Social Media Futures - Management Summary


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  • THis is a truly worthwhile and informative read on the subject of social media that goes beyond vague airy concepts.... to applied statistical and case study detail. An easy and engaging read.

    Problem is this is just 7 of the 51 pages here (its the official PDF preview) and to purchase it will require a visit to the IPA website and stumping up £75.
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Social Media Futures - Management Summary

  1. 1. Foreword As an industry, we have only just begun to scratch the surface of social media. There’s a revolution in the air, and a pseudo-science to describe it that leaves many of us searching for a better understanding. The tech-savvy creatives among us are leaping to experiment; strategy people are living in the ‘planosphere’; new ways of thinking and talking are emerging. There’s a lot of hype, but less understanding of the reality. This publication aims to bridge the digital divide between the old and new worlds. It seeks to make sense of social media with reference to both old and new communication models and, in so doing, provide common ground for debate and collaboration. As media convergence really begins to take hold, and brand owners seek to integrate social media into their overall communications strategy and plans, it is incumbent on agencies to help them navigate this new reality. In so doing, we will also arrive at a clearer understanding of social media’s likely impact on marketing and agency budgets, structures and services, and find it easier to take effective action. We can also identify new business opportunities for agencies beyond brand communications, where insight, planning and marketing database skills can be applied to reputation management, listening and monitoring, new product development and e-commerce. We are delighted to be partnering with the Future Foundation for a second time, on this most constructive research and consultation programme. Moray MacLennan IPA President and Chief Executive, MC Saatchi Worldwide
  2. 2. Contents Introduction and rationale 4 Scope of work 4 Methodology 5 Management summary 6 1 | Demystifying social media 8 1.1 | What are social media? 9 1.2 | An anatomy of social networks 10 1.3 | Key characteristics of social media 12 1.4 | Who uses social media? 12 1.5 | How networks are changing society 13 1.6 | Why networking is challenging brand communications 15 2 | Social media and brand communications 16 2.1 | New models for brand communications 16 2.2 | New advertising formats for brand communications 16 2.3 | New business opportunities beyond brand communications 17 2.4 | Applying social media ‘netiquette’ to brand communications 18 2.5 | Applying industry Codes of Practice to social media 19 2.6 | Social media and intellectual property 21 2.7 | Case examples of current practice 22 2.8 | Integrating social media 26 2.9 | Brand conversations online 27
  3. 3. 3 | Learning from academia 28 3.1 | Five academic theories of social networks 28 3.2 | Relating academic theories to practice 34 3.3 | Planning guidelines for social media 36 4 | Agencies and social media – the Delphi research 37 4.1 | Predicting the future of brand messaging over social media 37 4.2 | Painting a picture of the future of social media: the next 10 years 39 4.3 | Agency readiness for the social networked future 43 5 | Assessing the top-line business impact 45 5.1 | Opportunities for business growth in social media 47 5.2 | Broader opportunities for revenue generation 49 5.3 | Sizing the opportunity 50 5.4 | Broader market opportunities 50 5.5 | Comparing the consumer-led scenario of 2008 with that of 2007 51 Post-script: The future impact of technology 52 Bibliography 54 Contributors 56
  4. 4. Probability Frequency Central scenario Media-led scenario Consumer-led scenario 0.05 0.04 0.03 0.02 0.01 0 30,000 36,000 42,000 48,000 54,000 60,000 66,000 500 400 300 200 100 0 Total commercial advertising in 2016 figure 1 Source: The Future of Advertising and Agencies, IPA/Future Foundation 0 1996 2001 2001 2011 2016 10 20 30 40 50 60 Consumer-led scenario Central scenario The consumer-led scenario £bn at constant 2005 prices figure 2 Source: Future Foundation £bn at constant 2005 prices Introduction and rationale In January 2007 the IPA and the Future Foundation published The Future of Advertising and Agencies: a 10-year perspective. This thought-provoking study put forward three scenarios, of many possible, for the future of commercial advertising as we know it: a central scenario, which was deemed to be the most likely, and two alternative scenarios, one media-led, one consumer-led, which pushed to the extreme the impact of changes in the media and consumer landscape. The central scenario painted a picture of a healthy industry growing at an average 4.5% per annum to £52bn (at 2005 constant prices), with a shift towards more named, screen-based and two-way communications activity. It assumed that there would be no major shifts in power between agencies, clients, media and consumers, despite a more interactive digital media environment. The media-led scenario described a world in which brands would have to ally themselves to media owners to get their messages through to consumers in order to overcome stringent restrictions on paid-for advertising in a growing number of categories. The consumer-led scenario, on the other hand, described a future in which the consumer, empowered by social networks and ‘blocking’ software, increasingly mediated messages between brands, themselves and other consumers, and radically diminished the power and influence of the paid-for advertising industry. Not surprisingly, on this basis, the consumer-led scenario was predicted to be the most negative to the industry in terms of future growth. Indeed, the Future Foundation’s model of total commercial advertising in 2016 indicated a £16bn revenue gap between the best-case scenario (central) and the worst-case scenario (consumer-led); with total commercial advertising expenditure figures of only £36bn and average annual growth rates of 1.2%. The report suggested that some, though not all, of the revenue lost to commercial advertising would transfer to the wider communications industry, and be taken up by new forms of advertising and new channels of communication. Scope of work The broad purpose then, of this further exercise, was to explore in greater depth the consumer-led networked scenario; test the accuracy of the assumptions made about its likely impact on the future of advertising and agencies; provide a series of recommendations and principles for agencies to consider in order to maximise the potential of the growth of social media for their businesses; and
  5. 5. Editorial‘Advertising’ Commercial Consumer £35.8bn ~£16bn New forms of advertising: the consumer-led scenario figure 3 Source: The Future of Advertising and Agencies, IPA/Future Foundation identify a range of new revenue generating activities which social media would create for the industry. This report is a summary of the research, development and consultation undertaken and has, as its core objectives, to: 1. Demystify social media 2. Make sense of social media in a brand communications and broader business context, and provide case examples of current practice 3. Use academic theory to create guidelines for planning the use of social media for brand communications 4. Explain agency perceptions of social media and its likely impact on the future evolution of commercial advertising 5. Assess the top-line business impact of social media on agencies, and the implications for the future evolution of agencies. Methodology Many of the lessons from last year’s exercise came from observing how ‘think- tank’ teams, drawn from the IPA membership itself, were able to respond to alternative scenarios and invent new organisational forms in the face of radically different circumstances. This second-stage project has been no different, and has involved the same process of consultation and research among the IPA membership. This has been amplified, at different stages, by desk research into social network theory, a literature review of relevant reports and articles, and by case material provided by IPA member agencies. The statistical model has also been recalibrated by the Future Foundation. In total, the project has taken 18 months and involved over 100 participants from the IPA membership. The full schedule of activity is outlined below. Schedule of activity 2007 May. . . . . . . . . . . . . . . . . . . . . . . . . Scope of work June. . . . . . . . . . . . . . . . . . . . . . . . Exploratory workshops July - September. . Desk research into social network theory October. . . . . . . . . . . . . . . . . . ‘Visioning’ workshops 2008 March. . . . . . . . . . . . . . . . . . . . . Delphi Stage 1 – online research June. . . . . . . . . . . . . . . . . . . . . . . . Delphi Stage 2 – online research July. . . . . . . . . . . . . . . . . . . . . . . . . Modelling – future forecasts of market size September. . . . . . . . . . . . . Draft 1 – peer group review October. . . . . . . . . . . . . . . . . . Desk research - trade press Oct 2007 – 2008 November. . . . . . . . . . . . . . Draft 2 – peer group review 2009 January. . . . . . . . . . . . . . . . . . Publication
  6. 6. Management summary The spread of online social networking is a profound, deep-rooted social and technological revolution that is changing many aspects of society. It is one that, for the purposes of this study, requires a serious evaluation in terms of the scale and depth of impact on consumer interactions with all forms of brand communication. The growth of social media provides significant opportunities for increased business for agencies. New forms of campaign and content creation come top of the IPA member list of future priorities, with the industry predicting that client investment through agencies in this area would increase by more than 5%. Real- time data gathering and analysis was identified as the second most important growth area for agencies (just under 5%). Other important growth opportunities are: new forms of research and insight generation; applications of network understanding to new product and service research and development; and the integration of public relations and word of mouth into brand communications planning and execution. While it is undoubtedly true that income from these new business activities will take time to build, it is possible to calculate that, by 2016, getting on for two-thirds of the potential revenue ‘lost’, when comparing the consumer-led scenario to the central scenario (the start-point of this exercise), could be regained through these additional products and services. If the analysis is extended to include the more general additional services that agencies might provide e.g. board-level consultancy; new forms of metrics and accountability; and e-commerce; then the additional expenditure generated increases from £10.6bn to £16.4bn – which coincidentally brings the level of expenditure back to exactly the same level as was previously shown in the central scenario. As with all revolutions, what is new does not replace existing technologies; these often remain in place for decades. As each new medium appears and the doom-mongers presage the end of the previous era, the most common outcome in reality is an overlay and interlinking of the platforms in new and unforeseen ways. What results is an ever richer and more complex media and communications landscape for brands to orchestrate, and for the consumer to navigate. Needless to say, this troubles the consumer much less than the brand owners or agency executives whose job it is to understand and exploit this rapidly shifting environment for commercial purposes. Understanding these dynamics is vital for future success in brand communications. We can see that permission-based ‘advertising’ requires a fundamental shift in mindset. Creative guidelines are already beginning to emerge which can act as ‘rules of thumb’: high-involvement categories fare best; creativity and innovation are at a premium; humility is a virtue.
  7. 7. The interactive nature of social media has value-added benefits too – marketing activities which were previously difficult, expensive and slow to implement suddenly become easy, cheap and fast. However, if social media are going to play a significant part in the future of brand communications, a higher degree of sophistication in planning and insights development will be needed. The main difficulty with innovations in this area is that many of them fail to relate back to established media measurement and planning principles, creating a disconnect between old and new. By extrapolating detailed lessons from the academic review, it is possible to provide a more scientific framework for integration between social media and other communications channels. The ‘Delphi’ research results give an interesting perspective on what leading IPA agencies believe will be the impact of Web 2.0 and social media and, as you would expect, there are divisions between IPA member agencies when thinking about the future of the business operating in a networked society. In terms of agency preparedness, agencies appear to fall roughly into one of three groups: ready and waiting; concerned but unprepared; and sceptical but confident. Overall, both clients and agencies need to develop a more integrated, holistic approach to all aspects of the brand communications process, in order for it to be fit for purpose; they need to see network communications as an integral part of the mix alongside other routes. They need to understand, measure and predict the operation and impact of communications in this evolving environment. Specifically, they need to improve their ability to work in real time, and develop new ways to incorporate and engage consumers in the communications process. They should explore ways that reinforce brand values, build trust and maximise the potential inherent in these changing consumer behaviours. Many agencies are already adapting to this challenge. Thus, this investigation of the likely impact of social media on market size proposes that levels of expenditure by clients with agencies can be maintained as long as agencies adapt to changing market conditions in the next 10 years. While it is possible that expenditure on paid-for space will decline, there is a degree of optimism about the opportunity this release of funds will create for increased investment in creative content, data analysis, PR, word of mouth and brand insight; and in new products and services generated by the real-time functionality of social media and its application to e-commerce, reputation management and effective targeting. Those agencies who innovate appropriately have potential for significant income growth in these new value-added areas.