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 / Spring 2009 / Issue 54(originally published by Booz & Company)


Digital Darwinism

Most players, however, are still struggling to harness the power of digital media and build new capabilities. A major education gap, especially with marketers, still needs to be bridged. Thirteen years into the online era, only about one-quarter of marketers regard themselves as digitally savvy, and half claim they lack the support at senior levels to substantially increase the marketing dollars allocated to digital media. Media companies view educating the rest of the ecosystem as an area of opportunity, with 70 percent investing to expand their training and education capabilities, targeting both marketers and agencies.

In this emerging ecosystem, digital media companies have some important inherent advantages. Their points of contact and their data on target consumers swamp those of their traditional media counterparts. Yahoo Inc., for example, has 811 touch points with an average consumer each month, including searches, pages viewed, and videos watched. The Walt Disney Company, by contrast, has 64, and the New York Times just 45, according to the Times itself. Other major digital media players, such as Google, Microsoft, AOL, MySpace, and Facebook, sit atop similar treasure troves. With their richer view of consumer preferences, these digital media companies can slice and dice their audiences, better matching ads to consumer segments, thereby increasing marketers’ efficiency and effectiveness. Adding to these adaptive advantages, digital platforms enable media companies to mutate beyond being mere aggregators of eyeballs: They now offer marketers and agencies broader services such as performance marketing, e-mail marketing, and lead generation. Digital media companies are in turn morphing into aggregators of demand.

What we’re describing here is more than just a change in the marketing mix or media buy. The marketing function, equipped to broadcast brand messages to consumers, has now become a center for dialogue, geared to gleaning what consumers want, and when and where they want it. Advertising has evolved from an interruption — grabbing attention for a product or brand — into an experience, an application, a service that the consumer actually wants. This new marketing model doesn’t shout; it listens and learns. And relevance, interactivity, and accountability are its essential ingredients.

Redrawing the Boundaries of the Ecosystem
It is daunting to live in this ecosystem as roles and responsibilities become more demanding and complex. Boundaries between different types of organizations are growing blurry, and every bit of established tradition is now fair game for transformation.

Marketers, for example, are openly agitating for new models of interaction with agencies and media partners. HP’s Elliot says that traditional ecosystem re­lationships lack the required speed-to-market, and the com­pany is intent on forging tighter relationships with its agencies and media suppliers by working on some initiatives with just one key partner. HP’s dynamic partnership with MTV is an example, and HP is not alone. A majority of marketers believe these kinds of closer, deeper, more collaborative partnerships with media companies will become more important to their business success. Some marketers are also moving to in-source more advertising capabilities: Forty-two percent of national advertisers have set up in-house ad agencies, according to a recent ANA survey.

Media companies, in turn, are taking on responsibilities that were once the exclusive preserve of advertising agencies, in a bid to secure a more strategic relationship with marketers. Ninety-one percent of the media companies we surveyed are currently providing some kind of consultative service to marketers, including campaign development, customer content creation, and cross-platform execution. Although nearly two-thirds of media companies concede that the development of such services will cause friction with agencies, more than half still expect to do more business directly with marketers in the future.

These developments are cause for some consternation on Madison Avenue. Even agency insiders are questioning the viability of the traditional agency business model. Only 42 percent of agency respondents said they believe that full-service agencies deliver all the services that marketers want. Three-quarters of agency respondents said they have seen price competition worsen and believe it will intensify through 2010. And nearly 60 percent believe innovative digital agencies such as AKQA Inc. and others are poised to take on broader roles and responsibilities as lead agencies, perhaps even evolving into full-service shops.

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  1. Booz & Company, “Marketing & Media Ecosystem 2010: ANA Annual Meeting CMO Roundtable (PDF),” October 2008: Presentation detailing the survey data.
  2. Matthew Egol and Christopher Vollmer, “Major Media in the Shopping Aisle,” s+b, Winter 2008: Overview of new marketing initiatives in retail locations showing how one corner of the ecosystem is being transformed.
  3. Leslie H. Moeller and Edward C. Landry, with Theodore Kinni, The Four Pillars of Profit-Driven Marketing: How to Maximize Creativity, Accountability, and ROI (McGraw-Hill, 2009): Detailed guide to practices and organizational processes needed to implement marketing metrics and increase accountability for marketing spend.
  4. Christopher Vollmer, with Geoffrey Precourt, Always On: Advertising, Marketing, and Media in an Era of Consumer Control (McGraw-Hill, 2008): How the digital age has reshaped all marketing imperatives and the industry as well.
  5. HP advertising campaign (video)
  6. Nike Web site: Online community for runners that gives Nike key insights into that target market.
  7. For more articles on marketing and sales, sign up for s+b’s RSS feed.
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