Advertising Will Change Forever
Digital Spending Will Nearly Double in 5 Years, But Ad Budgets Won't
Josh Bernoff |
This means that inside every projection is an idea or ten about the future. Those ideas can be powerful, and they come from research with marketers and consumers.
My colleague at Forrester, Shar Van Boskirk, just published our five-year interactive marketing forecast. The idea inside it is the real kicker.
In this recession, marketers have learned that interactive marketing is more effective, and advertising less effective, per dollar spent. While budgets for online have decreased, they decreased less than other budgets. Six out of ten marketers we surveyed agreed with the statement "we will increase budget for interactive by shifting money away from traditional marketing." Only 7% said "we have no plans to increase our marketing budget."
Unlike the last recession, digital marketing is no longer experimental. Now it looks more like advertising is inefficient, relative to digital. More than half of the marketers we surveyed said that effectiveness of direct mail, TV, magazines, outdoor, newspapers, and radio would stay the same or decrease within three years. In contrast, well over 70% expected the effectiveness of channels like created social media, online video, and mobile marketing to increase.
The result is that digital, which will be about 12% of overall advertising spend in 2009, is likely to grow to about 21% in five years. Along the way overall advertising budgets won't grow much.
This is huge.
It means we are all digital marketers now, since digital is at the center of many campaigns anyway.
It means media is in trouble, or at least in the middle of a transformation. For example, online video ads, which will be about $870 million this year, will grow to over $3 billion in 2014. What will this do to networks plans to put more of their shows online in places like Hulu. How will it accelerate some newspapers plans to become more and more centered around online?
And it means that social "media," which will account for $716 million this year between social network campaigns and agency fees, will generate $3 billion in five years. And this doesn't even count displays ads on social networks (which are in the display ads category.) Of all the parts of digital marketing, social network marketing one is poised for the most explosive growth.
Pundits have been declaring the end of mass media and advertising for years now. From my 14 years of experience analyzing this stuff, I've learned that things die very slowly, but there are real trends you can see. If you're in advertising, you'd better learn to speak digital, because that's the way the world is going.
|
~ ~ ~
Josh Bernoff is the co-author of "Groundswell: Winning in a World Transformed by Social Technologies," a comprehensive analysis of corporate strategy for dealing with social technologies such as blogs, social networks and wikis, and is a VP-principal analyst at Forrester Research. He blogs at blogs.forrester.com/groundswell.
RSS Feed›› DigitalNext
Most Recent Posts 
- JC Penney's 'Doghouse' Returns
- Autism Speaks Hosts Chicago Fundraiser
- The Invisible Hand of Agency Culture
- Buffalo Soldiers Wings & Things
- Publicis' 'Boost' Wins Create for a Cause Contest
- A DigitalNext Challenge: What's Your Favorite Consumer Mobile Application?
- BCS Enters Twitter: Beat Down Like Notre Dame in a Bowl Game
- What Kind of Agency Are You?
- Vice Finds Oil in L.A. for Palladium Boots
- Scuzzy Bubbles Are Filthy Little Pervs in Method Video
- The Coming Darwinism of IPhone Apps
- Behind the Redesign: Virgin.com Mixes Social Activity and Lead Generation
- How Black Friday Can Be Brown Friday
- Trees for Troops: Helping Military Families
- Your Experience Is Your Biggest Hurdle
White Paper
The New Female Consumer: The Rise of the Real Mom
This Advertising Age and JWT white paper explores what multiple generations of American women want when it comes to family, work and life in the 21st century, decades after the women's liberation movement.
Bob Garfield
Verizon Exiles IPhone to Island of Misfit Toys for the Holidays
Too-Cool Apple Now Finding Itself on the Receiving End of Competitor Ridicule
Special Report
America's Hottest Brands
Advertising Age Honors the Top Brands of the Year -- and the Brains Behind Them
3 Minute Ad Age Video
Wal-Mart CMO Defends Private-Label Brand Expansion
Cites 'Pay-Check Cycle' Customers Who Don't Eat at Month's End
Special Report
Marketer of the Year: Hyundai
The carmaker won handily in our reader poll, besting Walmart, McDonald's, Lego and Amazon
Ad Age Video
Eddie Murphy's Long-Term Effect on Ad Agency Diversity
The Video Story of Dallas' Marcus Graham Project
Weekly Online Poll
Will small digital-production shops working directly with clients turn big digital agencies into unnecessary middlemen?
White Paper: 2010 America
What the 2010 Census Means for Marketing and Advertising
2010 America explains what you need to know about the biggest consumer market-research project of the decade: the 2010 U.S. census. Demographics expert Peter Francese, author of this highly readable Ad Age white paper, analyzes what the census will reveal about the changing face of consumers.
Most Read Most E-Mailed
Most Read Most E-mailed
Be part of the celebration at The Ad Age Media Mavens Awards Luncheon
Sponsored by ESPN. Join the world's leading media strategists for a celebration of creative thinking, innovation and a look at how the best are preparing for 2010. More
(What is RSS?)
Steve
http://DietCleanse.org
And it's exciting! It's amazing to see ads on Facebook that are tailored to what I'm interested based off what I've listed under my Interest, Activities, and so on.
Passionate about the change.
http://twitter.com/brianvandeputte
Now with social media, the people can take control of the message. Twitter, blogs, Facebook, even MySpace give individuals the ability to control the message. Their passion and effort can overrun any paid advertising budget.
It is also why connecting with your customer to create raving fans can grow your business faster than large ad budgets.
The problem is it takes much more effort to create something that is remarkable, to create a movement, to create passion.
You can buy your way to mediocrity but your create your way to greatness.
http://www.askthewealthsquad.com/blog/tradition-or-innovation-stand-out-from-the-crowd/
This won't make things easier though and I see a huge pitfall waiting for thousands of marketers and agencies everywhere. @TheWealthSquad touched on it. It's the fact that in the past advertising was forced to consumers who had absolutely no control. Now the message can and will be controlled by these very same consumers. Consumers now have the ability to call "bullcrap" on an ad.
Agencies that are used to being creative for the sake of it will mean nothing.
Being a "digital" agency will mean nothing as well as it will be the norm for every agency; no longer a "selling point".
This shift in the industry will continue to remove the blindfolds off of everyday consumers and I hope that marketers and agencies alike realize they will have to dig deeper in their efforts to reach them. Once the technology hype has settled down and the dust has cleared, the scene that is left will be telling.
-Terrence
Element-Hu
http://www.element-hu.com
Josh you absolutely spot on...this change is so powerful and so huge it certainly is going to level the playing field!!! I feel now this is only the beginning...
http://www.propertysyndication.com
The problem is, as Seth Godin puts it; "Your all trying to put a meatball on a sundae". I recently worked with two very large, billion dollar, international companies and they are LOST. Everyone can knock on their door and offer help for a nice profit but it won't work for either of them.
Dave Holt
http://holtinteractive.com
http://Twitter.com/holtinteractive
Although companies can no longer control the message they still have an opportunity to influence consumer perception.However,should this opportunity be ignored the likely outcome for their brand is dire!!!
-ben
http://propertysyndication.com
http://twitter.com/propertychannel
Online display advertising for small business is an untapped market which may pop up once the US economy recovers.
Jane Stone
Business Development
http://www.pointbanner.com
http://blog.zetainteractive.com/?p=408
Marc
http://domusinc.blogspot.com
http://www.domusinc.com
-ben
http://propertysyndication.com
marc
http://www.domusinc.com
http://domusinc.blogspot.com
Media change. The principles of communication remain the same.
And always will.
I just finished posting the same thoughts:
http://domusinc.blogspot.com/2009/07/digital-advertising-and-classic.html
Four months ago, we've disbanded our digital group and reassigned all the digital staff to brand teams. These teams are managed by senior level group directors who are responsible for managing client business. All junior level staff have been retrained so they can plan, buy, analyze and optimize online investment. Not only was this move reflective of the way media is consumed, it was highly motivating to the staff who all felt we just invested in them.
-Barry Lowenthal
President, The Media Kitchen
A conclusion appears to have been reached after sampling mere "opinion:" "More than half of the marketers we surveyed said that effectiveness of direct mail, TV, magazines, outdoor, newspapers, and radio would stay the same or decrease within three years."
More useful data would be findings that doing X and Y in digital delivered Z more results than the same spending in print or broadcast. Perhaps this data is in the study, but I am reluctant to base my clients' futures on other people's opinions.
Digital will overtake other media -- especially as the younger generation takes over and as ad agencies and advertisers take dollars away from traditional media. The decrease in readers and viewers is measurable. However, especially for local advertisers, the exact means of making digital deliver is still far from an exact science and subject to change. In fact, the best means of taking advantage of social networking may well be to use it augment word-of-mouth campaigns as I wrote recently at
http://www.cocoboston.com/coco_contact/coco_contact_14.htm
I prefer facts over hype.
Tim Coco
COCO+CO.
www.cocoboston.com
Brant Collins
CEO/CCO
Station X
That digital will reach 20% in 5 years is "huge"? (resists joke about author) "We are all digital marketers now." WTF? Did Tom Friedman of the Times co-author this?
Check the backgrounds of Bernoff and "Shar." Tell me how many years of client-side marketing experience you come up with.
The scope and predictions have only swelled over the years, and many have called for the demise or decline, myself included, of the traditional agency model. In fact it was a key selling point with my old firm; K2 Design. All of us involved in the first wave; Red Sky, Organic, Razorfish, Site Specific and Onramp (any old-timers remember that one?) differentiated from the agencies because we knew the ROI for digital was actually true. Took a long time for everyone to jump on the bandwagon. In fact, some marketing directors didn't want the accountability, since it would upset the applecart, including their annual marketing budgets and projections. How could they explain a request for a smaller marketing budget that would be more effective? That would be unheard of.
I can recall a client meeting in 1995, where the marketing director said "why do I need a website?" Comment sticks with me to this day. Now we hear, "Why do I need a Twitter or Facebook account?"
Funny how things have evolved, yet the same topics are the center of discussion 15 years later.
Douglas Cleek
Magnitude 9.6
Vickie Smith-Siculiano, PMP
http://www.VickieSmith.com
http://www.twitter.com/Vickie_Smith
Numerically, the most interesting element of the chart above is social media out-pacing email spend by 50% within 5 years. That's a huge shift in how companies will be communicating with their customers.
Jason Baer
www.convinceandconvert.com
(and Josh, thanks so much for the coverage a while back on Del Monte/Snausages. I did a video post about it and ate snausages on camera to prove the point.)
In a world where social media really matters, display needs to become part of the conversation, not a lame driver to it. Display media needs to be a destination - drive to site is surely dead.
Take a look at the latest Open IMU - created for Vodafone Music.
http://www.thisisopen.com/blog/2009/07/who-killed-summer-the-latest-open-imu/
joshua@thisisopen.com
Digital is obviously becoming the keystone of the media plan. However, without a Brand there is no ROI. Too many "interactive specialists" confuse advertising with simply leveraging your sales channel.
The internet is a tremendous sales channel, but don't confuse click-through rates with advertising. It's closer to the negotiation for shelf-space that marketers go through. Consumers don't buy what they can't see.
The purpose of great advertising is to create demand. Only then, will consumers buy it, on the internet or elsewhere.
To the question of where the growth in display is coming from, yes, it is from "static" formats -- in such a price sensistive market, advertisers shied away from more expensive rich media executions and sponsorships (see the IAB spending figures). Video is showing enormous growth, but there isn't enough spend to justify custom creative even though YouTube and the Pool project have been pushing for shorter pre-rolls and overlays. I've been following changes in display closely as for right now display is still the primary support of content online. Basic media tactics like managment of clutter, understanding how audiences build and managing frequency of delivery still need to be implemented by so many publishers and agencies. For more on this, see: www.primaryimpact.com/stateofdisplay.html
The most critical driver, one that a survey of advertisers misses completely, is the true metric that we are all chasing with our evolving marketing mix planning --- human consumption behaviors.
As consumers' media & content consumption patterns shift, e.g. music, books, videos, TV/movies, ads! --- our channel mix must evolve to find them (or be found) where there's a fighting chance for our messages to gain relevant cut-thru.
The media mix --- see Hulu, YouTube/Google, ESPN.com, Blip.fm, MySpace, Gawker, Facebook, cbs.com, etc. isn't about a diametric shift from "advertising" to "digital". That's a false polarity, which, frankly, might have made some theoretical sense 6 or 7 years ago.
But today, it's about an evolution from more traditionally "served" media to more organic media - social, search, owned, sponsored, partnered, embedded etc., not simply from 'advertising' to 'digital'. Hell, everything's digital.
It's about moving from a strategic marketing focus based upon "impressions and clicks" to one focused on "discoveries and shares".
Thom Kennon
Wunderman
FF tkennon
thom.kennon@wunderman.com
But, still...
How does a projection that in 5 years digital will account for 20% count as a massive change? It's noteworthy, but it's still only 20%.
But obviously, things are not 80% the same as ever. Not by a long shot. So what's happening here?
What both arguments miss is a broader perspective. When I step back from the question of digital vs. analog and old vs. new, I see two tremendous shifts.
The first is an explosion of content and a fragmentation of audiences that has blown a massive hole in the business models of all content businesses. This makes it tougher to reach a mass audience.
The second is a shift from long-term brand-building activities to short-term direct marketing activities.
IMO, the two biggest changes in advertising are 1) re-aggregating fragmented audiences into a meaningful size; and 2) re-learning how to build brands for the long-term.
Advertising IS changing forever. But when we focus too tightly on digital vs. analog share of ad spend, I believe we are missing the big picture.
You want a car ad, forget the old style "some bimbo leaning on a 'vette, get "Click & Clack the Tappett Brothers" to mention you favorably.
PR, and "Unearned" advertising"is about to get huge and go beyond mere "spin doctoring".
Yep, it's a new world. Digital, social and mobile technologies deliver transparency. Transparency allows consumers to find the best and weed out the marginal. Value, quality and brand equity begin to mean something again. Smart marketers will reinvest dollars saved in media towards building, and in some cases, rebuilding, their value quotient. Consumers will demand it, technology will enable it. Enable consumers to get what they need, when they need it. That's a "winning app"
Scott Thomsen
sthomsen@launchmediainc.com
http://launchmediainc.com
http://twitter.com/ScottThomsen
Remember when America OnLine was so big it bought Time Warner?
Speak digital, sure -- but be certain you've got the right dialect.
Being able to share your shopping experiences and the like with your friends and people that follow you where that message can then forward to followers of your followers can have a profound effect on a companies brand! (Messages can go viral instantly...and brands simply need to be in a position to respond quickly) Added to this, these messages can be indexed by search engines and sites like http://sitejabber.com (launching today) where the consumer can review and research online business.
There is certainly an evolution in advertising and marketing taking place and yes, Vickie, this is certainly an "exciting time for brands that are willing to move forward into this evolutionary frontier!!!"
- Ben (social media dude - @propertysynication.com - every company needs 1!)
http://www.propertysyndication.com
Are the belief's accurate? 20% of American's think all of the moon walks were staged and never happened. 60% of ad execs believe that interactive is the most effective communication. Nearly everybody (say 85%) believed in 1998 that Tivo/DVR's would be the end of TV.
They were quite wrong when you look at the facts.
The Advertising Research Foundation in their June publication of JAR (and reported in AdAge by Jack Neff) showed that despite claims to the contrary, TV advertising remains the most effective method of achieving market gains --- even when compared with new media. And, TV had a massive impact on the effectiveness of new media approaches like word of mouth.
Sad state of affair for Forrester to foster this kind of weak research. Pathetic.
The point being, that now we have more page views, ad displays, videos watched (close to 200,000 viewed) that really confirms to an advertiser their money is well spent
The next report might want to look at hyperlocal advertising. Its on the rise too
www.30atelevision.com
www.30abuzz.com
I also believe that advertising will become more personalized as we delve into Social Media. But as the Internet world becomes saturated with constant messages, we will have to go back to the basics: Good creative!
Marketers need to stop worrying about the digital hype and focus on what is right for their brand. By "right" I mean the brand idea. Once you have identified a compelling idea that is relevant to your target market then you can figure out how best to engage people with it. To date all our research suggests TV, combined with an appropriate selection of other channels, still delivers the best ROI.
Regardless of which medium is being used - we need to interrupt our targets, engage with them, educate them and offer them a course of action.
Newer, on-line media are much better at parts of that process than "traditional" media and visa-versa.. Media Mix has always been the key - the mix is changing for sure, but we're not talking about either/or but what level of both.
More on the methodology questions coming soon.
As an online marketing consulting and services firm, The Fresh Basil helps our clients realize the benefits of digital, social media every day. It's great to see mainstream corporate America is coming around and embracing the future.
Ironically, it's only a matter of time before the early adopters find a new way to subvert the mainstream messages and create a new user-generated diologue elsewhere. This will no doubt happen in ways we can't imagine today. When it does, companies like The Fresh Basil will be there to evangelize and capitalize for our clients.
Get Fresh.
http://thefreshbasil.com
This particular forecast includes five different models (one for each of the interactive channels in the figure Josh shows above) each with its own set of data inputs. Roughly, all of the models use a combination of consumer behavioral data (usage of different channels, response to certain mediums based on Forrester's Technographics panel of 120,000 consumer households), media impressions, response rates and revenues (reported by publishers), marketer budget expectations (gathered through a quantitative survey of 210 marketers and through follow-on interviews), analysis of third party reports (eg. IAB, Veronis & Suhler, McCann Erickson) and analysis of historical trends and changes in correlating markets.
To me, the notion of online cannibalizing traditional media is worth noting because it is in stark contrast findings in our 2005 and 2007 forecasts. In years past, digital media was also growing, but due to organic budget, not at the expense of other marketing tools. Now this observation in no way discredits the value of traditional media -- I would agree that television can't be beat at creating an emotional connection between a consumer and a brand. But what it does imply is that the role of traditional media in the marketing mix is changing. Marketers are getting smarter about leveraging multiple tools -- on and offline -- to create a conversation with their end consumer.
To the point that 20% isn't really that big a chunk of overall spend, here are some other %s for comparison. TV = 35% of ad spend today, newspapers = 14%, radio = 12%, magazines = 5%. Online spend has hovered between 6-9% of all advertising for the last 4 years.
The last point from the research I will highlight addresses Josh's point about an overall decline in advertising. For years, marketers have been shifting dollars away from branding and toward direct response vehicles. This trend is occuring even more markedly now because of the recession. I would agree with the comments that a cease in branding is a short sighted strategy. But the shift is still at hand and also contributing to a decline in traditional advertising dollars.
Looking for a internet/digital business to get started with that you can make a small fortune doing part time. Check this out for more info mychocolatelifestyle.com
When offline channels realize that there is more valor in bringing these components to their vehicles than in riding the slow decline (that Josh has so accurately called out), trends will be more reflective of what marketers really desire and consumers really want to interact with.
Until then, these statistics will continue to cloud the conversation. Digital is a big world for while interactive display rates are being gutted, Cost per Acquisition is skyrocketing. And while brands race into the social network space, users resent their awkward presence.
The lesson? Media that proves to be fluid, cross-platform, accountable and fiscally-scalable will get a shake. No matter how long it takes for newspapers to die.
Stephen Byrne
www.difffusion.com.au
Twitter @spbyrne
or creating brand loyalty. They like the ability to demo and geo target. A Well crafted offer in your geo to your demo equals success.
Twice as many people have cell phones than computers and the viral effect of mobile is hovering around 24% and the coupon redemption is averaging 30%, Compare that to print coupons at about 2%. We've seen redemption rates as high as 60%. Also using our state of the art texting platform we can convert all of their media into lead generation campaigns. When someone sees their ad in print or billboard, radio or TV they text the keyword to our short code to redeem the coupon, which under best practices is an opt-in and now they can continue sending out messages, if they want to stop receiving offers reply stop.
What we do for our clients is when we launch a mobile SMS campaign for them we also send out a free matching email about 3 days later. They're loving it. The best part is we can send out the text an hour or two before lunch or dinner time for our restaurant chains when people are thinking about their next meal. Using a POS in the text our clients can track the ROI to the penny.
Sure, I'm a geek! I love technology, but what I love more is that my clients are happy and we just rolled out a new smaller test campaign so you don't have to sell your children into slavery to test our service.
That's my 2 cents! and yes a shameless plug.
There is still only 24 hours in a day. And you have a massively fragmenting audience. And technology makes it increasingly easy to evade advertising you don't want to see (ad blocker plus and no scripts on the Firefox browser is a great example which I use). and then there is fraud since 17% of all clicks are spiders. Or like me, who feels he shouldn't get free content from news sources that I used to buy the physical paper/magazine. So I will click on some random ads so they get money for my free viewing. Money for the content creator, and a waste of money for the advertiser.
This is a huge dilemma. And there is no true answer except creative luck. It is very important in my opinion to analyze your product/brand/service and target demographics to figure out the best way to market vs. a me too media plan like everyone has been used too since advertising time began.
The biggest problem I see is legacy. Advertisers have paid for viewership/eyeballs without the consumer being forced to watch/view. And while a media company can charge for content, the advertisers can not force people to pay attention. Hulu has a great format because they limit ads and thus make it more likely someone will watch vs getting up to go to the fridge or make a phone call. And if pay for content succeeds it will make it even harder for advertisers to get their message out there.
Lastly, so much of advertising is wasted. Think of Coke vs Pepsi. Every single person over the age of 12 has tried both. They all know about the brand, how they taste, and yet when you go to a fast food place you have only one brand. At the supermarket you buy the 12 pack that is on sale because they are interchangeable. So in reality they spend all those millions just to sway single point of purchase sales at the convenience stores? I bet they could slash ad spending 50% and not have sales dented!
Pepsi and Coke have web advertising and full blown websites promoting their product. But why spend time on their sites or paying attention to their digital ads when I see their ads everywhere and yet my decision is still 100% unaffected by all of it!
Is digital the answer. Not really. It is just another dart to throw at the board.
Jim Lefevere
www.theinteractivemarketer.com
Nonetheless, the forecasts in the article present a realistic progression for marketing professions to prepare for an eventual digital world. What is holding back many of today's advertisers to increase their media mix in digital is the perceived lack of trust and credibility which the online space represent. This perception is built over the years by traditional media companies such as newspapers and public radio. This explains why these media assets are still used by media agencies and advertisers.
Darren
www.laurenbarnak.com
Problem is that the people on top do not want to go down to the trenches to see it first hand. They stay in their ivory towers and content with the bird's eye view.
Personally, I believe that everyone should be excited. We are back to pioneering days and no one wants to be in the spearhead because they are afraid to lose their perks. :-(
And that is the true sad state of affairs here. :-(
- Evelyn
If a coupon in a paper or magazine delivers 20% ROI and a Twitter campaign brings in 18% then the choice of putting in budget is a no-brainer. Now in order to lay out options marketing needs a customer database, and that is the only thing that can and must be done digital.