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


The Future of Advertising Is Now

Changes in media technology and format have also gradually but fundamentally changed individuals’ expectations of advertising, along with their behavior as consumers. In studies by Yankelovich Marketing and Forrester Research, 70 percent of consumers say they like products that block advertising, especially TiVo and other digital video recorders (DVRs). Owners of these devices say they fast-forward through 92 percent of the commercials they receive. But relevance renders advertising worthy: Fifty-five percent of the respondents in one Yankelovich study said they would pay extra to receive more personalized marketing. In a Washington Post survey of working women conducted by Nielsen Media Research, 44 percent of the respondents (all of whom conduct at least part of their work online) rated the Internet a “very important” medium for prepurchase research on health-care products. That was more than twice the percentage saying they considered magazines, the next most significant research medium, “very important.” These results paint a bleak picture for companies whose marketing models depend on one-way “push” delivery of advertising impressions.

Meanwhile, the most successful media companies are building a presence in digital media (including Web sites, mobile platforms, social networking sites, and interactive gaming sites) and explicitly using that presence to develop deeper, more direct relationships with consumers. Broadcast and cable networks, for example, are making more of their high-quality content available to consumers online. Within just a few months of Apple Computer’s October 2005 introduction of its video iPod, ABC, NBC, ESPN, MTV, the SciFi Channel, and USA Network were among the television networks that were making shows available for download. In April 2006, ABC announced it would make four of its most popular prime-time shows available free on the Web. Dedicated online channels, such as ESPN Motion and MTV Overdrive, are selling out their ad inventory, at costs per thousand impressions (CPMs) that equal or exceed what they get on TV. Some mainstream programmers, including ABC News and CBS Sports, are putting content online or converting their programming into Web-only video formats, as Trio, the arts network, did at the end of 2005.

These experiments are only a harbinger. Because broadband delivery accommodates previously unwieldy video files, it will increasingly acclimate consumers to use of the Internet as an integrated information and entertainment medium. There will be vast new media inventories and new opportunities for advertisers to reach consumers who are no longer tethered to their living rooms or the network programmer’s schedule. As Apprentice and Survivor producer Mark Burnett remarked in February 2006: “To me, the new prime time is 9 a.m. to 5 p.m., because more people have access to a computer then.” Mobile devices will create additional opportunities to reach consumers outside their homes. With these developments accelerating each day, big-brand advertisers are poised to significantly increase their online advertising budgets, clustering around outstanding online communities and high-quality digital venues. In March 2006, for example, Heineken announced that it would launch its $50 million “Premium Light” beer campaign with ads on Yahoo, MSN, and, among other Web sites.

Conventional wisdom in the television industry has not yet fully grasped this change. Even with the tremendous publicity accorded Apple’s video iPod, the prevailing view is that digital video will create a new direct-to-consumer retail model — a pay-per-download revenue stream that will replace fragmenting advertising revenues. But it’s much more likely that digital video will embrace a variety of business models, including a great deal of free, ad-supported entertainment, offered to specified audiences who watch it when it is convenient for them and whose responses are tracked in detail. Although user attention is fragmenting, successful video deployment over multiple platforms will allow advertisers to deliver a much more targeted, productive, and measurable advertisement, and enable media networks and programmers to halt the advertising-revenue outflow and even capture new revenue.

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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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