Aptus Consultants

In the opening paragraph of the IBM report ‘The end of advertising as we know it’ it states that “The next 5 years will hold more change for the advertising industry than the previous 50 did.” The paper goes on to outline four primary drivers of this change:

Attention – Consumers are increasingly in control of how they view, interact with and filter advertising in a multichannel world.

Creativity – Thanks to technology, the rising popularity of user-generated and peer-delivered content, and new ad revenue-sharing models, amateurs and semi- professionals are now creating lower-cost advertising content.

Measurement – Advertisers are demanding more individual-specific and involvement- based measurements, putting pressure on the traditional mass-market model.

Advertising inventories – Will be bought and sold through efficient exchanges, bypassing traditional intermediaries.

So is their projection for change realistic or just another example of digital hype? Let’s just take a look at two of the factors they have mentioned, attention and creativity.

Well few people could argue with the assertion that consumers are now in control. Just think about how we now watch TV. 10 years ago it meant a choice of 4 channels, although if you were unlucky you could also get the newly launched Channel 5! Programmes were watched when they were broadcast, unless you were out, in which case you took pot luck with the video. Now, 90% of homes have digital TV providing multiple channels via satellite or cable. Viewers can choose when and what to watch using Time Shift channels like E4+1, on demand services like BBC iPlayer, or easy to use DVR services like Sky+. Nor is viewing restricted to the 50 inch monster HD screen in the corner, as people can now watch TV on their PC, Laptop, mobile, or even via their games box.

The impact of this evolution on TV advertising is already clear. For example, over 30% of the programmes broadcast on DVR services like Sky+ are recorded by users, usually to be viewed within 24 hours. Most people do this to skip the ads, indeed a recent survey suggests 76% of DVR users routinely fast forward through the commercial breaks. This fall in viewing has contributed to a 10% decline in TV advertising over 3 years, the equivalent loss of some £400 million in ad revenue. On the flipside, new TV advertising models are emerging, such as are being trialled by Sky as part of their online Sky Player service. Rather than traditional broadcast ads, these promotions will be targeted according to the browsing habits of the viewer which should increase their relevance and hence generate greater value for both the advertiser and Sky. This is also in line with the culture of the web as 60% of UK consumers would rather watch online ads than pay for content.

Moving on to creativity, the volume of user produced content which is now flooding the web is truly staggering, be it sending photos to an online album, uploading videos to You Tube or the sharing of thoughts via a blog. Indeed the term ‘Prosumers’ more accurately reflects the status of web users as both content producers and consumers.

Such creativity is not a minority activity with 66% of 16 to 19 year olds regularly uploading photos and 48% of them contributing to blogs. Nor is it the preserve of the young, with 41% of 35 to 44 years olds uploading photos and 32% having their own social network page.

To give a scale to this creative activity Flickr, the photo sharing service, now hosts over 3.6 billon photos alone. You Tube now uses more bandwidth than was consumed by the entire internet in 2000. It shows over 1.2 billion videos clips a day, indeed it is now the second largest search engine after Google. Meanwhile, our desire to share our views and opinions with the world is illustrated by the fact that there are now over 120 million blogs, with the number growing by 175,000 every day.

Underpinning much of this creativity are innovative new business models, most of which are advertising based. As shown below, the result of this has been the migration of advertising revenue from traditional media to online channels.