The advertising industry is undergoing significant changes over the next 5 years driven by 4 main factors: consumer attention shifting away from linear TV to online/interactive formats, demand for more targeted measurement, growth of user-generated content, and opening of advertising inventory systems. This will challenge traditional players and benefit new entrants. The document analyzes 4 potential future scenarios based on these changes and calls on industry players to innovate their business models, creative approaches, and operating capabilities to adapt.

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. 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
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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.
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