Disruptive Media: Mobile Phones, Ad Spend Declines

mobile phonesThe pullback of ad spending and mobile phones becoming personal computers are the most "disruptive" force in media today, according to a new survey of media and advertising professionals by consulting giant KPMG.

Of the 200 executives polled by KPMG in connection with the AlwaysOn OnMedia NYC conference this week, nearly half cited the ad downturn as the industry's major trend, while 40% noted the growing use of cell phones for more than just talking. A close third was the thinning of "old media" through bankruptcies and closures (38%).

Survey participants were asked to choose from among six trends that also included Internet penetration opening up global markets (25%), the failure of social networks to monetize as expected (18%), and smartphones' potential for location-targeted content, advertising and marketing (17%).



The economic downturn also appears to have cooled enthusiasm for shifting ad dollars into digital media. While three-quarters expect more than a quarter of ad budgets will be moving away from traditional outlets in the next five years, that 75% is down from 90% a year ago.

KPMG partner Brian Hughes, who co-leads the firm's venture capital practice, said the results reflect executives' short- and long-term views. Media and advertising executives are dealing with the impact of the recession. At the same time, "everyone is beginning to realize the power of handheld phones to become portable PCs in the future," said Hughes. "So I think views are tempered by the economic climate, but not by the opportunity."

He also noted that 87% of those surveyed say media companies will shift more content to mobile devices in the next two years. Most say companies so far have adapted less than a quarter of their content for mobile.

Location-based advertising is seen as holding the most promise for mobile compared to other media categories including games, shopping, music, video and user-generated content, and mobile TV.

The launch of Apple's App Store last year created a vibrant market for mobile applications, with more than 500 million downloaded to date. Monetization of mobile apps is expected to come mainly from advertising, as well as by charging fees and third-party sponsorships (such as mixing a new music album with a game).

When it comes to social media, marketing executives suggested that agencies were doing a slightly better job of helping clients get a handle on social network advertising. Forty-two percent say ad agencies lacked a plan to leverage social working for clients, down from 48% last year. But that still leaves a lot of room for improvement. The vast majority (72%) say social networking will be used for creating a new brand image.

Despite the emergence of newer options, search is still considered to be easily the most effective form of online advertising. Nearly half of those surveyed identified search as the most efficient format, followed by interactive (21%), online partnerships (11%), email advertising (6%) and banner advertising (5%). "Other" accounted for 10%.

The outlook on CPM rates is split, with about as many executives expecting prices to rise as to fall in the next two years.

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