• by Patrick Vogt , June 2, 2008

To gauge the state of change in a particular industry at any given time, just look at the number of buzzwords in the lexicon. The more new words there are and the less understood or agreed upon their meanings, the more certain it is that change is afoot and that the community is struggling to describe something new.

This is certainly true today in the online advertising industry. There has been a flood of new words, phrases and acronyms such as econometrics, brand engagement, blog-groveling, social bookmarking, opt-in advertising, mash-up, CGC (Consumer Generated Content), CPW (Cost Per Whatever), and finally, my personal favorites, Web 2.0 and 3.0. Each of these words represents an effort to define online phenomena that did not exist until recently.

Buzzwords are not the only evidence of change within an industry. Big money is always a bellwether for change. The amount of money now flowing into interactive digital ad channels is staggering, and the projected increase is unprecedented in the history of advertising. Forrester Research estimates that the total U.S. interactive advertising spend will rise from $20 billion in 2008 to more than $61 billion in 2012, with the biggest growth in video spend (72%) and "emerging market channels" (59%), which include mobile, gaming and social networking.

This estimate presupposes that marketers will continue to shift much of their ad spend toward the higher performing, emerging interactive channels, and away from the traditional offline channels of television and print. Redirection of resources on this scale does not simply happen. It is the result of a fundamental change in the advertising business brought about by the emergence of a new ecosystem of communications technology and user behavior on the Web.

"Revolution doesn't happen when society adopts new technology, it happens when society adopts new behaviors." - Clay Shirky, author, Here Comes Everybody

In this industry, change has occurred on both the technology and user behavior fronts, and these changes are fundamentally affecting communication channels between brands and consumers. On the technology side, brands can now reach customers with ease through new interactive channels and devices. These include cell phones, video phones, embeddable video, social media, in-game advertising, desktop widgets, RSS feeds, and more. New features and applications are arriving in the market almost daily. The channels that brands can use to communicate with their audiences are increasing exponentially, and, equally important, so is peer-to-peer communication between users to promote or refute a brand's message.

On the consumer side, users are spending more and more time on the Web. As a result, their attention has shifted from traditional to interactive media. This does not mean that users no longer see offline media and marketing, but they see less of it. At the heart of the Forrester study is the recognition of a significant imbalance between the time that users spend online (29% of their daily media consumption) and the share of advertising dollars spent to reach those eyeballs (8% of the total ad spend is for online). These numbers show that advertisers as a whole are overspending on traditional channels, and need to more than triple their online budgets to achieve a balanced approach and to reach their new audiences. Although a balanced integrated marketing campaign across all medium is still recommended, it needs to be representative of where consumers are spending their time.

This fundamental change in user behavior has been anticipated for some time, but advertisers have been slow to respond to this shift because the current, traditional ecosystem doesn't support it.

"If you don't like change, you're going to like irrelevance even less." - General Eric Shinseki, retired Chief of Staff, U. S. Army

The strategy for ad agencies has traditionally been to build creative content for the passive, one-way medium of broadcast television. Television was considered the lead communication vehicle, and agencies were organized to support a model where all strategy, creative and media were focused on the broadcast channel. The Web was considered a direct response, non-branding medium; creative content was generally repurposed from TV to play on the Web.

It has been challenging for advertisers and their agencies to turn this deeply ingrained business model and process upside down, particularly when TV brand campaigns are simple, profitable, and less subject to scrutiny over ROI performance. However, as traditional advertising yields smaller returns and millions of dollars shift to the Internet, brands and marketers are beginning to demand accountability for their advertising spend.

What's more, brand marketers are starting to see that the Internet offers excellent branding opportunities that traditional advertising does not, such as precision targeting, visually compelling content, brand engagement, viral distribution, and improved metrics. The ubiquity of the Web has thoroughly blurred the lines between brand advertising and direct response advertising, and creative agencies will need to adapt to the new market conditions or face marginalization.

This evolutionary period in the advertising market provides an opportunity for new media technology companies to expand deeper into the advertising business. Consumers now expect to act-to make choices, talk back, save ads for later, send things to friends, embed widgets and video, and actively connect with content and brands. Marketers are responding to this by exploring Premium Rich Media (PRM). PRM is digital content that is interactive, visually compelling, and can integrate photorealistic 3D and flash elements into online campaigns for better performance.

This content can be deployed across all platforms and devices, providing a consistent branding experience through television, print, online, mobile, and in-game marketing channels. That is the ultimate end game for advertising-to engage with customers on their terms with relevant content delivered wherever they are.