Media and Entertainment Industry GroupThe Billion-Dollar Challenge:Monetizing the DigitalOpportunityMedia and entertainment companies are struggling to adjustto the inexorable digitization of the industry. Innovation isoccurring, to be sure, but transforming digital innovation intodigital revenue streams will require more fundamental andtherefore more difficult change.
The Traditional Marketing Funnel: Missed Opportunities to Influence Consume A new paradigm of engagement creates opportunities for unlimited dialogue and interaction throughout the marketing Figure 1. The traditional marketing funnel: Missed opportunities to influence consumer choice and sales process, not only at the bottom of the funnel. Embracing this new engagement paradigm can lead to significant competitiveparadigm, an inverse relationship exists between the number of consumers moving from awareness to loyalty In the traditional marketing advantage. (left), and the number of consumers who can be engaged in dialogue (right). Dialogue occurs mostly at the end of the funnel, where numbers are relatively low. This means that traditional approaches have, in general, not been able to leverage opportunities to engage with consumers and influence choice earlier in the marketing and sales process.High Low Awareness Awareness Consideration Consideration Ability to Number of engage consumers consumers Purchase in dialogue Purchase Use UseLow Loyalty High Loyalty The challenges of monetization in the digital world are profound. Media and If media and entertainment companies are to generate the digital revenue streams Understanding the new entertainment companies, as well as required to support growth—a state well consumer engagement marketers, face the difficult task of call "monetization nirvana"—they must: paradigm bringing a new business model online (1) understand and leverage the unique The opportunities that digital advertising while still maximizing profitability from capabilities of digital to influence consumer and digital content present to media and the old model. They also live in a world of behavior and spending through more entertainment companies must be under- dramatically shorter lifecycles for products relevant interactions; (2) use the distinctive stood both from the consumers and the and services, and also companies and aspects of the digital world to help marketers perspectives. markets. Dynamism and volatility marketers achieve more specific, measur- constitute the "new normal" of the able and accountable outcomes; and (3) Engaging with the consumer today is one digital marketplace. continuously optimize the user experience of the areas where too few companies are and the marketers value proposition Bold action is needed. Instead of trying to leveraging the distinctive power of digital through enhanced analytic capabilities. passively protect old models in the face marketing. Consider that the traditional of industry disruption, companies need to frame of thinking has been focused on push actively engage with that disruption. marketing—reducing messages to the basics Instead of bringing analog formats and and getting those messages in front of as pricing models into the digital environment, many eyes as possible. But that paradigm— media and entertainment companies must the traditional marketing funnel that moves understand the distinctive capabilities of people through awareness, then consider- digital and put in place compelling value ation and purchase of a product, then usage propositions and metrics for marketers and development of loyalty (see Figure 1)—is and consumers alike. Achieving high being significantly disrupted and reshaped. performance in the digital world isnt about doing old things in new ways. Its about doing new things in new ways. 2 The Billion-Dollar Challenge: Monetizing the Digital Opportunity
luence Consumer ChoiceoughoutFiguremarketing the 2. m can lead to engagement paradigm of digital marketing The new With the new digital paradigm, the marketing funnel is opening up, transforming its shape. More opportunities exist for dialogue, interaction and engagement throughout the marketing and sales process, even at the stages of awareness and consideration. Embracing this new engagement paradigm can lead to significant competitive advantage by more effectively influencing consumer choice to drive highly valuable business outcomes. Awareness Consideration Purchase Use Loyalty The new marketing paradigm (see Figure 2) Take the example of a manufacturer of food Companies also must be attuned, in real is about influencing consumers brand blenders that produced a humorous online time, to what is happening to their brand associations and buying behaviors by video campaign to support its entry into the over digital experiences such as social engaging them in dialogue and interaction— retail market. In its ongoing series of videos, networks. Consumers are much smarter and in part because dialogue and interaction are a variety of oddities are placed in the better informed than they were just a few distinctive capabilities of the digital world. blender to demonstrate its blending years ago, and they are connected—all the Companies have the opportunity through a strength. The videos became a viral hit, time, anywhere and everywhere. One only variety of digital experiences such as social drawing more than 60 million viewers needs to consider how social media helped networking to engage in dialogue with during the first year of the campaign. But build the "Obama" brand during the most millions of potential consumers. And every people werent just "viewing" the video recent US presidential election to under- interaction—even those at the very earliest ads—they were providing feedback, sharing stand how future brands will be built. stages of awareness—becomes an opportu- the video link with others and spreading the nity to influence choice. Media companies word through social networks. Retail sales One-way marketing may live on in the and marketers alike now have a magnitude rose 500 percent in the first year of that marketplace for a time, but it has passed the of opportunities for interaction and 2007 campaign. stage of maturity. Pushing and controlling a dialogue—at the front end as well as message will not earn the trust needed to throughout the funnel—that can be much achieve high performance. Media and richer in terms of content and experience entertainment companies as well as than what was possible before social digital marketers must therefore look to where capabilities arrived. their target consumers are across all the different modes of social interaction and engage those consumers in ways that are meaningful to them and that engender trust. The Billion-Dollar Challenge: Monetizing the Digital Opportunity 3
The Consumer’s MindsetFigure 3.Monetizing the consumer experience by staying highly relevantConsumers are concerned with whether a digital experience is relevant to theirneeds, pain points and interests. The good news is that consumers are increasingly are highly relevant toMedia companies as well as marketers must ensure that the digital experiences they offer across all channelsconsumers needs, pain points and interests. The good news is that consumers are increasingly willing to pay for relevant experienceswilling value to their lives.that add to pay for relevant experiences that add value to their lives. Perceived relevance: “This experience is valuable to me.” Low value High value I could do what I wanted to do easily and freely. Revenue model: “I am willing to pay for this experience.” Services are free Pay for use Free Free trial • Subscriptions • Virtual goods • Pay per useThe Marketer’s MindsetMarketers want to increase their ability to measure the impact on desired outcomesThe importance ofoptimize results based on is the primary reason search-Publishers and the challenges, there is alsoand incrementally Relevance quantitative insights. In spite ofparticipating ecosystem players should enable marketers to so profit- and manage If relevance to the consumerconsumer relevance based advertising has become measure good news. able. If a user is searching for "blenders," or user is high, we are finding that peopletheir desired outcomes and then only charge for aresults achieved. ofThe other critical dimension of the new thats probably fairly sound indicator are increasingly willing to pay for digitalconsumer engagement paradigm is an intent to buy a blender. But other experiences (see Figure 3)—throughrelevance. Media companies, and marketers innovative ways to target users with subscriptions, for example, or on a pay-Outcome/result:as well, must be highly relevant to a relevant information must be developed if per-use model. Were also seeing that“I reached my desired business outcome.”consumers interests and pain points. the industry is to succeed. micropayments for virtual goods (buyingWeak outcome assets in a virtual-world game, for Strong outcomeAchieving that relevance is becoming A significant challenge in this environment Sample outcome: example) is also finally catching on afterexceedingly difficult, however, given the is that media consumption patterns are a few failed early attempts.fragmentation of channels and the user also highly fragmented. Companies are value Increase customer lifetimeexperience in todays marketplace. Its competing with almost innumerable Result:becoming increasingly easy for users to platformsMarketer improved value by and channels. That means theytake matters into their own hands (as with 10 percent in 3 months. must be highly relevant all the time, atapp stores), re-composing their overall every point of interaction, to gain be attributed Half the increase canend-to-end experience into something to specific digital activities. significant user mindshare. If they fail to bemeaningful and relevant to them.Revenue model: relevant, companies risk negative brand“I pay based on results.” associations which can then spread virally. Not Performance- performance- based (high based (little accountability) accountability) Cost per Cost per Cost per Cost per Cost Per mille click lead acquisition Desired (cannot be the model Outcome of the future) (CPDO)4 The Billion-Dollar Challenge: Monetizing the Digital Opportunity
The Marketer’s MindsetMarketers want to increase their ability to measure the impact on desired outcomesFigure 4.Providing increased value to marketersand incrementally optimize results based on quantitative insights. Publishers andparticipating ecosystem players shouldentertainment companiesto measure and accountability, which means their ability toIn the age of "performance marketing," media and enable marketers must increase their managetheir desired outcomes andathen only charge for results achieved.charge for results achieved.measure whether they have helped marketer achieve its desired outcome—and thenOutcome/result:“I reached my desired business outcome.”Weak outcome Strong outcome Sample outcome: Increase customer lifetime value Result: Marketer improved value by 10 percent in 3 months. Half the increase can be attributed to specific digital activities.Revenue model:“I pay based on results.”Not Performance-performance- based (highbased (little accountability)accountability) Cost per Cost per Cost per Cost per Cost Per mille click lead acquisition Desired (cannot be the model Outcome of the future) (CPDO)New ways to provide value that are embracing the distinctive nature and major global brand, for example, has an- capabilities of digital and using those nounced it will no longer pay its advertisingto marketers: Pricing capabilities to shape their pricing models. agencies by the hour or based on fixed fees,models based on outcomes Those capabilities and models become a way to but instead, only for achieved results. Consider- stay relevant to marketers and provide them ing todays challenging economic climate, thisPart of the old-world thinking that still with dramatically higher and more accountable is a clear sign that accountability for results ispervades digital advertising has to do with levels of service. increasingly sought within the industry.pricing models. Its been 15 years since theappearance of the first online display ad, In terms of pricing models and metrics, Although the transformation to performancemeasured in traditional "cost per mille" (cost Accenture believes that the industry will marketing will be challenging to most mediaper thousand views) ways. Thats really no migrate to something we have termed, “Cost companies, it presents a strong potential fordifferent a pricing model than paying for a per Desired Outcome” or CPDO. Such a metric growth. Consider that, at least in theory, anewspaper ad insertion; it’s simply substituting will be a distinctive feature of the age of CPDO model means that a marketers budgetthe cost of showing a web page for the cost of "performance marketing"—where media is limited only by supply constraints. If theshowing a newspaper page (independent of companies will ask marketers to pay based on marketer is paying based on the desiredwhether or not the user/reader actually pays performance or the achievement of a outcome of X dollars of sales with attractiveattention to the ad). particular outcome. This is a distinctive profit margins—paying a percentage of competitive advantage to a media company— revenues—then the more the sales, the moreSome digital advertising metrics do begin being able to tell a marketer, "Lets work advertising budget there is to spend. Its agetting to more defined goals: cost per lead together to precisely define the outcomes you win-win all around.(CPL), for example, pays only when a legitimate are looking for, then you will pay only if weand well-qualified buyer expresses interest. Paying for outcomes is a major trend that help you achieve that desired outcome.” (SeeOther metrics—cost-per-action, cost-per- media companies will eventually be forced Figure 4.) This approach also improves theacquisition, cost-per-engagement—try to move to embrace. Marketers will soon demand it. effectiveness of marketers because they mustthe pricing model toward a more accountable Any media company that does not aspire think more clearly about business objectivesand performance-driven arrangement. toward performance marketing and a metric that drive desired results. such as CPDO will be disrupted or extinct atHowever, if we look at where innovation is We are already seeing the beginnings of some point.happening in the world of advertising today, performance marketing in the industry. Oneits with media and entertainment companies The Billion-Dollar Challenge: Monetizing the Digital Opportunity 5
Monetization Nirvana As the chart indicates, marketing that is not relevant to the user will face acceleratedFigure 5. extinction. Product/service success stories represent a more compelling model. TheMonetization greatest success, however—monetization nirvana—will be in the space where the nirvanaAs the chart indicates, consumer experiences andrevenue streams (the ones the user willat the user asextinction. the publisher connects the marketing that are not relevant to targeted face accelerated well asProduct/service success stories represent a more compelling model. The greatest success, however—monetization nirvana—will be in the ones targeted at marketers) with reinforcing mechanisms that benefit each otherspace where the publisher connects the revenue streams (the ones targeted at the user as well as the ones targeted at marketers) withreinforcing mechanisms that benefit each other inthe quality of the service.of the service. in a way that improves a way that improves the quality High Accelerated Monetization Extinction Nirvana Ability to deliver desired business outcomes to marketer No Product/ Game Service Success Stories Low High Perceived relevance to the consumerAchieving monetization • Companies that fail at both consumer However, where an optimal future lies— relevance and accountability to marketers call it “monetization nirvana”—is at thenirvana will not be in play at all—its no game. intersection between (1) digital experiencesGetting digital monetization right— that are highly relevant to the consumer • Companies that do not create experi-achieving monetization nirvana—means and (2) a performance-based model using ences that are relevant to consumers willoptimizing both the dimensions we have the CPDO metric based on achieving the face accelerated extinction, even if theydiscussed to this point: mastering desired outcome for the marketer. Both improve their accountability to marketers.consumer relevance and influence on dimensions—relevance and outcomes—the one hand, and mastering the ability • Companies that achieve a high degree generate value to stakeholders, and evento provide more accountable outcomes of consumer relevance can stake out a reinforce each other without trade-offs.to marketers on the other. position where they can achieve a degree To achieve high performance, media of success, whether or not they achieveAs shown in Figure 5, the challenge and companies must excel at relevance and additional revenue streams fromopportunity alike for media and entertain- accountability at the same time. Excellence marketers. Apple iTunes, for example,ment companies in the digital age can be in one dimension only will not support sells other companies products, on topsummarized as follows: competitiveness in the long run. of its own products, at premium prices. With or without advertising, its a compelling business model.6 The Billion-Dollar Challenge: Monetizing the Digital Opportunity
z Figure 6. Managing fragmentation and shortened lifecycles with science-based optimization Today, innovation is occurring across all technologies and models in the digital world— engagement platforms, content types, delivery From Fragmentation to Science-Based Optimization mechanisms, advertising units and pricing models. Tomorrows challenge is rooted in the fact that this multi-faceted innovation is leading to increased fragmentation of therequire developing new capabilities of ways of influencing consumer of the user experience and market Fragmentation and complexity consumer experience and, therefore, in science-based optimization choice. Product, service lifecycles have also been dramatically shortened, creating a dynamic and volatile environment. Traditional management techniques fall short and marketing performance. in the digital environment. Decision-making must be supported by automation and science-based optimization. New analytic techniques and tools can enable media companies to continuously optimize (1) the consumer experience and (2) marketing performance at scale and at lower cost. Today’s situation The challenge of fragmentation Tomorrow’s solution Engagement platforms Quantitative, continuous, science-based Devices: Mobile, PC, TV, etc. optimization of the user experience Services: Facebook, Twitter, etc. and marketing performance to enable solutions at scale Content types User-generated content, premium, short-form, long-form, etc. Delivery mechanisms Widgets, websites, RSS feeds, tweets, etc. Units Ads, campaigns, etc. Pricing models CPA, CPL, CPE, CPDO, etc. Using science-based The quality of information and data is also critically important to the value of the search engine marketing (SEM), among other elements in the marketing mix. These analytics to continuously insights generated. Analytics are only as kinds of analytic approaches have a consid- optimize the consumer good as the data that is used. In our erable impact on profitability and in some experience, companies that are more experience and the advanced in their analytics capabilities cases on the viability of entire business models. The science behind things like the value to marketers have attained a high degree of granularity, mass-personalization and optimization of quality and timeliness in their data. Near The explosion of devices and channels, the landing pages is still in its infancy but real-time data generation and access is shortening of product lifecycles, and the becoming increasingly essential. Companies holds tremendous potential. different ways to access an ever-increasing also need the organizational and decision- supply of content have strained ordinary making structures that enable them to act 2. Master how to influence the modes of user and usage analysis past the quickly on the insights generated. desired actions of the consumer breaking point. To successfully execute and to drive profitability. monetize digital services and advertising, These analytics capabilities, in turn, enable companies need stronger, science-based Companies must also continuously optimize companies to continuously optimize the analytics capabilities that generate insights the consumer experience so that it is made consumer experience and the value to into customer preferences and desires and continuously relevant across all channels. marketers. Such optimization requires that also support continuous improvement The one-size-fits-all approach of tradi- mastering three complementary things: in terms of accountability to marketers. tional mass marketing will not drive differentiation; such an approach increas- Better analytics tools, methods and 1. Master how to be found. ingly represents a risk to the brand. High approaches can enable companies to Continuous optimization of how consumers perceived value to the consumer will be embrace fragmentation on multiple levels locate a digital experience is increasingly rewarded by the ability to be paid for and then tie outcome-driven strategy and a matter of how the digital experience is services—either directly (e.g., subscriptions) execution together in effective and architected and built. The importance of or indirectly (e.g., micropayments for actionable ways. This is not a trivial search and discovery today means that virtual goods). High perceived value to the problem to solve, from either a technical media companies must leverage search consumer will also allow for increased or a business perspective. (See Figure 6.) engine optimization (SEO) in addition to positive influence of offline behavior. The Billion-Dollar Challenge: Monetizing the Digital Opportunity 7
Transforming digital innovation into digital revenue streams requires funda-mental and difficult change. Media companies must create highly relevantconsumer experiences, characterized by engagement and dialogue, thatcan influence consumer buying behaviors. These companies must also workin closer cooperation with marketers, offering pricing models based onaccountability for outcomes. Success in both dimensions requires sophisticatedanalytics and optimization platforms. .3. Master how to deliver and In addition, these platforms will accommo- encourage and enable experimentation atmeasure marketers’ desired date dynamically adapting objectives as all levels and with all stakeholders.outcomes. demand and supply factors change, helping to create more agility in business and its Aim to define an explicit roadmap thatThis concept refers to the continuous underlying technical and organizational enables your organization to break out ofoptimization of marketing performance to infrastructure and processes. old, siloed ways of thinking. Then, invest inthe marketer with both the "ad unit" (for analytics and continuous science-basedlack of a better word, since "advertising"might be the wrong expression here) as well On the path to optimization. Increased complexity and fragmentation mean that competitiveas the pricing model behind it (e.g., Cost high performance differentiation and achieving high perfor-per Desired Outcome or CPDO). This kind The end of the old push paradigm for mance will depend on the ability toof optimization will allow for accelerated marketing could result in dramatic revenue continuously optimize the consumerinnovation in digital advertising—innova- growth for media and entertainment experience and the value proposition totions that are truly analytics- and data- companies as well as marketers—indeed, marketers with data-driven capabilities.driven—adding value not only to themarketer but also to the consumer. for any company in the value chain. Success today is based on influencing ContactAll three opportunity areas represent a consumer brand associations and buying behaviors. Its important to create opportu- For more information on how Accenturepath toward monetization nirvana. These nities for dialogue, which then influences can help your company achieve highingredients have to be operationalized at consumer choice. performance by transforming digitalscale across the ever-growing cloud of innovation into digital revenue streams,services and data if they are to positively At this stage in the evolution of the media please contact:influence the bottom line. industry, media companies should be more Philipp StaufferTomorrow’s solutions will enable companies open and transparent, working collabora- firstname.lastname@example.org more easily manage sophisticated tively with marketers to create and realize Matthew Symonsanalytics and optimization platforms the vision of performance marketing based email@example.com will allow for accurate and relevant on highly relevant consumer value propositions. Companies should also Marco Vernocchimeasurement of business outcomes. firstname.lastname@example.org The Billion-Dollar Challenge: Monetizing the Digital Opportunity