November 12, 2007

Product Placement Keeps Track of Digital

Product Placement will be the only “traditional” marketing tool with comparable growth expectations of digital media beyond 2010 with a CAGR of 20 percent – spurred on by advertisers’ desire to drive relevancy and reach for their advertising as consumer control over interruption advertising continues, according to a startling new report by IBM Global Business Services.

The report entitled The End of Advertising as We Know It, forecasts greater disruption for the advertising industry in the next five years than occurred in the previous fifty, indicates that by 2012, the landscape of the industry will change so profoundly that in order to survive advertising industry players will need to take aggressive steps to innovate in three key areas:
  • Consumers: making micro-segmentation and personalization paramount in marketing;
  • Business models: how and where advertising inventory is sold, the structure and forms of partnerships, revenue models and advertising formats;
  • Business design and infrastructure: All players need to redesign organizational and operating capabilities across the advertising lifecycle to support consumer and business model innovation: consumer analytics, channel planning, buying/selling, creation, delivery and impact reporting.
Nearly half of the advertising survey respondents anticipate a significant (greater than 10%) revenue shift away from the 30-second spot within the next five years, and almost 10 percent of respondents thought there would be a dramatic (greater than 25 percent) shift. Two-thirds of advertising experts surveyed by IBM expect 20 percent of advertising revenue to move from impression-based to impact-based formats within three years.

The bulk of survey respondents acknowledged that consumers have tired of interruption advertising, and are increasingly in control of how they interact, filter, distribute, and consume their content, and associated advertising messages.

The Ad Marketplace

Notably, the report found that self-service advertising exchanges or "marketplaces" are attracting revenues that were once exclusively sold through proprietary channels or transactions. More than half of ad professionals polled by IBM expect that in the next five years open advertising exchanges will take 30 percent of current revenues now commanded by traditional broadcasters and media.

The IBM report shows increasingly empowered consumers, more self-reliant advertisers and ever-evolving technologies are redefining how advertising is sold, created, consumed and tracked. IBM said all players must adapt to a world where advertising inventory is increasingly bought and sold in open exchanges vs. traditional channels.

Traditional advertising players risk major revenue declines as budgets shift rapidly to new, interactive formats, which are expected to grow at nearly five times that of traditional advertising.

Bill Battino, Communications Sector managing partner, IBM Global Business Services said, "companies must re-look at how they serve content to consumers with business models based much more on engaging consumers in a relationship. Digital entertainment is experiencing faster adoption than anyone had previously anticipated. The advertising community needs to dramatically re-orient its business to serve consumers who increasingly access content in non-linear formats," he said.

Finally, a corporate giant speaks frankly to the industry. I'd love to know the voice traffic between New York, London, Sydney and Paris Monday morning.

"Duncan, this is Alan. Did you see that news report Friday?"
"IBM, yeah. F#*#k.

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