digital
                            outlook
                             report09
digital outlook report 09
The following report contains statements that are forwardlooking, including expectations and predictions
regarding future ...
contents
                                                                   Social Object Theory:    56
             a new...
TiVo on the Future of Television:   158
                    consumer conversations
                                       ...
A N E W R O L E FO R AG EN C I ES



From Breaking
Campaigns
to Building
Client Businesses
By Clark Kokich, Chief Executiv...
Agencies haven’t played this role very long. They
Now, after 10 years in the digital space, I find myself
                ...
the consumer experience in totality across all
departments — from product development to new
collections to the digitally-...
outlook
                                Trends to Watch    10
                           Shifting Their Focus:   16
      ...
• Converted to d
                                                                                            igital c
    ...
1. Advertisers will turn to “measurability” and “differentiation”
   in the recession

  As the economy softens, advertise...
2. Search will not be immune to the                         Web site and across the Web. We can also
   impact of the econ...
you want it. As GPS functionality and loca-
    adopted, it could revolutionize how online media
                         ...
7. “Portable” and “beyond-the-browser”                    ways to search, discover, browse, organize and
   opportunities ...
As social media elements begin to influence video
(CNN’s social TV experience on the Web around the
inauguration was well-...
• Ad
                                                  ver
                                                      t
       ...
The increased potency of social networking is just one
example of why 2008 was a year that empowered Razorfish’s          ...
2008 Media Distribution
Broad trends in Razorfish™ client spending

As in the past, the net ad spend of Razorfish’s™ clien...
Share of search spending increases

                                                          Advertisers continue to supp...
Vertical placements move emphasis
away from portals

                                                                     ...
2008 Vertical Spend                       In entertainment, sites with strong video and audio
                            ...
Category Share vs. Site Growth


                                             142
                   150%


              ...
Ad Network Consolidation


            100%


             80%                                                            ...
media — but it will also be an opportunity to explore
ence Network, and the move of many premium adver-
                  ...
25
O U T LO O K



Trends in
Social Influence




                                                                           ...
A year ago, we developed a hypothesis that the way
people were influencing each other — online, in small groups,
through p...
more attention. An event like the Motrin episode,
Now, as SIM becomes more mature, 2009 will be the
                      ...
5. The portable social graph will fuel marketing
   sumers define the brands by the sheer volume
                         ...
porations to rethink how they are organized,
   Granovetter, Barry Wellman and Duncan J.
                                 ...
finally realize that social is not a fad; it is fund-
    amentally changing how we relate and interact
    with each othe...
•M
                ap
                 sa
                    nd
                     di r
                      ec
      ...
It’s expected that 2009 will likely be a challenging year for
search marketing. While budget cutbacks won’t be as severe a...
suspicious of last-click, search-driven attribution
Volatility in the paid search landscape
                              ...
Two forces are converging to hasten this develop-
Focus on the site-side
                                                 ...
An emphasis on driving more                                 Marketers will have to make use of assets such
search “shelf s...
critical role in helping users access and navigate
Expect some consolidation in 2009 as the three
                        ...
real time and with GPS location functionality. This
Respectively), for on-deck searches across their
                     ...
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2009 Razorfish Report
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2009 Razorfish Report

  1. 1. digital outlook report09 digital outlook report 09
  2. 2. The following report contains statements that are forwardlooking, including expectations and predictions regarding future industry trends and developments. Actual results may differ materially from our expectations or projections. This report also contains opinions, estimates, and forwardlooking statements by industry leaders. Such statements are the personal opinions of the individuals quoted and should not be attributed to any other entity or individual. Readers are cautioned not to place undue reliance upon forward-looking statements, which speak only as to the date of this document. Except as required by law, neither Razorfish, LLC nor any of its affiliated entities undertake any obligation to update any forwardlooking or other statements in this document, whether as a result of new information, future events or otherwise. © Razorfish, LLC. All rights reserved.
  3. 3. contents Social Object Theory: 56 a new role for agencies The Secret Ingredient for Powering From Breaking Campaigns to 4 Social Influence Marketing™ Campaigns Building Client Businesses For Here or To Go? 62 outlook How Portable Media Is Like Fast Food Trends to Watch 10 Top 10 Mobile Applications to Watch 66 Shifting Their Focus: 16 Getting Smart With Mobile Marketing: 78 A Look at 2008 Digital Ad Spending How Mobile Marketing Is by Razorfish™ Clients Evolving in Europe and the U.S. Trends in Social Influence Marketing™ 26 topics on our minds Search Outlook 2009: 32 Pushing Search Forward Looking for the Pulse Online in 2009 84 in a Volatile Marketplace The Future of Retail: 88 Publishers of the Year 40 The Consumer’s New Shopping Journey Think Inside Someone Else’s Box: 96 what’s emerging Business Model Innovation in the Digital Age Digital Media Escapes From the PC: 44 Converged Connections: 100 Unlocking Opportunity for Consumers Moving Brands Across Multiple Experiences and Marketers Email Marketing: 104 Ad Exchanges: Revolutionizing 52 Increasing Marketing Connections the Buy-Sell Process in a Social World
  4. 4. TiVo on the Future of Television: 158 consumer conversations A Call for Innovation Catching Up With the Connected Class 112 Xbox Live on the Future of Television: 160 Connecting with Digital Mom 118 A Window into the Next Generation through Emerging Technologies Comcast on the Future of Television: 162 New Opportunities for Enhanced Television the evolution of research Navic Networks on the Future of Television: 163 and measurement As TV and Its Audiences Fragment, Bringing Media Mix Models Into the Digital Era 124 How Will It Be Funded? Social Influence Research: 128 Google TV on the Future of Television: 165 The Confluence of Consumer Research An interview with Mike Steib and the Social Graph Social Media Measurement: What’s it Worth? 136 three things every executive Modeling and Creating Measureable should know in 2009 Outcomes of Social Media Engagement The Web Gets a Pulse 170 tv at a crossroads Fragmentation Moves Beyond Media 172 The Digitalization of Television: 146 When the Going Gets Tough... 174 Challenges and Opportunities as TV Turns a Corner Jack Myers on the Future of Television: 154 Realities and Opportunities for Media Companies and Marketers 3
  5. 5. A N E W R O L E FO R AG EN C I ES From Breaking Campaigns to Building Client Businesses By Clark Kokich, Chief Executive Officer I spent the first 30 years of my advertising career focused on saying things. What do we need to say to persuade people to buy our product or service? How do we say it in a unique and memorable way? Where do we say it? How much will it cost to say it? How do we measure consumer reactions to the things we say to them?
  6. 6. Agencies haven’t played this role very long. They Now, after 10 years in the digital space, I find myself used to, but, with the rise of strong client marketing spending my time talking to clients about building groups, agencies have focused squarely and things. What do customers need to make smart deci- exclusively on producing great advertising, on saying sions? What applications do we need to build to things. satisfy that need? Where are our customers when they make a decision? That limited perspective won’t cut it anymore. Clients are desperately dealing with a laundry list of chal- How do we make sure the things we build can be lenges: A sinking economy. A connected, in-control delivered wherever (and whenever) they need them? consumer. A drive for lower costs. The disruption How do we build a link between the digital and the of traditional media channels. An expansion of global physical world? How do we help consumers share competition. The list is long and growing. the things we build? In this environment, clients need ideas that will trans- This isn’t news to anyone; we’ve all seen it coming form their business. In the past, when our only tool for awhile. At every industry conference you’ll hear was paid media, it was virtually impossible to develop someone make a compelling case that the future an idea that could change a client’s fundamental of creating and sustaining brands is in building competitive position. Now, digital has the potential to experiences, not just in producing great advertising. re-imagine a consumer connection, or reinvent a business model. And we have a long list of consumer What’s not so apparent is the impact this change touchpoints with which to work, starting with the is having on the role that advertising agencies play Web, then expanding to mobile applications, social, within client organizations. It’s not just about the gaming, viral, digital-out-of-home, widgets, gadgets work that agencies do, but rather, it’s about the and more. Now, anything is possible. actual role they should be playing in setting business strategy, designing product and service offerings, With this expanded palette, we can build experiences delivering service after the sale, creating innovative that become an integral part of the brand. Experiences distribution channels and developing new revenue that have the ability to add value, create new cate- models. For a growing number of brands, the digital gories, surprise, delight, serve, simplify, entertain and experience is becoming as important as the actual tell a story in an entirely new, richer way than ever physical product. before possible. We are beginning to put examples of transformational business ideas into market for global brands such as Levi’s, which views the company and
  7. 7. the consumer experience in totality across all departments — from product development to new collections to the digitally-enhanced fitting room. This is the role that agencies must fill now. Clients need us to bring them business ideas. They need us to expand beyond our traditional role of being great communicators. We need to be great thinkers and problem solvers as well. They need us to understand how their consumers and markets are changing, and then bring them strategies that fundamentally improve their competitive position. Finally, they need us to turn those ideas and strategies into reality — by building transformational experiences. We’ll still need to be good at saying things. Tradition- al, one-way advertising will continue to be a power- ful marketing force. But it won’t be enough. We need to make the things we say real by building experi- ences that truly deliver on the promise — experiences that establish a concrete and direct connection be- tween the consumer and the brand. It’s a new role. One that will challenge the status quo. One that will stretch all of us to expand our view of what it means to be a great agency. One that will require new skills. And one that will drive deep col- laboration between creative, technology, media, user experience and analytics. It’s a tremendous challenge. And it’s a huge opportunity for those marketers who embrace it fully. 7
  8. 8. outlook Trends to Watch 10 Shifting Their Focus: 16 A Look at 2008 Digital Ad Spending by Razorfish™ Clients Trends in Social Influence Marketing™ 26 Search Outlook 2009: 32 Pushing Search Forward in a Volatile Marketplace Publishers of the Year 40
  9. 9. • Converted to d igital c able O U T LO O K • Addicte d to i Pho n ea pps Trends to Watch • Skips th e com me rci als
  10. 10. 1. Advertisers will turn to “measurability” and “differentiation” in the recession As the economy softens, advertisers will be asking more from their budgets. Even those with healthy financials are likely to push for, and command better price terms and concessions from media companies, who are eager to fill the vast supply of ad space available. video and targeted media, or it could mean high qual- Agencies and advertisers will look to established pub- ity engagement opportunities with select partners lishers with reliable models to focus their investments who deliver unique brand engagement. The pressure as more scrutiny is placed on return on investment. points will be on “measurability” and “differentiation.” Depending on an advertiser’s goal, this might include proven performers like search, ad networks, online 11
  11. 11. 2. Search will not be immune to the Web site and across the Web. We can also impact of the economy expect new social advertising formats and new social research approaches to emerge that lever- Budget cuts will be a reality for search marketers age the complex relationships that occur within for the first time in recent memory, requiring them a social graph. As social behaviors go main- to do more with less in an increasingly volatile stream, Social Influence Marketing™ is going to landscape. Nevertheless, we expect the search be glue that binds every digital strategy together. landscape to continue to evolve and innovate, with an increased focus on measurement and 4. Online ad networks will contract; search engine optimization (SEO), and the rise of open ad exchanges will expand compelling opportunities in local and mobile search. In 2009, the online ad network world will see both contraction and expansion: 3. Social Influence Marketing™ The traditional ad network world will contract • will go mainstream as competition for declining ad dollars increases. 2009 is going to be the year that Social Influence There are simply too many broad networks Marketing truly goes mainstream. According to competing for the same inventory and not telling Forrester Research, 75% of the online population a new story. is now engaged in online social behaviors, and At the same time, branded networks will expand. • with social strategies getting more integrated and Large publishers (e.g. the Fox Audience Network accountable, marketers are going to depend on and Turner Entertainment) will continue to take their customers, more than ever, to do the mar- back control of their inventory and monetize keting for them. Marketers this year will learn how it themselves, or they will work with fewer ad to deploy Social Influence Marketing campaigns networks to ensure quality and maximize value. more successfully compared to 2008, which had its fair share of experimental failures. Expansion will also come in the form of Ad • Exchanges like Right Media, DoubleClick and As new tools gain adoption like Facebook Con- AdECN, which are newer open markets for on- nect, which has the power to make an individual line ad inventory that increase buying efficiency viewing experience social, and we begin to by delivering unprecedented transparency in deepen our understanding of consumer interac- the process. Development of this ecosystem will tions in social environments, we should see put further pressure on small and mid-tier ad the lines blurring between marketing efforts on a networks to survive. If Ad Exchanges are widely
  12. 12. you want it. As GPS functionality and loca- adopted, it could revolutionize how online media tion-based intelligence begin to improve content is bought and sold. delivery and advertising through the mobile 5. This year, mobile will get smarter device, mobile will get smarter, and marketers who leverage it will, too. “The year of mobile” has come and gone with the advent of the iPhone. Mobile is still an area of 6. Research and measurement tremendous growth but the idea that it will have will enter the digital age a “break-out year” has passed. There is a risk Due to increased complexity in marketing, estab- that the recession will curtail R&D spending in the lished research and measurement conventions newer of new media and that mobile will take are more challenged than ever. For this reason, a hit, but smart marketers will take advantage of 2009 will be a year for research reinvention. continued growth and opportunities — like mobile rich media ads, applications, mobile search Current media mix models are falling down; they and location-based opportunities — to gain are based on older research models that assume an advantage. Despite tremendous growth in the media channels are by and large independent mobile browsing population in 2008 (mobile of one another. As media consumption changes browsing grew from 13% to 20% of all U.S.-based among consumers, and marketers include more mobile users from Q1 2008 to Q1 2009 as per digital and disparate channels in the mix, it is comScore’s M:Metrics), advertiser interest as well more important than ever to develop new media as the ad model infrastructure is still catching up. mix models that recognize the intricacies of channel interaction. Since online media is often The question brands need to ask themselves now linked closely with other media (TV can drive as it relates to mobile is: how can they add val- search, search can drive magazine usage and so ue to their customers’ lives in this environment? forth) we need to adopt new ways of measuring A good example is the iFood Assistant mobile to account for the true complexity of media in the application powered by Kraft, which offers recipe digital age. and dinner ideas, or Wikitude AR, an augment- ed reality application that, using a Webcam and GPS functionality, overlays information from Wikipedia onto your visual location. Both of these applications provide the convenience of relevant information at your fingertips when and where 13
  13. 13. 7. “Portable” and “beyond-the-browser” ways to search, discover, browse, organize and opportunities will create new touchpoints for “touch” rich content like video. This will change brands and content owners how we interact with the Web, our mobile devices and our televisions moving forward. Collectively, It was only a few short years ago that the bulk these changes are opening the doors to incredible of rich content was consumed via TV sets, home new ways for advertisers to connect with con- entertainment systems or desktop computers. sumers. The notion of portable media conjured up images of retro Game Boys and clunky laptops. But Ap- 8. Going digital will help TV modernize ple’s iPod changed all that, launching a portable As TV signals convert to digital in June 2009, we media revolution that continues to churn today. will see an opening of opportunities in advanced Advances in smartphones and entertainment television. Through their media platforms and devices have delivered endless on-the-go options real time set-top box data, TiVo, Google TV and for music, video, social networking, news and start-up Navic Networks, which, like Razorfish™, email. The Web environment has witnessed tremendous growth with embeddable content was recently acquired by Microsoft, have been through widgets and applications, creating a offering limited scale options for increased modular environment where people can share accountability and metrics in the TV space. This information and influence their networks online or coverage and opportunity will expand in 2009 remotely. Portable media has also come to mean with the digital conversion. that content unhinged itself from legacy devices; music is free from the turntable, primetime Advanced television providers, including the broadcast is no longer limited to the TV, and so cable companies, are also growing their audience on. The very things that define a media platform bases and their opportunities for marketers in have become rather blurry. And it’ll only get the form of branded VOD channels, featuring long more confusing — portability is phase 1. Further form content or t-commerce (purchasing through evolution is clearly visible on the horizon, with television), both of which are often reached content becoming more social and non-linear. by telescoping out from traditional 30-second TV spot overlays. It is expected that progress In addition, interface innovation ranging from by Project Canoe, the consortium of cable gesture and object recognition tools like the Wii companies working on standards for television to interactive, multi-touch storefront windows, in addressability, creative versioning and meas- to new browsers like Cooliris, is enabling new urement, will also push the industry forward.
  14. 14. As social media elements begin to influence video (CNN’s social TV experience on the Web around the inauguration was well-regarded), and alternative television providers like Xbox provide social commu- nities in the living room around premium content, we may also see TV go social. The desire for more for your money as well as more interactivity, measurability and community will be especially apparent in the TV space as it struggles to modernize. 15
  15. 15. • Ad ver t is e rs co n ti nu et o su pp or O U T LO O K ea ts rc h — Shifting Their Focus: de sp ite th e ec on om ic d A look at 2008 Digital Ad Spending own t urn by Razorfish Clients ™ By Sarah Baehr, Vice President, Media, New York and National Media Lead
  16. 16. The increased potency of social networking is just one example of why 2008 was a year that empowered Razorfish’s ™ flexibility and command of a deeper, wider, more sophisticated digital channel. engaging users. As you’ll see from the statistics on Just as President Obama discovered he could build our clients’ spending below, we saw several trends a movement and win an election through social which underscored that last year, our focus had media channels, our clients also recognized the power to become less about how much digital we do, and that well-built digital strategies have on building mo- more about how well we manage broader demands. mentum for brands, reinventing business models and 17
  17. 17. 2008 Media Distribution Broad trends in Razorfish™ client spending As in the past, the net ad spend of Razorfish’s™ clients was widely distributed. It spread across 1,024 Web sites last year, as opposed to 1,832 Web sites in 2007, 12% indicating a continued trend towards niche targeting and the diversification of media choices. We saw a 37% 16% decline in ad spend beginning late in the third quarter across the agency, and the typical fourth quarter overflow of budgets did not materialize. Growth from the third to fourth quarter was 7%, versus 17% in 2007, showing the first sign that the online market had 35% been impacted by an increasingly weak economy. Search A closer look at the distribution of ad spend by Verticals Razorfish™ clients reveals several trends, including: Portals An increasing reliance on ROI and proven • Ad Networks channels like search A continued shift of budget away from portals • Renewed fragmentation in the ad network space •
  18. 18. Share of search spending increases Advertisers continue to support search despite In 2008, paid search allocation grew, with share of the downturn because it delivers a strong ROI, and total ad spend among our clients increasing to 36% for the most part, it continues to outperform other from 31% in 2007. While there was no fourth quarter tactics. While the marketing and media industries spike as in previous years, there was very little speculate on whether search is recession-proof, variance quarter over quarter, indicating our clients’ we do anticipate that as budgets tighten, search will desire for consistent presence in search. also be impacted by the economy this year. Among our clients, Google captured 72% of the total category. Yahoo! continued at a distant second at 22%, while Microsoft continued to be challenged with a 4% share. Spend Distribution 2004 — 2008 50% 42 47 39 37 40% 37 Verticals Search 28 28 35 30% Portals 31 31 19 Networks 24 20% 16 15 13 10% 12 12 11 11 12 0% 2004 2005 2006 2007 2008 19
  19. 19. Vertical placements move emphasis away from portals In the U.S., unlike previous years, we have seen Vertical placements saw a slight decrease year-on- the dominance of general ad networks wane and the year, from a 39% share in 2007 to 35% in 2008. While opportunity to buy similar inventory in premium still prominent and strategic partners for marketers, branded environments rise. The ability to buy and tar- portals continued to trend downward in 2008, garner- get within the gated environments of premium sites ing a 16% share, versus 19% in 2007. Scale still are a boost to the vertical category and offer new, matters, but the choices available that deliver depth more transparent choices as advertisers look for both and breadth outside of the portals continue to safe and efficient options to promote their brands rise. Outside the U.S., however, the portal category in this economy. received a large percentage — nearly 26% of share of spend, indicating that the scale and quality of por- tals abroad still dominates. Vertical Spend Comparison 25% 23 19 20% 2006 18 17 17 16 2007 15 15% 13 2008 12 11 11 10 10 10 10 10 10 9 10% 8 8 8 7 7 6 6 5 5% 4 0% ity s ts ce t ch el lth ss en ew av or ne un n Te ea m re Sp N Tr si m H in fe Bu om rta Re te C En
  20. 20. 2008 Vertical Spend In entertainment, sites with strong video and audio capabilities drove the growth of this category. Stand- outs are Pandora, which saw a 142% increase, and Hulu which went from zero in 2007 to a 3% share 6% 7% of the category last year. These dramatic increases 24% reflect the maturation of the video landscape in terms 7% of the growing audience and the offerings it provides 10% advertisers. 15% Lifestyle sites as a subset of entertainment grew at 10% the expense of the health category, as pharmaceutical 11% 10% advertisers in particular showed they were com- fortable with advertising on sites outside of the health category. Pharmaceutical advertisers had a much Entertainment broader appetite for diversity of content and affinity- Community based targeting, and a growing trust in digital as a Reference branding medium. Similar to the concentration of Travel dollars we see in ad networks, the top five publishers Health in the health category amassed 68% of the ad spend; Business WebMD remains the leader with a 36% share of the News category. Sports Tech In a year in which we had a historic election and the Olympics, news as a category was down. In 2008, we saw newspapers and magazines continue to strug- gle and our data supports the notion that print dollars As we look at vertical spending in the U.S., two trends are not translating to online. 38% of the spend in the emerge: a significant jump (18% to 24% year-on- news category was spread out amongst 25 traditional year) in money allotted to the entertainment category, print publishers, pointing not only to the tremendous which includes video and lifestyle sites, and a decline fragmentation of online advertising but also suggesting in spending within the health category (from 15% in that traditional ad powerhouses continue to struggle 2006 to 10% in 2008). to establish a similar presence online. 21
  21. 21. Category Share vs. Site Growth 142 150% 100% 81 62 50% 27 0 0% -15 -50% t r ity a l t en ve so ke or un m a vi nd uc Tr Ad m in ob Pa ta om ip ot er Tr C Ph t En marketing cannot be achieved with banners; instead, Unlike video, spending in the community vertical, which they placed their attention on leveraging social as is still one of our top two categories and includes a core part of their overall marketing strategy. In the social media spending, seems to have flattened out short term, this trend indicates that there won’t from 2007 to 2008. Facebook and MySpace still be an influx of spend in social media; however, it dem- garnered 24% of the ad spend in the category, while onstrates that our clients are approaching social About.com, Federated Media and Photobucket, which media not as a tactic but as a foundation upon which saw a 63% growth year-on-year, rounded out the top to build an effective communication strategy. five in this category. While industry standards around ad models related to social media are still evolving , clients last year realized that effective social influence
  22. 22. Ad Network Consolidation 100% 80% All Others Top 5 60% 40% 49 63 76 62 20% 0% 2005 2006 2007 2008 ities to diversify their buys. As said above, advertiser 2008 was the first year that we saw mobile ad spend- concerns about transparency and efficacy have re- ing pop; it represented 1% of the vertical category sulted in spending growth within broad premium envi- and 3% of the entertainment category. While still a ronments or “branded networks” like CondéNet, NBC fledgling area, we saw a strong desire from marketers Universal and Fox Interactive Media (not including to test and subsequently expand their efforts in MySpace). Branded networks represented 15% of the mobile. We believe that despite the poor economy, spend in this category. marketers will continue to invest in mobile marketing, although growth may be limited to the single digits Despite the drive towards increased efficiency because in the near term. of the recession, ad networks as a category saw only a slight increase in share year-over-year. One trend Consolidation and fragmentation reversal we saw was in the concentration of spend within ad networks amongst the top five ad networks dropping to 62% The ad network category saw 62% of spending con- from 76% in 2007. A few things contributed to this centrated within the top five ad networks and 72% change in direction. The first is a rise in spend outside within the top ten. This continues to illustrate a move the U.S. and the development of branded networks towards consolidation but the trend is slightly down such as Forbes, Turner Entertainment and Fox Audi- year-on-year; buyers continue to look for opportun- 23
  23. 23. media — but it will also be an opportunity to explore ence Network, and the move of many premium adver- new buying methods, such as conducting business tisers away from general networks. Additionally, the through ad exchanges, and learning how to employ rise of specialty vertical networks like the community social influence marketing strategies that have value sites BuzzLogic, Six Apart, Lotame and BlogHer for consumers and brands alike. has further fragmented this category and put a refo- cus on testing the emergent opportunities. Whatever happens, one thing is for certain: we’ll all learn how to do more with less. And be smarter for it. Another trend we expect in 2009 is the increased usage of ad exchanges (like those offered by Yahoo!’s Right Media and Google’s DoubleClick), and tools that allow agencies to directly buy within those environments. CPM pricing pressure and the buyer’s market mentality will only further muddy the 2009 landscape, but the battle to maintain pricing and manage inventory pools among publishers is sure to be front and center. The continued rumblings of anti-ad network sentiment by premium publishers is only going to increase pressure on the small- and mid-tier ad networks to differentiate, leading to a significantly-altered and, perhaps, consolidated network landscape going into 2010. 2009: A glass that is half-empty may be half-full The world, in the year to come, is one in which many of us in advertising will see as a glass half-empty. A flat year would be a good outcome for digital adver- tising in 2009, and while many major publishers will Footnote: see a YOY drop, there will still be winners. We are in Note that in previous Digital Outlook Reports, Razorfish™ has released total media billings for the previous year. In the the midst of a historic time when industries, that some 2008 report, we have included more detail on spending by would argue were the foundations of our economy, category and publisher than we have in past years. Because may be doomed — but there is also an opportunity many of our publisher contracts preclude us from publicly for new business models to take root and thrive. Yes, disclosing total spend with specific publishers, we have 2009 will be a tough year for all media, even digital opted not to release total billings for 2008.
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  25. 25. O U T LO O K Trends in Social Influence B ou ght a Marketing ™ new la ptop based By Shiv Singh, Vice President and Global Social Media Lead on consumer revie e• li n on ws • ng pi op sh as tm ris Ch h er D oes 87 % o f • og bl n s ig de ne w a ut o ab nd ri e af il ma to e in g Is go
  26. 26. A year ago, we developed a hypothesis that the way people were influencing each other — online, in small groups, through peer pressure, reciprocity or flattery — was giving rise to a whole new form of marketing that we called Social Influence Marketing (SIM). ™ Today, SIM is not just a hypothesis. It is a driving We defined it as marketing to the network of peers force that affects everything we do as an agency and, that surround and influence the customer across as we’re impressing upon our clients, it matters more social platforms and on brand Web sites. The rise of than ever in this economic downturn as consumers SIM reflected the emerging thinking in our agency that across the country are losing faith in large institutions the social Web and the mainstream Web were con- and experts, and instead are turning to each other verging, and that digital marketers needed to deliver for advice. In fact, we believe it is as important a mar- better value exchanges to consumers and allow for keting dimension as the traditional pillars of brand influence more directly. marketing and direct response. It is even bigger than we thought it was. 27
  27. 27. more attention. An event like the Motrin episode, Now, as SIM becomes more mature, 2009 will be the in which a group of social media-fluent mothers year in which differentiating between good and bad managed to force Motrin to pull down an online SIM will get easy — a year in which every campaign, video they found offensive, will not happen every marketing effort and even every digital bus- quite as much this year because marketers will iness transformation activity (where digital is used to focus on SIM more. transform core business processes) will need a social influence component. It will be a year in which com- panies realize that social influence must be harnessed 2. The focus will shift to influencers. Who are strategically if they want to transform their brands, these people that influence your customers their relationships with their customers — and their and how does their influence actually work? This businesses too. It will also be a year in which mar- will come into sharper focus, as reaching the keters discover which agencies truly grasp SIM and influencers gets easier via the social graph and which ones have only a tenuous hold on it. the plethora of technology vendors that make targeting easier. Different influencers will matter With those broad themes as a guide, what exactly at different stages of the marketing funnel, too. can you expect in 2009? Here are 10 specific trends For example, at the point-of-purchase, friends to look for: and family may matter the most in determining what a consumer buys, while at the awareness 1. Social media usage will result in more influ- stage, key influencers, like the bloggers at ence. As social media adoption climbs exponen- Edmunds.com, carry more weight. We’ll also find tially, so too will the influence conversations a way to put a valuation on each consumer’s in a social context have on brand affinity and pur- potential influence for specific product catego- chasing decisions. Participating in a conver- ries. Google and a few others are already taking sation online, sharing an opinion and influencing a crack at defining your influence rank. a purchasing decision explicitly or implicitly are becoming second nature for more and more 3. Top-down branding will experience growing consumers. The only thing that will prevent these impotence. Most brand managers are used messages from spreading is that a lot of this to defining their brands in relative isolation of the influence happens in small groups within the marketplace — or they do extensive customer walled gardens of the social networks and there- research and see it as their jobs alone to define fore goes unnoticed. That will change in 2009 the brand (or the manifestation of the brand) as social network analysis vendors help us peek in different forms. That’s going to change as con- over the wall and, as a result, marketers pay
  28. 28. 5. The portable social graph will fuel marketing sumers define the brands by the sheer volume innovation. Arguably, the most successful of their opinions; they’ll be shaping the brands manifestations of the social graph we’ve seen more than the brands will be shaping them. so far are in the news feeds and activity streams As a result, in order for them to be remembered, that reside on social platforms like Facebook brands will be forced to deliver much stronger and Twitter. Expect to see new innovations that value propositions to their customers. Cute adver- harness the social graph imaginatively, especially tising won’t be enough as the focus shifts to at the awareness and consideration stages of value exchanges. If you’re a brand manager, you the marketing funnel. The early implementations can either fight this or treat it as an opportunity of Facebook Connect, which extends users’ to take your career in a different direction. connections with their Facebook friends to other sites, barely scratch the surface of what’s pos- 4. Social advertising will grow up. We’re all tired sible. For example, imagine your personal profile of hearing about the failures of advertising being used for targeting content and advertising. on social platforms. Not surprisingly, IDC calls And imagine this happening across the Web, advertising on social networks “stillborn,” as it and not just on the social network where the pro- has been plagued by low click-through rates and file resides. confusing advertising formats. Although there are many formats, such as so-called app-vertis- 6. Not just friends, but friendsters, will start to ing, hypertargeting and engagement ads, we matter. There have been a lot of debates about haven’t found what really works. That will change whether a person’s “real” friends matter in a in 2009 as ad units evolve to work more harmoni- social graph — call it the tension between friends ously with user behavior on social platforms. and friendsters. In 2009, we’re going to realize Display advertising in the broader Web, too, will that loose ties (like your friendsters on Facebook) become more social, as linking display adver- are as valuable as your strong ties (close friends) tising to forms of social marketing — like blogger because they’re the ones that bring new ideas outreach, social credits, engagement programs into your world and share your opinions with and widgets that let you mix in your own content people who are further removed from you. You’ll — become more important. However, there are be less conflicted about them and you’ll share no guarantees that this will be completely figured more of your life with them. And the best way to out within the course of the year. understand this trend will be by paying more attention to academia and researchers like Mark 29
  29. 29. porations to rethink how they are organized, Granovetter, Barry Wellman and Duncan J. including agencies. Niche social media consulting Watts, all of whom have shaped theories govern- firms will find it harder to compete as SIM goes ing influence across social networks. mainstream. 7. Social influence research will become more 9. The intranet will join the Web. By virtue important than social measurement. Do of buying media for our clients, building massive you want to know how? By focusing on meaning Web sites and designing intranets too, we have rather than measurement. To think in terms of a unique perspective on all things digital. And social as a channel that should be measured like something we’ve learned in the last few years is TV, print, radio or digital is missing the point. that the boundaries between the corporate Web Instead, the greatest value in social for marketers site and the intranet are blurring. Your employees will be in the real-time insights it provides. We want to collaborate and share knowledge with call this Social Influence Research and it is going peers who work outside your organization too. to drive marketing campaigns, product devel- Your intranet is going to need to encourage and opment and customer service programs. There allow for that kind of collaboration if you want will be an evolution from measuring sentiment to be competitive in this economic environment to understanding opinion and synchronizing with fewer employees having to do more work. it with the Net Promoter scores. Why? Because The best ideas can come from anywhere and the marketers care about opinion much more than best people will look for others like them to col- they do about sentiment. laborate with. They may be in your company — but they may not be. If they aren’t, you better give 8. Marketers will organize around Social Influ- your employees the tools to reach them. ence Marketing™. In today’s organization, SIM is everyone’s stepchild. It is part public relations, 10. Your CEO will join Facebook. We believe it’s part direct response, part brand marketing, part finally going to happen this year — your CEO customer intelligence and part sales support, is going to succumb to the pressure from employ- just to name a few categories. That will change ees and join Facebook, or at the very least, in 2009 as marketing organizations discover the LinkedIn. If he (or she) is smart, he’ll be on a blog- benefits in approaching it holistically. Budgets ging or micro-blogging service too, sharing his will be put behind SIM and it will be treated as the perspective in an authentic fashion. Why does third dimension of marketing with its own team, this matter? Because by doing this, he is going to objectives and initiatives. This will also force cor-
  30. 30. finally realize that social is not a fad; it is fund- amentally changing how we relate and interact with each other and with brands online. He is going to want to get on board. It also means that, if you’re not already, you had better get on board yourself or you’ll be left behind. These are the 10 Social Influence Marketing™ trends we’re predicting for 2009. Like we did last year, we’ll evaluate these trends in July and then again at the end of the year. Now that SIM is so obviously real, we’ll see which brands are able to truly capitalize on it. Those that do will transform their business relation- ships with their customers, employees and partners. 31
  31. 31. •M ap sa nd di r ec ti o ns co ns ti t ut e 69 of % m ob il e se ar ch es O U T LO O K Search Outlook: Pushing Search Forward in a Volatile Marketplace By Matt Greitzer, Vice President, Search, New York and National Search Lead and Josh Palau, Vice President, SEO, Global
  32. 32. It’s expected that 2009 will likely be a challenging year for search marketing. While budget cutbacks won’t be as severe as in other channels, they are still a reality for search marketers — for the first time in memory. This requires them to do less with more in an increasingly volatile landscape. Nevertheless, we expect the landscape to continue mobile arenas. In this article, we identify the key evolving, with an increased focus on measurement factors that will shape the search market domain over and search engine optimization (SEO) and the rise the next year. of compelling opportunities in the local search and 33
  33. 33. suspicious of last-click, search-driven attribution Volatility in the paid search landscape models, and also less willing to accept the validity of 2009 represents perhaps the first year in the brief portfolio optimization, wherein high-performing history of paid search advertising where same-client keywords subsidize low performers. This means the budgets are declining year-over-year. To that extent, standard optimization toolkit of search engine the Razorfish™ client base is representative of the marketers may need to be restocked with new tools search marketing industry overall; same-client bud- — and therein lies the opportunity. Now, more than gets in 2009 should be flat to down 10% versus the ever, marketers are intensely interested in revisiting previous year. These budget pullbacks will drastically their assumptions about ROI and how it is measured. shift the paid search competitive landscape in In this new period of open-mindedness, marketers unpredictable ways, as previously entrenched com- with multi-channel approaches are developing cus- petitors pull back on their paid search efforts, and tom attribution models that take into account search abandon certain categories entirely — a trend that marketing’s impact beyond immediate, click-based has already begun. These pullbacks will create pock- direct response — and working to understand value ets of opportunity within keyword categories, prev- outside whether or not those clicks lead to online iously unattainable due to cost constraints. To some purchases. By combining quantitative and qualitative extent, we expect search engines to mitigate CPC information, they are developing key purchase indi- (cost per click) pricing volatility through their built-in cators that help determine how search-driven traffic pricing controls (e.g. quality score). Nevertheless, corresponds with purchase intent off the site. pockets of “undervalued” inventory are emerging. Search marketers able to take advantage of these This approach is valuable for all search marketers opportunities will keep a keen eye on the competitive with sales channels beyond their Web site, and landscape, and look for shifts in competitive activity is transformational for non-transactional advertisers. that may signal an opening. Indeed, the proliferation of accepted methods for valuing search-driven traffic beyond direct response A focus on new metrics is perhaps the brightest spot in search marketing in 2009, as marketers in the consumer packaged- The more conservative spending environment will goods and pharmaceutical categories embrace also result in increasing scrutiny of metrics. In 2009, meaningful metrics to inform their search marketing search advertisers will be reassessing long-held investments. They will no longer have to guess the beliefs about how they measure success through the value of search clicks; these advertisers will increase search marketing channel, presenting both a threat their search marketing investments with a solid and an opportunity to the search marketing industry. grasp on what their investments are truly worth. That threat is easily defined: marketers today are
  34. 34. Two forces are converging to hasten this develop- Focus on the site-side ment. First, after three years of intense focus on If the shift toward a new approach to measurement paid search, advertisers are more confident they are represents the inward focus of search marketing covering the relevant ground in that area. They can in 2009, so too does the increased focus on the mar- now shift their attention to how they appear in unpaid keter Web site — and its connection with the search listings, using SEO — a tactic many have neglected. marketing experience. With growing budget con- Second, pressure on marketing investments is caus- straints, search marketers will focus on getting more ing advertisers to get more from less. With average out of their investments through more effective site- SEO engagements in the low six figures, this tactic side experiences. No longer a secondary consider- provides a compelling opportunity. We expect this to ation, conversion path optimization and field analysis be expressed in the following ways: will take hold in 2009 as a standard tool in the search marketer’s toolkit. Additionally, 2009 may finally see The creation of search-centric content the end of the “point and shoot” philosophy in paid Content continues to be a dominant factor in strong search marketing — whereby advertisers simply point search engine performance. Now, more than ever, paid search clicks at the most relevant pre-existing Web site owners are using search query activity pages on their Web sites. Advertisers are making in- to drive how they develop content on their sites, creasing investments in search-centric landing pages linking user experience and content strategy with and mini-sites with the intent to align their content search engine marketing to create content that with searcher intent. The focus on the site in 2009 will aligns with searcher intent. CondéNet, for example, allow advertisers to get more from their search mar- used search query data to inform the launch keting dollars, and nowhere is that more true than in of its Portfolio.com Web site, building out specific the increasing focus on SEO. content pages for key business executives who garner large search query volume. Through their Focus on SEO effectiveness in organic search rankings, these pages are among the most trafficked section of the If investments in paid search marketing are under Portfolio Web site. increasing pressure in 2009, the opposite is true of investments in SEO. In fact, 2009 will likely be the year larger advertisers finally give it its rightful place in the marketing arsenal. 35
  35. 35. An emphasis on driving more Marketers will have to make use of assets such search “shelf space” as press releases, videos, news feeds and product reviews as ways to seek relevant links. As SEO Content created in multiple formats allows market- implementation demands persist, link development ers to increase their search footprint and control continues to be a great way to succeed in search the search experience. Marketers now have the engine results pages without straining resources. opportunity to optimize their product page, create a video on product usage, post commercials Local search: An ongoing shift from featuring their spokesperson, create new product print directories to online press releases and tag product images, creating what we call additional “shelf space” for their own By Danny Huynh, Associate Search Director, Seattle content on the search results page. In addition, and National Local Search Lead and Rob Aronson, social media savvy marketers may develop blogs, Vice President, SEM Product Development, Philadelphia Twitter profiles or Facebook groups that engage 2008 saw local search engines surpass print active audiences. All these assets can be crawled directories as the leading source of local information. and ranked by search engines, providing not only With the digital landscape dominating local search the opportunity to increase marketers’ search information in 2009, marketers with brick-and-mortar shelf space but also to develop more links to their locations can no longer ignore the local search content. opportunity. And though Google is increasing The continuing importance of links its presence in local search, local is by no means a one-player game. Consumer usage is distributed Without engaging in the paid link debate (which is across search engines, Internet yellow pages, niche certainly spilling into 2009), there is no arguing that local directories and review sites. In fact, the primary links are still important. The created — or optimized challenge in local search marketing is no longer — assets can be used in several ways. Some may one of scale; it’s execution. The task of launching and not pass link value but can still be used as link maintaining a local search campaign can be daunt bait. And significant link value can be attained if an ing, and advertisers of all sizes will increasingly turn influential blogger or Web site links to your assets. to automated feed management solutions to maintain There are many areas from which link strategies accurate local search listings across varied search may emerge, and big ideas must be implemented engines and directories. swiftly before they become obsolete or overused.
  36. 36. critical role in helping users access and navigate Expect some consolidation in 2009 as the three the robust amount of content and offerings available. biggest search engines, and yellow pages companies, As users spend more time glued to the handset be- seek to solidify their position in local search. Either cause of new user interfaces and applications, search through acquisitions of niche sites such as Yelp is in a position to become its centerpiece. In short, or Angie’s List, or through the distribution of local as the habits and needs of mobile users begin to mir- search marketing platforms, this consolidation ror a PC user’s, so too does the way information is will mean the local search landscape will simplify in accessed — search will become the go-to application. 2009 for marketers and consumers alike. These advances in software and services have Mobile search: Coming closer to the cusp blurred the lines of mobile search. Previously, mobile By Justin Scarborough, Senior Search Manager, search was thought to consist of five experiences: New York on-deck (a mobile carrier’s branded portal), off-deck (Google, Yahoo!, Live.com and other engines accessed It seems as though mobile search has been on the via the Web), applications, voice (operator-assisted cusp of broad adoption for over five years. While 2009 search) and SMS. may still not be “The Year of Mobile Search,” the future is very rosy due to a few key areas of development. Today, however, we are starting to see a convergence, not only of these experiences, but also of the types First and foremost is the increasing adoption of smart of handsets that drive each type of search. Whereas phones, such as the iPhone, and cell phone plans in the past, the type of search performed on the that enable unlimited data access, which in turn sup- mobile phone was predicated on device functionality ports increased mobile browsing. This trend is ex- and data availability, we now find that where and how pected to become substantially more popular over the users search depends on personal preference and next five years. With that will come a corresponding need. Applications now support multiple types of rise in mobile search: it is expected to nearly double search (see Google’s iPhone application with voice) from 28.8 million U.S. users in 2008 to 56 million U.S. and search engines (mobile browsers with change- users by 2011. able default search bars) — and carriers are increas- ingly teaming up with Web-based search engines The second major impact on the growth of mobile to power on-deck search portals, which often come search is the advancement of mobile technology and, in the form of an application on a smart phone. One more specifically, software. As the mobile industry needs only look at recent announcements by Verizon becomes more serious about software, services and and AT&T (set to partner with Microsoft and Yahoo!, content, mobile search will play an increasingly 37
  37. 37. real time and with GPS location functionality. This Respectively), for on-deck searches across their is the latest example of convergence offered in mobile networks to see how carriers, who have traditionally search: enhancing a very PC-centric search task — not shared on-deck search, have come to the con- product price comparison — by making it an in-store clusion that mobile search is better controlled and experience. Add on the ability to use GPS to get monetized by their Web counterparts. Lastly, the the lower price, and you’ve got a pretty revolutionary notion that SMS search is exclusive to non-data sub- customer experience. scribers or non-smart phones is being challenged. The monumental growth of Cha-Cha, which not only With the change of consumer-usage patterns comes surpassed Yahoo! in October 2008, only 10 months the increased expectation that advertiser-con- after its inception, to become the second largest sumer interactions will be highly-relevant and highly- SMS based search engine, also counts 20% of its targeted, putting search at the center of the mobile users as smart phone owners. For instance, users of advertising space. As with PC-based search, mobile T-Mobile’s G1, the first phone to run on Google’s search is poised to become the entry point to many Android platform, have the ability to search the Web Web interactions and a key point of contact between or use an application, but still like to ask Cha-Cha a advertisers and consumers. How will brands begin question, and have the answer in one to two minutes. to adapt to the new evolution of searcher interaction? Will they be catalysts or passive engagers? Will The information users seek on a mobile device is also they interrupt or aid users? As it has been for paid poised to change. Currently, the leading content search, SEO and local search, the first brands to categories searched by mobile users are maps/direc- get it right may be able to gain an early advantage in tions (69%), weather (65%), local information (62%), the next search frontier. news (51%) and entertainment (43%). As the mobile search experience begins to mirror that of the PC, so too do the expectations for types of content. This means users will increasingly begin to see the mobile device not only as a source of localized informa- tion on the go, but as an aid to many of their everyday tasks. Consider three shopping applications: G1’s Shop Savvy, the iPhone’s LikeThis and Amazon.com applications. All three offer the ability to either scan a bar code or take an actual picture of a product, and then send it to a database that identifies the product and provides price comparisons — often in
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