expect to decrease traditional advertising.
This shift will come at the expense of traditional marketing as advertisers follow their audience's migration to new channels. Digital online formats will enable advertisers the ability to more effectively measure and analyze campaign results to prove the value of their spend.
Shift to "Brands-Actional" Advertising
The continued migration to digital platforms blurs the distinction between advertising and marketing and allows advertisers to pursue two format objectives simultaneously. 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. In contrast, platforms like TV, print, outdoor and radio made it easier to address brand objectives. 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 the study, today's suppliers (agencies, content networks and distributors) are not ready to meet the demands of the digital consumer and advertiser. Eighty percent of advertising industry participants interviewed for the study expect the industry to be 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 be successful and meet the growing digital demands of consumers. Granularity is the basis for ROI driven advertising -- which implies the ability to micro-target and interact with desired consumers while measuring response and impact. Integration enables the delivery of messaging to consumers in compelling, innovative ways across platforms, and tightly coupled with the emotionality, sensitivity, pace and genre of the content within which it is placed.
IBM Survey Methodology
To continue tracking both end-user consumer behavior and leading industry expert opinions about advertising, the IBM Institute for Business Value used two primary forms of research: an online consumer survey and one-on-one interviews with industry professionals. The online survey was conducted during the third quarter of 2008, generating 2,800 responses from six countries: Australia, Germany, India, Japan, the UK and the U.S. The respondent group was split 50/50 male/female, proportionately reaching demographic and economic groups age 13 years and over.
To assess industry strategies, over 70 one-on-one sessions were conducted with global participants across the advertising value chain, representing the following types of organizations: Content owners, Media distributors, Agencies, Advertisers, Research organizations/analysts, Advertising enablers, Information providers, media networks and advertising.
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