Mike Consol

The end of advertising as we know it

The next five years will bring more changes to the advertising business than the previous 50 years. That’s the conclusion of an IBM study of consumers and advertising experts. Read about the four major trends the research project sees emerging.

Everybody is well aware that the advertising game has undergone some pretty radical changes. Online advertising, animation, keywords and contextual ads, to name a few. But that’s just the beginning according to IBM, which is predicting that the next five years will bring more change for the advertising industry than we saw during the previous 50 years.

That’s the conclusion of an IBM Institute for Business Value report titled The end of advertising as we know it. The study’s results are based on the input of 2,400 consumers and 80 advertising experts. It invites us to imagine a bold new frontier in advertising, a marketing environment where:

• Spending on interactive, one-to-one advertising formats surpasses traditional, one-to-many advertising vehicles that we’ve used for decades in the form of newspaper, radio stations and TV networks.
• A significant share of ad space is sold through auctions and exchanges, rather than proprietary channels.
• Advertisers know who viewed and acted on an ad, and pay for their advertising based on results rather than “impressions.”
• Consumers self-select which ads, choosing to receive only those messages about products and services that interest them. They then share preferred ads with their peers.
• User-generated advertising that is as prevalent as spots created by professional advertising agencies.

Naturally, these conclusions don’t bode well for radio, television and newspaper advertising, though that is assuming their operational models don’t undergo some significant changes, which is already happening. Traditional media outlets all have websites and are experimenting with new advertising models and packages. This aside, notions that companies are going to entirely abandon brand-building ad campaigns entirely in favor of measurable direct-response campaigns is surely folly.

Still, statistics show there is a major reordering of spending priorities underway by advertisers, as more and more ad dollars continue migrating from traditional media venues to online channels. This is due in part to the high priority advertisers place on reach young people who haven’t yet established their buying patterns.

The IBM report believes there are four powerful trends at work that are reconfiguring the advertising business.

Attention. Consumers are increasingly in control of how they view, interact with and filter advertising in a multimedia environment. TiVo alone shook up the television advertising business, as viewers shifted their attention away from linear TV watching and have adopted tools that allow them to skip advertisements, as well as rate their favorite ads and easily share them with friends. This is happening while people spend less time with tradition media outlets and more time with online media. Those surveyed for the IBM report say they spent as much time online as they do watching television.

Creativity. Technology has unleashed the creativity of everyday people. Popularity of user-generated and peer-delivered content is rising. People aren’t happy just consuming media; they want to participate in its creation. New ad revenue-sharing models – such as YouTube, Crackle and Current TV – have allowed amateurs and semiprofessionals to create low-cost advertising content. IBM’s study indicates the trend will continue. Example: User-generated content sites were the top destination for viewing online video, attracting 39 percent of survey respondents. Meanwhile, established media players, like publishers and broadcasters, are taking on traditional agency functions and developing more of their own creative.

Measurement. Advertisers are demanding more targeted and measurable advertising campaigns, putting pressure on the traditional mass-market model created by newspapers, radio and television. Two-thirds of the advertising experts IBM polled expect results-based formats to account for 20 percent of ad spending within three years. Those dollars will be shifted from the currently dominant impression-based model. The exodus from traditional media ad campaigns began at least a couple of years ago and shows no signs of letting up.

Advertising inventories. New advertising industry players are making ad space that once was proprietary available through open exchanges. As a result, more than half of the ad professionals polled expect that within the next five years open platforms will account for 30 percent of the revenue currently flowing to proprietary advertising channels, such as TV channels and radio stations. Mighty media empires have already been crippled by the new world order created by the internet. Ad exchanges will further democratize the business and take the media moguls down yet another peg.

Advertising campaigns have been a key component of corporate empire building for generations. The advertising agency business itself became a big industry. Those were simple days by comparison to the fragmentation taking place today. New technologies have proliferated options for ad creation, placement, targeting and measurement. The array of diagnostics available for analyzing online performance is seemingly endless, and technology’s rapid advance means we’ve just reached the edge of this new landscape.

It’s all become very unpredictable, interesting and egalitarian.

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