• by Diane Mermigas , September 4, 2009

When the executives at Razorfish, an ad agency "born digital," peer into their crystal balls, they see thing like universal screens, ubiquitous devices and consumer e-dentities becoming realities within the next five years. For media and advertising, old business is crumbling under the weight of digital interactivity going mainstream.

Advertisers and content providers will no longer rigidly push out what they are selling, but instead, co-xist with consumers on an open, integrated digital plane of video, text, images, audio and commerce. When genuine interactivity abounds, prime-time television and the 30-second spot will be history. And that could be sooner than we think, according to the Razorfish brain trust.

New approaches to social networks and social graphs, content and e-commerce, are among the change agents already at work, says David Friedman, president, Americas, Razorfish.

By 2011, we will have truly interactive television, where the interface between consumers and the communications, content and commerce they seek will seamlessly flow to and from other devices, Friedman said in an interview. Only then will the living-room shrine finally catch up to the mobile interactive devices -- including smartphones and BlackBerries -- that are consumers' digital life lines.

"The simplicity of universal devices and the interface that keeps information, video and connections flowing will radically change everything about business," he said. Understanding and using social graphs to track consumers' relationships will assist even traditional companies to make digital media more intuitive and lucrative.

Consumers already are opting to store their preferences and identifying information in devices to allow for more relevant, fluid interaction. In Orwellian terms, how long before we sacrifice privacy for the sake of convenience and embed microchips under our skin?

The technology and even some consumer receptivity are already in place, but too many companies are holding back on the structural and logistical change to make it happen. It most likely will take more negative catalysts -- like an incident that prompts companies to use connected media to defend and clarify their products (think the Tylenol scares) -- before the business world makes decisive change, Friedman said.

"Right now, some companies still have legal and other barriers. A fire will have to be lit under them before they engage with consumers in their social networks," he said.

The digital ubiquity that Razorfish exists to mine seems far removed from the walled gardens and fiefdoms of Madison Avenue, broadcast and cable TV networks, satellite and cable systems, and even Apple's iPods and iPhones

An ad:tech Chicago panel that Friedman participated in last week, moderated by Tim Hanlon, VivaKi executive vice president and managing director of VivaKi Ventures/Denuo (Publicis), debated the function of "the modern agency" in this chaotic transition. The consensus: too much advertising and agency business remains structured and satisfied to maintain the status quo -- for as long as it lasts.

"Agencies are still pretty creaky," Hanlon observed. "Are we diluting ourselves?"

Razorfish's Web site showcases the digital interplay and enterprising use of social media and social influencers to build consumer relations and sell goods. It has even devised a SIM Score to help marketers measure the digital effectiveness of their brands.

The 14-year-old firm once owned by Microsoft is being sold to France's Publicis Groupe SA for $530 million, although Razorfish will continue media buying for the software giant under a new five-year pact. Razorfish will operate as an autonomous social-influence marketing shop inside VivaKi, the Publicis media-marketing entity that also includes Digitas, Denuo, Starcom MediaVest and Zenith Optimedia.

Concentrating all that digital firepower should make it easier to wage a full-fledged media and marketing revolution. Razorfish executives -- whose progressive tech partners work with clients ranging from Levi Strauss and The NFL to Coca-Cola and Adidas -- concede they can't do it without fundamental business changes.

"A lot of things are possible today. But there is a high degree of consumer skepticism. What consumer will agree to embedding a micro chip containing their health, financial and personal data unless companies can tap that data to deliver more of what they want?," said Patrick Moorhead, Razorfish's direct of emerging experiences. "Consumers already are demonstrating they will accept the privacy issues and risk. It's already happening now with some things."

Developments such as Google voice, mobile banking and micro payments underscore the coming age of ubiquitous cloud computing, which Moorhead addressed in a presentation at ad:tech Chicago.

Multifunctional smartphones and other mobile devices are morphing into "federated technology," he said. Eventually, passwords will be replaced by digital networks that intuitively know and recognize individuals.

Integrating this digital technology into the physical world is more challenging. For instance, in order to facilitate "instant" store checkout -- where consumers walk out of the store with full shopping carts whose contents are scanned at the exit-- sensors must be integrated into all products and packaging, the cost of which could erode merchandisers' profit margins. The question: how long will it take to reengineer the mainstream?

The interaction of personal devices and packaged products through tagging will materialize for cars, apparel and consumer electronics, such as televisions within the next five years, Moorhead said.

Just last week, YouTube threatened to storm the video rental business, leveraging its 40% video market share to upend not only Blockbuster's storefront business but Netflix's wildly popular mail-in and online access model. The broadcast and cable networks indicated that they will premiere some new shows streaming on the Web, where the economics and the viewership could be more favorable. A year from now, the interchangeability of the TV networks, YouTube and Hulu could be surprising. It is change in small steps, Moorhead acknowledged, for the big leap later.