IBM Global Business Services

IBM Institute for Business Value
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As the advertising value chain                     © Copyright IBM Corporation 2007
         The future of advertising is ...
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End of Advertising As We Know It

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End of Advertising As We Know It. IBM Study.

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End of Advertising As We Know It

  1. 1. IBM Global Business Services IBM Institute for Business Value quick read Media and Entertainment The end of advertising as we know it The next 5 years will hold more change for the advertising industry than Measurement – Advertisers are demanding more individual-specific and involvement- the previous 50 did. Increasingly empowered consumers, more self-reliant based measurements, putting pressure on advertisers and ever-evolving technologies are redefining how advertising is the traditional mass-market model. Two- thirds of the advertising experts IBM polled sold, created, consumed and tracked. Our research points to four evolving expect 20 percent of advertising revenue future scenarios – and the catalysts that will be driving them. Traditional to shift from impression-based to impact- advertising players – broadcasters, distributors and advertising agencies based formats within three years. – may get squeezed unless they can successfully implement consumer, Advertising inventories – New entrants business model and business design innovation. are making ad space that once was proprietary available through open, efficient Imagine an advertising world where… away from linear TV and adopt ad-skipping, exchanges. As a result, more than half of spending on interactive, one-to-one sharing and rating tools. Our survey the ad professionals polled expect that advertising formats surpasses traditional, suggests personal PC time now rivals TV open platforms will, within the next five one-to-many advertising vehicles, time, with 71 percent of respondents using years, take 30 percent of the revenue and a significant share of ad space is the Internet more than two hours per day, currently flowing to proprietary incumbents sold through auctions and exchanges. versus just 48 percent spending equivalent such as broadcasters. Advertisers know who viewed and acted time watching TV. To envision four possible scenarios for on an ad, and pay based on real impact Creativity – Thanks to technology, the the industry in 2012, we juxtaposed two rather than estimated “impressions.” rising popularity of user-generated and of the most uncertain change drivers Consumers self-select which ads they peer-delivered content, and new ad – the propensity for consumers to watch and share preferred ads with peers. revenue-sharing models (e.g., YouTube, control marketing; and the openness User-generated advertising is as prevalent Crackle, Current TV), amateurs and semi- of advertising inventories (see Figure). (and appealing) as agency-created spots. professionals are now creating lower-cost Because industry players will progress at Based on IBM global surveys of more advertising content. Our survey suggests differing rates, these scenarios will likely than 2,400 consumers and 80 advertising this trend will continue – user-generated coexist for the foreseeable future. experts, we see four change drivers content sites were the top destination for Continued evolution: In this scenario, shifting control within the industry: viewing online video content, attracting 39 the one-to-many model still dominates, percent of respondents. Further, established Attention – Consumers are increasingly in but the industry evolves in response to players, like publishers and broadcasters, control of how they view, interact with and DVR penetration, the popularity of user- are taking on traditional agency functions filter advertising in a multichannel world, generated content and new measurement and broadening creative roles. as they continue to shift their attention
  2. 2. As the advertising value chain © Copyright IBM Corporation 2007 The future of advertising is largely dictated by the outcome of two disruptive variables. reconfigures, broadcasters, advertising IBM Global Services Route 100 agencies and media distributors in Somers, NY 10589 Open particular will need to innovate in three U.S.A. Ad inventory systems Open Ad exchange marketplace key areas: Produced in the United States of America 09-07 1. Consumer: Drive greater creativity in All Rights Reserved traditional ads, while also pursuing IBM and the IBM logo are trademarks or Continued Consumer new ad formats across media devices registered trademarks of International Business evolution choice Machines Corporation in the United States, other Closed to attract and retain customers. countries, or both. For example, consider tactics like Other company, products and service names Providers Consumers may be trademarks or service marks of others. campaign bleeds where short and Marketing control References in this publication to IBM products long commercials are linked, micro- and services do not imply that IBM intends to versioning, short ad teasers / “flickers” , make them available in all countries in which IBM operates. capabilities (albeit for “old” formats). pod management and ad-supported Advertisers therefore allocate a greater content creation to limit ad-skipping. portion of dollars traditionally spent on 2. Business model: Pioneer changes in direct marketing to channels typically used how advertising is sold, the structure and To request a full version of this paper, for brand-oriented advertising. forms of partnerships, revenue models, e-mail us at iibv@us.ibm.com advertising formats and reporting Open exchange: Here, the industry metrics. For example, broadcasters, morphs behind the scenes, with little to no agencies and distributors can pursue additional consumer influence. Advertising opportunities such as agency gain formats largely remain the same, but sharing, more sponsored shows, impact- advertising inventory is bought and sold Authors based pricing models, user-generated through efficient exchanges, bypassing Saul Berman, Global Media and advertising revenue-sharing models and traditional intermediaries. Entertainment Strategy Leader, IBM open inventory sales. Global Business Services Consumer choice: Tired of intrusions, 3. Business design: Support consumer Bill Battino, Communications Sector consumers exert more control over the and business model innovation through Managing Partner, IBM Global Business advertising they view and filter. Formats redesigned organizational and operating Services evolve to contextual, interactive, permission- capabilities across the advertising based and targeted messaging to retain lifecycle – consumer analytics, channel Louisa Shipnuck, Global Business attention. planning, buying/selling, creation, Development Executive and Andreas delivery and impact reporting. Neus, Managing Consultant, Ad marketplace: Consumers choose Communications Strategy and Change preferred ad types as part of self- There is no question that the future of programming their media choices and advertising will look radically different from are more involved in ad development its past. The push for control of attention, and distribution. Advertising is sold creativity, measurements and inventory predominantly through open, dynamic will reshape the advertising value chain exchanges, allowing virtually any advertiser and shift the balance of power. For (large or small) to reach any consumer. With both incumbent and new players, it is new consumer monitoring technologies imperative to plan for multiple consumer in place, consumer action drives bids on futures, craft agile strategies and build new inventory up or down. capabilities before advertising as we know it disappears. G510-6625-00

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