• by Jack Loechner , Staff Writer @mp_research, April 2, 2009

A new executive brief by IBM Global Business Services, based on an in-depth study by the Institute's research team, reports that to compete in the new era of advertising will require a fundamental change in media and entertainment companies' capabilities. The study findings show that four trends are raising the bar for consumer-centric marketing: consumer adoption of new distribution formats, a shift in advertiser spending, the digital migration of platforms and the emergence of new capabilities due to game-changing moves by both new entrants and existing players.

The extensive report, available in PDF format for a thorough review, describes marketing and advertising conditions in today's marketplace, and suggests the need to respond to these questions...

• How can we break down silos across individual agencies to deliver a consumer-centric approach? 
• In what ways can we change our business models, back-office capabilities and fee structures to take on what previously were more manually intensive and potentially more risk-oriented deals? 
• How can we leverage data to play an "insights broker" role? 
• What will help us drive efficiencies in light of legacy, siloed campaign support tools and organizational structures? 

Introducing the study, the authors say that the distinctions between advertising and marketing have blurred, as new forms of communication combine the ROI-characteristics of direct marketing with the brand characteristics of traditional advertising. To adapt and succeed, says the report, companies must move beyond traditional advertising to combine granularity of targeting and measurement with cross-platform integration, greater insights, open collaboration and digital processes.

The study addresses in detail the four primary trends that are blurring the boundaries between traditional brand advertising and direct marketing:

• Consumer adoption of new distribution formats - Consumer behavior has changed forever: They are more digital-savvy, willing to provide personal information in return for perceived value, and increasingly ready for permission-based advertising.
• A shift in advertiser spending - Spending is moving from traditional advertising toward measurable, interactive marketing. Combined with spending contraction in the new economic environment, this requires smarter advertising, and doing more with less.
• Digital migration of platforms - Traditional boundaries are fading, creating opportunities for innovative business models for content platforms.
• Emergence of new capabilities - Moves, by both new entrants and existing players, are driving new types of industry innovation, challenging existing business models and accelerating the pace of change.

The report quotes a Lead M&E Analyst of a global research firm in summarizing the situation:

"Consumers can no longer be considered ‘the audience' - they are simultaneously readers, editors and marketers, especially the younger demographics." 

Consumers are adopting digital content services faster than previously anticipated. The M&E industry serves two types of audiences: those who enjoy media in more traditional ways and those who are more media-involved. Their combined influence is contributing to the growth of consumer-centric marketing.

65% of the overall population, referred to as Massive Passives in the report, are most interested in maintaining their existing content experiences, skew older, and are least likely to participate in innovative types of media consumption. As the "cash cow," this segment expected to keep delivering a large portion of revenues.

35% represent a faster growing segment that is more tech savvy and younger. It consists of two types of users: 

• 15% dubbed Gadgetiers: early adopters of the latest multimedia devices
• 20% are Kool Kids: those under age 24

Both types want the latest gadgets, devices and content services, and are willing to pay for services they deem valuable. They are adopting and using new digital content services at a high pace, taking control of media formats.

• Kool Kids are "cash poor" and "time rich"  
• Gadgetiers are relatively "cash rich" and "time poor"
• Kool Kids are more likely to accept ad-funded models (free content in exchange for viewing advertising)

Digital Content Interaction With Online Video.
	Kool Kids	Gadgetiers	Massive Passives
Passive Experiencer (Percent who have watched online video)	84%	89%	68%
Engaged (Percent who regularly watch online video)	45%	40%	25%
Influencers (Percent who have rated video content online)	31%	36%	13%
Authors (Percent who have uploaded videos)	25%	25%	7%
Source: 2008 IBM Digital Consumer Survey, March 2009 (Total responses = 2800 across six countries: Australia, Germany, India, Japan, UK, U.S.)

Advertisers are shifting investments into more interactive, measurable formats, such as the Internet and mobile, branded entertainment (product placement, event marketing, word of mouth) and custom publishing, says the report, which are expected to gain a 20 point share of overall spend. This shift will be at the expense of traditional marketing, such as direct marketing and promotions, and traditional advertising formats such as TV, print and radio.

U.S. Advertising And Marketing Share(2002 - 2012E)
Ad or Marketing Type	2002	2007	2012e	Share Change
Alternative, interactive channels (e.g., online advertising, branded entertainment, word of mouth marketing)	7%	13%	27%	+20
Traditional marketing (e.g., direct marketing, promotions)	46	46	42	-4
Traditional advertising (e.g., TV, print, radio, outdoor)	47	41	32	-15
Source: Veronis Suhler 2008 Communications Forecast; IBM analysis, March 2009

The report offers these "implications," concluding that:

• Mass marketing alone is no longer feasible. Reaching these diverse segments requires niche offerings and context via approaches that are tailored for new platforms, new offerings and, new experiences
• A strategy of permission based marketing, tailored by geographic market and segment, can help avoid privacy concerns while providing valuable information about consumers.
• M&E companies can reach consumers through convergence across devices, but only by addressing barriers related to cross-platform audience tracking and comparability
• Not only do advertisers expect truly innovative, breakthrough campaign alternatives, they also require the ability to analyze campaign results to prove the value of spending
• Participants that previously focused on delivering either ROI-driven marketing or brand-oriented advertising to the market can now cater to both sets of objectives 

To learn more about this IBM Institute for Business Value study, view charts and graphs, and to study a model for improving granularity and cross-platform integration, please download the PDF formatted report from this link.