The end of advertising as we know it

Everybody is well aware that the advertising game has undergone some pretty radical changes. But that’s just the beginning according to IBM, which is predicting that the next five years will bring more change for the advertising industry than we saw during the previous 50 years.

That’s the conclusion of an IBM Institute for Business Value report titled The end of advertising as we know it. The study’s results are based on the input of 2,400 consumers and 80 advertising experts. It invites us to imagine an advertising world where:

• Spending on interactive, one-to-one advertising formats surpasses traditional, one-to-many advertising vehicles.
• A significant share of ad space is sold through auctions and exchanges.
• Advertisers know who viewed and acted on an ad, and pay based on results rather than “impressions.”
• Consumers self-select which ads they watch and share preferred ads with peers.
• User-generated advertising becomes as prevalent as spots created by professional advertising agencies.

Naturally, these conclusions don’t bode well for radio, television and newspaper advertising, though that is assuming their operational models don’t undergo some significant changes, which is already happening. And the notion that companies are going to entirely abandon brand-building ad campaigns entirely in favor of measurable direct-response campaigns is surely folly.

Still, statistics show there is a major reordering of spending priorities underway by advertisers, as more and more ad dollars continue migrating from traditional media venues to online channels.

The IBM report believes there are four trends reconfiguring the advertising business.

Attention. Consumers are increasingly in control of how they view, interact with and filter advertising in a multimedia environment. They have shifted their attention away from linear TV watching and have adopted tools that allow them to skip advertisements, as well as share and rate their favorite ads. This is happening while people spend less time with traditional media outlets and more time with online media. Those surveyed for the IBM report say they spend just as much time online as they do watching television.

Creativity. Technology has unleashed the creativity of everyday people. Popularity of user-generated and peer-delivered content is rising. New ad revenue-sharing models – such as YouTube, Crackle and Current TV – have allowed amateurs and semiprofessionals to create low-cost advertising content. IBM’s study indicates the trend will continue. Example: User-generated content sites were the top destination for viewing online video, attracting 39 percent of survey respondents. Meanwhile, established media players, like publishers and broadcasters, are taking on traditional agency functions and developing more of their own creative.

Measurement. Advertisers are demanding more targeted and measurable advertising campaigns, putting pressure on the traditional mass-market model created by newspapers, radio and television. Two-thirds of the advertising experts IBM polled expect results-based formats to account for 20 percent of ad spending within three years. Those dollars will be shifted from the currently dominant impression-based model.

Advertising inventories. New advertising industry players are making ad space that once was proprietary available through open exchanges. As a result, more than half of the ad professionals polled expect that within the next five years open platforms will account for 30 percent of the revenue currently flowing to proprietary advertising channels, such as TV channels and radio stations.

Advertising campaigns have been a key component of corporate empire building for generations. The advertising agency business itself became a big industry.

Those were simple days by comparison. The new technologies of today have proliferated options for ad creation, placement, targeting and measurement. The array of diagnostics available for analyzing online performance is seemingly endless.

It’s all become very interesting and egalitarian.

What has your experience been? Click on the “comments” link to share your perspective.

 

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