• Financial Times, Thursday, January 15, 2009 12:01 PM

Advertising agencies are not prepared for the changes that will come as a result of new forms of media such as social networks, a new study claims. The Institute of Practitioners in Advertising's "Social Media Futures" report warns that ad agencies face growth of just 1.2% per year by 2016 if they fail to tackle the changes prompted by the emergence of social networking.

Recommendations from friends are obviously more influential than traditional forms of advertising. Because social networks enable consumers to pass on information about products and services, advertisers need to be able to take advantage of that trend. A good example of this is the Cadbury "Gorilla" spot, which has been viewed on YouTube more than 10 million times, or Dove's famous "Campaign for real beauty," which can also be seen on YouTube and other online video sites.

Even so, the report claims that two-thirds of agencies aren't properly adjusting to the online world. Should they fail to create new products and services catering to the social media world, the report warns that the industry could lose $23 million in revenues by 2016. "The current downturn will accelerate these trends in agencies as everyone is looking to innovate and stand out from the crowd," said Moray MacLennan, IPA president and chief executive of M&C Saatchi Worldwide, an agency. "I don't think (social media) is a replacement for paid-for media, it is just going to be a challenger for (consumers') time and attention."

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