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 / Summer 2006 / Issue 43(originally published by Booz & Company)


The Future of Advertising Is Now

Major media companies, in turn, recognize the need to pump up the volume on advertising innovation or be left behind by the consumer. They are scaling up once-tentative experiments in consumer-created content, social networking, and interactive media for their clients. They are developing new types of advertising formats, sometimes in partnerships, as NBC and Yahoo did for Unilever’s Dove soap brand early in 2005 with a tie-in to the reality TV show The Apprentice. The promotion was unexpectedly successful: It drove a 1,500 percent increase in traffic to the Dove brand Web site. Other new formats being developed enable advertisers to segment markets in ways once unthinkable. For example, both the Fox Network and Comcast are using New York startup Visible World to customize television commercials locally, so that neighborhoods as small as a few blocks in size can receive custom-tailored commercials on cable-TV channels.

With the fragmentation of choices available to consumers and the consolidation of retail channels, the long-delayed emergence of marketers from the television-centered advertising ethos of the mid-20th century is now reshaping every link in the marketing–media value chain. “The opportunity to use different media to create more meaning, more connection, with the consumer is something we’ll be looking to do more and more,” says Katie Lacey, until recently the vice president of marketing for carbonated soft drinks at PepsiCo. Long a standard setter in television advertising, Pepsi last year relaunched its PepsiOne product without television. It is one of the leading major marketers (carmaker BMW is another) learning to thrive in the post-TV environment.

But, as ever when value chains are reconfigured, there is evidence of a widening gap between well-positioned firms and those for which disruption means dislocation. The winners, among brand marketers and media companies alike, are those learning to reconfigure their efforts in several key ways. They:

  • Shift spending and management attention to digital media, and use those media to more effectively influence consumer purchase behavior.
  • Develop formats to promote interaction with audiences, especially their most likely consumers.
  • Create new research approaches and metrics that measure outcomes, not inputs.
  • Combine “above-the-line” advertising (TV, radio, and print) and “below-the-line” marketing (promotions, sponsorships, events, public relations) in new two-way, integrated campaigns.
  • Create their own branded entertainment assets and appeal to customers directly through them.
  • “In-source” new skills and capabilities to achieve greater sales impact and other measurable results.

Embracing Digital Media
The years 2005 and 2006 will probably be known in advertising history as the period when marketing practices caught up with reality. After a decade of continual increases in advertising budgets but relative stability in their media mix, many leading marketers — Anheuser-Busch, Procter & Gamble, and DaimlerChrysler, to name a few — are rebalancing the assortment of communications channels they use. Specifically, they are directing more money and more attention to digital media.

“Two years ago, 10 percent of my advertising budget had an online component,” says the CMO of a U.S. auto company. “Today it’s 30 percent. Two years from now, it will be 50 percent. And overall budgets are not growing. It’s coming at the expense of television and print.”

In part, this shift represents a natural culmination of advertisers’ growing displeasure with those traditional media, especially broadcast television, that raised prices while efficacy declined. But it also reflects the increasingly strong financial returns, often in unanticipated areas, that marketers see from their digital endeavors. Enough consumers spend enough time accessing information and entertainment via digital media platforms — cable TV, mobile phones, video games, and, of course, the Internet — that they have shifted the overall pattern of media use. This shift will increase substantially in 2006 as greater broadband penetration — roughly two-thirds of all U.S. households with Internet access currently use broadband — makes the Internet more viable as an entertainment platform.

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  1. Des Dearlove, editor, Results-Driven Marketing: A Guide to Growth and Profits (strategy+business Books, 2005): On creating an ROI-savvy marketing department. Click here.
  2. Evan Hirsh and Mark Schweizer, “The Advertising Saturation Point,” s+b, Fall 2005: Discerning the overspend in conventional advertising budgets. Click here.
  3. Paul Hyde, Edward Landry, and Andrew Tipping, “Making the Perfect Marketer,” s+b, Winter 2004: Study from the Association of National Advertisers and Booz Allen Hamilton explores the challenges and opportunities that the media shift creates for marketing departments. Click here. 
  4. Maarten Jager and Steven Wheeler, “Building a Better Matchmaker,” s+b, Winter 2005: The future of automotive advertising starts with the dealer’s interactive “customer-sensing capability.” Click here.
  5. Paul Keegan, “The Man Who Can Save Advertising,” Business 2.0, November 1, 2004: Profiles Seth Haberman, inventor of the Visible World technology for targeting TV neighborhood by neighborhood. Click here.
  6. Nielsen//Net Ratings, “Working Women Online: Media Usage and Purchasing Habits of Online Working Women,” Washington Post/ Newsweek Interactive, 2004: The Internet as the window to the world for busy working women. Click here.
  7. Yuki Noguchi, “TV When — and Where — You Want It: New Video Technologies Free Viewers from the Couch,” Washington Post, February 12, 2006: Mark Burnett and other pundits on the “new prime times” of video-on-demand. Click here.
  8. Randall Rothenberg, “Bye-Bye,” Wired, January 1998: Looks ahead to the death of “big media.” Click here.
  9. Veronis Suhler Stevenson, “Communications Industry Forecast 2005–2009,”: Predicts growth in home video, Internet media, wireless content, and interactive TV. Click here.
  10. Mark Wallace, “The Game Is Virtual. The Profit Is Real,” New York Times, May 29, 2005: Unveils the remarkable global growth of World of Warcraft and other role-playing games.
  11. Nick Wreden, ProfitBrand: How to Increase the Profitability, Accountability, and Sustainability of Brands (Kogan Page, 2005): Cogent guide to sustaining brands in the new-media-driven “demand economy,” where customers expect their desires to be satisfied instantly.
  12. Yankelovich Partners, “2005 Marketing Receptivity Survey,”: Finds that consumers hate advertising, except the personalized kind. Click here.
  13. The Apprentice Web site, Season 2, Episode 4: Recap of the Unilever tie-in episode, in which contestants created a Dove TV commercial, after which Dove Web site traffic increased 1,500 percent. Click here.
  14. Jack Myers Media Village, Former CBS-TV sales executive’s Web site reports on declining TV ad sales (in May 23, 2005, archive) and other new media harbingers.
  15. For more articles on marketing, sign up for s+b’s RSS feed. Click here.
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