• by Diane Mermigas , February 27, 2008

The most notable change in this year's upfront will be widespread resignation that the status quo cannot survive next year's mandated digital conversion.

When more homes have the means to make their television experience interactive, there will be no stopping the transformation of the staid 30-second commercial into engaged exchanges and transactions. Dramatic changes in pricing, creativity and marketing expectations will make the spot market passé.

The adoption of new media formats for advertising (morphing into something more like synched marketing and e-commerce) will evolve quickly, given the record time in which consumers have come to embrace iPods, iPhones and other connected devices. Consumers are willing and ready--even if Madison Avenue is not.

For the last time in an analog television's upfront season, everyone on the advertising and network sides is resigned to imminent change. If the free-fall of broadcast TV ratings and the blows of a recessionary economy weren't enough, the writers' strike put a fine point on old media's inevitable demise. At the same time, slowing growth trends, increased click fraud and rampant consolidation are hammering the new media market. All media continues to be disadvantaged by the absence of accountable real-time universal measurement to fully monetize connections. That, too, will become a function of the entire media universe going digital.

In the interim, the broadcast and cable networks' upfront advertising ritual may prove more troublesome than Hollywood and Madison Avenue expect. The Big 4 broadcast networks will attempt to elicit their $9 billion in upfront ad commitments on shaky metrics amid formidable shifts away from their static core business. Declining ratings and recession fatigue already are obvious at CBS--which reported lower-than-expected 2008 guidance as well as operating income in the fourth quarter when it should have benefited from a tight, pricey scatter market and lower strike-related program costs. Conversely, News Corp. insists it sees no weakness ahead for its Fox broadcast and cable networks.

Even Google is showing its vulnerability to a soft economy and fluctuating ad metrics. The king of search advertising is in the middle of a measurement faux pas that regularly plagues Nielsen Media. Google's stock fell another 7% Tuesday (down more than 40% from its highs) on the difference between reported domestic revenue growth performance of Web sites, and comScore's estimated declines in U.S. Web site paid click growth.

Merrill Lynch analyst Justin Post concludes that the "data adds risk to Google's 2008 growth outlook highlighting that a decline in consumer spending could be causing reduced commercial search activity." The leveling off of the Net's meteoric growth is elsewhere, such as domestic visitors for Facebook and MySpace. Although online advertising revenues topped $21 billion in 2007, and now outdistance radio, its growth rate will continue to slow below 25% as it siphons more from other media.

Even as the rebalance of ad dollars continues, the process of pricing, evaluation and measurement effectiveness requires refinement that can only come from an underlying digital infrastructure that connects all media platforms and devices. Even as that gradually falls into place, Yahoo promises to "revolutionize" advertising with its new Apex platform, allowing marketers to build and track unified campaigns across search, display, mobile, television and other formats. Such cross-platform integration will depend upon widespread structural change that will bring pervasive interactivity to the entire media spectrum.

Microsoft says it will test engagement mapping that takes into account all Internet interactions that result in consumer transactions and feedback to advertisers. It's a step toward achieving more integrated return on specific niche or consumer investment measurement. With an eye toward online becoming the dominant medium by 2013, Yahoo CEO Jerry Yang and Microsoft SVP Brian McAndrews told an annual meeting of IAB this week about their plans to improve the mechanics of interactive advertising. Others--like Nielsen Media, TRA and Google--have similar initiatives.

They all are on the right track, according to Group M ad scion Irwin Gotlieb, a media buyer who controls $59 billion in advertising, or 16% of the global spend. Gotlieb said he sees himself becoming an arbiter of bulk ads to match and resell to niche interactive audiences at a premium. He favors the creation of an electronic data-based exchange of ad measurement and placement for all media, but opposes Google's involvement in the process.

For now, television's upfront and spot advertising markets will hobble along on deficient metrics, fighting to keep any of its billions from being siphoned by alternative media. But when the underlying mechanics allow for every consumer click and movement to be measured everywhere along media's interactive landscape, the game changes. When that happens beginning next year, media buying, audience estimates, unit pricing, upfront buys and economic sensitivity will fall away. Mass advertising as we know it will give way to more disciplined, effective matching of particulars--individual consumers, products, services, and content--in a viral interactive loop that flows from the pitch to the transaction and feedback in one swoop.

That's when advertising really gets exciting.