The end of advertising

IBM Global Business Services, through the IBM Institute for Business Value,
develops fact-based strategic insights for senior executives around critical public
and private sector issues. This executive brief is based on an in-depth study by
the Institute’s research team. It is part of an ongoing commitment by IBM Global
Business Services to provide analysis and viewpoints that help companies realize
business value. You may contact the authors or send an e-mail to iibv@us.ibm.com
for more information.
The next 5 years will hold more change for the advertising industry than
the previous 50 did. Increasingly empowered consumers, more self-reliant
advertisers and ever-evolving technologies are redefining how advertising
is sold, created, consumed and tracked. Our research points to four
evolving future scenarios – and the catalysts that will be driving them.
Traditional advertising players – broadcasters, distributors and advertising
agencies – may get squeezed unless they can successfully implement
consumer, business model and business design innovation.
The end of advertising as we know it
By Saul J. Berman, Bill Battino, Louisa Shipnuck and Andreas Neus
The end of advertising as we know it
A glimpse into the future of advertising
Jim, the Chief Marketing Officer of a consumer products company, used to spend 60 percent of his marketing
dollars on broadcast, free-to-air television – a significant portion of which was spent in upfronts. But he never
knew exactly who he was reaching or how effective his advertising was.
Now, he has a very different approach…. and is more comfortable with the effectiveness of his marketing. Jim
assesses all media channels (television, radio, mobile devices, print, interactive portals and the like) neutrally
to determine how best to allocate his marketing and advertising dollars. Recognizing that consumers have
increasing control and choice over how they interact with, filter and block marketing messages, it is more
important than ever for Jim to know his advertising is reaching individual consumers, not generic zip codes at
the household level.
With the help of Cathy, the company’s Chief Consumer Officer, he has gained a full understanding of who
his target consumers are, where his consumers are going, and how to reach them on their terms across the
plethora of media devices they interact with on a regular basis. As consumers move to 360-degree content and
information experiences, marketing also personalizes its content to consumers’ lifestyle, context and location.
Previously, Jim bought broad-reaching spots, hoping to reach his target audience. But now, targeting, measurement
and analysis capabilities that previously were only available for Web advertising are available for all
channels. Jim can develop an interactive, integrated marketing plan tailored to his individual target consumer,
IBM Global Business Services
and he pays based on actual impact rather than by cost per thousand impressions (CPM). His marketing
message follows those customers across content platforms to deliver a consistent experience.
His advertising includes a mix of creative spots and formats, like special interest content, product placement and
self-published advertising that are tailored to his consumers’ preferences, community affiliations and devices.
This enables his target consumers – be they traditional moms in Des Moines, Iowa, urban professionals in
Berlin or university students in South Korea – to better experience the value of his product. Jim created his
advertising campaigns jointly with broadcasters, semi-professionals and avid product fans (or “influencers”),
who develop creative at a significantly lower cost than his traditional agency. Though Jim creates multiple
versions of his advertising campaigns in order to appeal to numerous customer micro-segments, his budget
has not increased because of the decreased cost of developing creative campaigns. His ROI is also improved,
because the advertising is more effective.
Because much of the budget is based on impact, he works closely with the Sales team, and a portion of the
direct marketing budget has moved to advertising channels. He is now able to measure the effectiveness of his
marketing campaigns through the use of marketing software packages that have centralized and standardized
disparate data sources.
Jim’s team can purchase much of its advertising space through an open, Web-based platform and manage its
impact through a “dashboard” that delivers realtime metrics and analysis across all advertising platforms. Gone
are the days of “hoping” advertising works. Jim is now in a world where he has full control of the effectiveness
of his marketing spend.
IBM Global Business Services
Introduction
“We will see ‘neutral’ evaluation of all
media formats. There is no primary
role for linear TV any more.”
– Managing Director, advertiser, Europe
The trends toward creative populism, personalized
measurements, interactivity, open
inventory platforms and greater consumer
control will generate more change over the
next 5 years than the advertising industry has
experienced in the last 50. This means that
many of the skills and capabilities that were
the mainstay of success in the past will need
refinement, transformation or even outright
replacement.
Based on an IBM global survey of more than
2,400 consumers1 and feedback from 80
advertising executives worldwide collected in
conjunction with Bonn University’s Center for
Evaluation and Methods,2 we see four change
drivers shifting control within the industry:
Attention – Consumers are increasingly
exercising control of how they view, interact
with and filter advertising in a multichannel
world, as they continue to shift their attention
away from linear TV and adopt ad-skipping,
ad-sharing and ad-rating tools.3 Our survey
suggests personal PC time now rivals TV
time, with 71 percent of respondents using
the Internet more than two hours per day for
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personal use, versus just 48 percent spending
equivalent time watching TV. Among the
heaviest users, 19 percent spend six hours or
more a day on the PC versus just 9 percent
who watch a similar amount of TV.
Creativity – Thanks to technology, the rising
popularity of user-generated and peerdelivered
content, and new ad revenue-sharing
models, amateurs and semi-professionals are
now creating lower-cost advertising content
that is arguably as appealing to consumers
as versions created by agencies. Our survey
suggests this trend will continue – usergenerated
content (UGC) sites were the top
destination for viewing online video content,
attracting 39 percent of respondents. Further,
established players, like magazine publishers
and broadcasters, are partnering with advertisers
to develop strategic marketing campaigns
– taking on traditional agency functions and
broadening creative roles.
Measurement – Advertisers are demanding
more individual-specific and involvementbased
measurements, putting pressure on the
traditional mass-market model. Two-thirds of
the advertising executives IBM polled expect
20 percent of advertising revenue to shift from
impression-based to impact-based formats
within three years.
Advertising inventories – New entrants are
making ad space that once was proprietary
available through open, efficient exchanges.
As a result, more than half of the ad executives
interviewed expect that open platforms
will, within the next five years, take 30 percent
of the revenue currently flowing to proprietary
incumbents such as broadcasters.
To envision four possible scenarios for
the industry in 2012, we juxtaposed two of
the most uncertain change drivers – the
propensity for consumers to watch, block or
participate in marketing campaigns; and the
openness of advertising inventories. Because
players across geographies and media
formats will progress at differing rates, these
scenarios will likely coexist for the foreseeable
future. The four scenarios are:
Continued Evolution: In this scenario, the
one-to-many model still dominates, but the
industry evolves in response to digital video
recorder (DVR) penetration, the popularity of
user-generated and peer-distributed content,
and new measurement capabilities (albeit for
“old” formats). Advertisers, therefore, allocate a
greater portion of dollars traditionally spent on
direct marketing to channels typically used for
brand-oriented advertising.
Open Exchange: Here, the industry morphs
behind the scenes, with little to no additional
consumer influence. Advertising formats
largely remain the same, but advertising
inventory is increasingly bought and sold
through efficient open exchanges, bypassing
traditional intermediaries.
Consumer Choice: Tired of intrusions,
consumers exert more control over the advertising
they view and filter. Formats evolve to
contextual, interactive, permission-based and
targeted messaging to retain attention.
Ad Marketplace: Consumers choose preferred
ad types as part of self-programming their
media choices and are more involved in ad
development and distribution. Advertising is
sold predominantly through open, dynamic
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exchanges, allowing virtually any advertiser
(large or small) to reach any consumer. With
new consumer monitoring technologies in
place, consumer action drives pricing.
As the advertising value chain reconfigures,
broadcasters, advertising agencies and media
distributors in particular will need to make
a number of “no regret” moves (necessary
actions regardless of which scenario plays out
in the future) to innovate in three key areas:
1. Consumer innovation: Drive greater
creativity in traditional ads, while also pursuing
new ad formats across media devices to
attract and retain customers. For example,
consider tactics like campaign bleeds, microversioning,
video ad flickers, pod management
and ad-supported content creation
(embedded in the programming) to limit adskipping.
4 This also means making segmentation,
micro-segmentation and personalization
paramount in marketing. Anyone that touches
buyers and consumers needs to collect and
analyze data to produce relevant and predictive
insights.
2. Business model innovation: Pioneer
changes in how advertising is sold, the
structure and forms of partnerships, revenue
models, advertising formats and reporting
metrics. For example, broadcasters, agencies
and distributors can pursue opportunities
such as agency gain sharing, more sponsored
shows, impact-based pricing models, usergenerated
advertising revenue-sharing models
and open inventory, cross-channel sales.
3. Business design and infrastructure innovation:
Support consumer and business model
innovation through redesigned organizational
and operating capabilities across the advertising
lifecycle – consumer analytics, channel
planning, buying/selling, creation, delivery and
impact reporting.
We know advertising remains integral to pop
culture and media investment. But it also will
need to morph into new formats and new
channels and offer more intrinsic value to
consumers to capture a meaningful share of
fragmented audience attention.
There is no question that the future of advertising
will look radically different from its past.
The push for control of attention, creativity,
measurements and inventory will reshape the
advertising value chain and shift the balance
of power. For both incumbent and new players,
it is imperative to plan for multiple consumer
futures, craft agile strategies and build new
capabilities before advertising as we know it
disappears.
Key questions to consider
• Will advertisers still need a traditional agency? If
so, in what capacity?
• Will traditional programmers lose significant
revenue to the Internet, mobile device providers
and interactive home portals?
• Will consumers reject outright the concept of
interruption marketing in the future?
• Will consumer receptivity vary by medium (for
example, mobile devices versus home-oriented
devices)?
• Will consumers see value in advertising as a
trade-off for content?
• To what extent will advertising inventory be sold
through open platforms?
• Do advertising industry players have the
customer analytics needed to better understand
and reach target customers?
• Are companies organized correctly to create,
market and distribute cross-platform content?
The end of advertising as we know it
Industry battles and trends:
Power shifts
As advertising budgets shift to new formats
and shape the future advertising market,
control of marketing revenues and power will
hinge on four key market drivers: attention,
creativity, measures and advertising inventories.
This section will explore these changes
and their economic impacts through 2012.
We expect overall ad spend to grow in line
with the general health of the economy, but
the composition of that spending will change.
We have used an amalgamation of industry
forecasts for our consensus view in Figure
1. While this spending breakdown is helpful
for highlighting the direction of change, the
speed and magnitude of this kind of disruptive
change tends to be underestimated by
traditional forecasting methods. For example,
FIGURE 1.
Global advertising spend by category.
Source: IBM Institute for Business Value analysis based on an amalgamation of industry forecasts.
450
400
350
300
250
200
150
100
50
0
Mobile advertising
Global Internet
Interactive TV promotions
In-game advertising
U.S. product placement
Global cable/multichannel
Global broadcast
U.S. MSO advertising
Global radio and outdoor
Global magazine
Global newspaper
U.S. local station
41
20
19
19
20
5
5
5
5
4
2
2
CAGR
(2006-2010)
2002    2 003 2 004    2 005    2 006 2 007F 2 008F 2 009F 2 010F
New ad
formats
22.4%
Traditional
ad formats
4.4%
US$ billions
5.7% 5.9%
our analysis shows that the actual growth of
Internet advertising has outpaced forecasts by
25 to 40 percent over the past two years.5
But even in Figure 1’s forecasts – which may
be too conservative – digital, mobile and
interactive formats are clearly the key to
overall industry growth going forward. Mature
channels like print, traditional direct marketing
and TV have 2010 CAGR forecasts of low
single digits, while the combined growth
forecast for interactive advertising formats,
such as Internet, interactive television promotions,
mobile and in-game advertising, is over
20 percent.6
Product placement is the only “traditional”
marketing tool with comparable growth
expectations – spurred by advertisers’ desire
to drive relevancy and reach for their advertising
as consumer control over interruption
advertising continues.
The end of advertising as we know it
Interactive advertising
formats are key to
overall industry growth.
IBM Global Business Services
While control of attention, creativity, measurements
and advertising inventories impacts all
forms of advertising and content funding, we
are focusing here on TV/video as an illustration
of significant change.
Attention
“Consumers will continue to gain
more power over content, but they
will not ‘skip’ all forms of advertising.
Fewer will pay for all the
content they want to consume;
there will be new models to
trade attention to advertising for
content.”
– Account Executive, full-service media agency,
North America
As we predicted in our 2002 “Vying for
Attention” paper, audiences continue to
fragment.7 While this is not a new phenomenon,
we are reaching a critical juncture where
new platforms may soon have more impact
than TV. Today, consumers have more options
for visual entertainment than ever before – TV,
PC, game consoles, mobile devices and more.
Studies from several countries have shown
that, especially for young users, TV is increasingly
becoming a secondary “background
medium.”8 The primary focus of attention is
elsewhere – surfing the Internet, chatting or
playing an online game. Our consumer survey
showed that more respondents spend significant
blocks of time on daily personal Internet
usage than watching TV, especially among the
heaviest users. This behavior is particularly
prominent for younger audiences (ages 18 to
24) and “gadgetiers” (early adopter consumers
who own at least four multimedia devices).
Our survey also illustrates the ongoing fragmentation
of consumer attention and the wide
variations in adoption by age groups across
content services (see Figure 2). The only
content service with mass adoption (greater
FIGURE 2.
U.S. content subscription services adoption by age group.
TV: Premium video content
Online: Social networking sites
Online: User-generated content sites
Online: Music service (e.g., Rhapsody)
Online: Newspaper subscription
Online: e-Book subscription
Portable: Music service (e.g., iTunes)
Mobile: Internet plan
Mobile: Content plan
Source: IBM 2007 Digital Consumer Study.
18-24 25-34 35-44 45-54 55+
Mass adoption (greater than or equal to 50%)
Significant adoption (40-49%)
Strong adoption (30-39%)
Moderate adoption (20-29%)
Partial adoption (10-19%)
Niche adoption (less than 10%)
Highest adoption
across age groups
The end of advertising as we know it
than 50 percent) was Social Networking, and
this was only among respondents under the
age of 35. Younger audiences are far more
willing to experiment with new content sources,
though less willing to pay, particularly for online
services. Older audiences had higher adoption
of more traditional services, such as premium
content for television and online newspaper
subscriptions.
As users migrate to new screens for content
and information, advertising and marketing will
need to shift as well. It is more important than
ever to reach consumers where they want,
when they want and how they want. And with
advertising dollars funding a significant portion
of entertainment around the world (sponsoring
an estimated 50 percent of television in major
markets, for example), the medium, content
and advertising spending must synch up.9
We are also witnessing the possible substitution
of other visual media for TV viewing time.
Though mobile video consumption is currently
lower than PC video consumption among
our respondents, 42 percent said they have
already watched or want to watch video on a
mobile device. In the United Kingdom, nearly
one-third of those who watch mobile TV had
consequently reduced their standard TV
viewing patterns.
In addition to preferring hot new devices and
screens for entertainment, users are also
enjoying and exploiting new control tools.
With spam-blockers, “do-not-call” and “do not
mail” lists in the United States, the DVR and
peer distribution tools, marketers are being
forced to rethink how to prevent buyers from
tuning out.
For example, 25 percent of our U.S. consumer
respondents and 20 percent of our U.K.
respondents already have a DVR. Given high
customer satisfaction rates, forecasters project
DVR penetration to reach close to 40 percent
in the United States within the next five years,
which poses a significant threat to the traditional
TV advertising model.10
In our consumer survey, 53 percent of DVR
owners in the United States report watching
at least 50 percent of television content on
replay, supplying them with the fast-forward
capabilities that allow ad-skipping. As DVRs
gain traction across demographic groups
and consumer segments, traditional television
advertising may be the first major
casualty of changing media consumption
habits. And though new commercial rating
tools can now track viewership via DVR,
industry debate continues about the true
value of an ad if it is viewed after the initial,
targeted broadcast period.
Multimedia devices are also proliferating,
though adoption behaviors vary by country.
For example, respondents from Germany
appear to prefer portable devices and are far
more likely to have MP3 players and Internetenabled
phones than any other country.
Almost 70 percent of German respondents
own an MP3 player, and almost 40 percent
have an Internet-enabled phone, compared
to global averages of 50 percent and 20
percent, respectively. In Japan, portable game
player adoption is widespread, with almost
40 percent of respondents owning one,
versus between 15 and 23 percent in other
countries. U.S. respondents report higher
adoption of living-room-related devices, such
as DVRs, high-definition television sets, and
game consoles, but have lower adoption rates
for portable devices, such as MP3 players,
Internet-enabled phones and portable game
players, than other countries. Finally, video on
demand (VOD) habits vary, with close to 50
percent of U.K. and U.S. respondents having
already watched VOD, as compared to less
than 5 percent of Germany and Japan respondents
who have done so.
Advertising spend will
eventually synchronize
with shifts in consumer
attention from television to
other media formats.
IBM Global Business Services
What do these trends mean for the industry’s
bottom line? Nearly half of the respondents
in our advertising executive interviews
expect a significant (i.e., greater than 10
percent) revenue shift away from the 30-
second spot within the next five years, and
almost 10 percent of respondents thought
there would be a dramatic (i.e., greater than
25 percent) shift.
As consumers turn away from traditional television
and toward new content sources, such as
popular online sites (like YouTube, MySpace
and Facebook), games, mobile and other
emerging entertainment platforms, the shift in
attention will eventually be reflected in advertising,
subscription and transactional fees. This
puts at risk the revenue base of incumbent,
traditional content distributors and aggregators
– especially for those that do not produce
content or own rights to distribute content on
these newer channels.
As shown in Figure 3, growth in Internet advertising
far exceeds that of traditional channels
like television. And while no evidence suggests
a one-to-one correlation of advertising revenue
with this audience migration to new channels,
we believe that the current large discrepancy
between advertising revenues and eyeballs
will shrink significantly over the next five years.
The majority of the advertising executives we
interviewed expect significant dollar shifts
from traditional advertising vehicles to search,
mobile, Internet Protocol Television (IPTV), VOD
and online video ads. Advertising industry
incumbents could lose out entirely if they do
not keep up with advertisers who are following
their audiences into new channels.
Creativity
“Consumer-created advertising will
have all the appeal of anything
crafted by the agencies, and will be
‘coopted’ by the brands themselves.”
– CEO, advertiser, Asia Pacific
In addition to new tools for control of what
consumers choose to view, lower cost tools
are also available that allow new creative input
from consumers, semi-professionals, amateurs
and nontraditional players. Inexpensive videoand
photo-editing tools create opportunities
for hobby tribes and individual users to selfproduce
entertainment and advertising – a
form of creative populism. At the same time,
content owners are increasingly partnering
directly with advertisers to develop innovative
and strategic marketing campaigns that go
beyond the traditional advertising formats.
Our consumer survey shows users – particularly
those in the United States and the
United Kingdom – are increasingly willing to
participate in social networking sites, with 26
percent of U.S. respondents and 20 percent of
U.K. respondents having already contributed
content. And though not quite as popular yet,
users are starting to create video content for
UGC sites, with 9 percent of German and 7
FIGURE 3.
Index of U.S. ad-spend growth: All television
versus consumer Internet.
700
600
500
400
300
200
100
0
Source: IBM Institute for Business Value analysis based on an
amalgamation of industry forecasts.
99 00 01    02    03 04    05    06 07F 08F 09F 100-point index
Consumer Internet ad spend
TV ad spend
The end of advertising as we know it
percent of U.S. respondents reporting they
have contributed to those sites (see Figure 4).
We also see evidence of consumers
becoming trusted influencers. When asked
about how they find content on UGC sites
like YouTube, 32 percent said they followed
recommendations from friends. We expect
the power of communities to grow as tools for
community-based recommendations improve.
The “voice” delivering a message, along with
its perceived authenticity, will become as
powerful perhaps as the message or offer.
There are also other creative forces at play. In
addition to users, other members of the value
chain – such as content owners and broadcasters
– are increasingly working directly with
advertisers to drive nontraditional campaigns,
bypassing the agency’s intermediary role
as the cost of production declines and tools
become generally accessible. For example,
creating a professional video ad typically costs
around US$100,000 to US$350,000 or more,
which is prohibitive for most small businesses.
However, cheaper tools and community-based
or semi-professional content creation can
lower production costs to reasonable levels,
making them affordable for small and mediumsized
businesses that cater to niche markets.
Current TV, for example, pays US$1,000 for
viewer-created advertisements (V-CAMs) that
it chooses to air.11
Further, content owners are broadening their
creative roles, taking on responsibilities that
previously belonged to agencies. There are
already many examples of broadcast and
publishing content owners that are displacing
traditional ad agencies in creative and
campaign planning. Companies like Conde
Nast’s Media Group have creative units that
work directly with advertisers to produce and
distribute custom advertising programs often
at lower prices than agencies by charging cost
for creative services and making their money
on the media.12 Conde Nast trades on its ability
to blend images, characters and stories from
content into relevant, marketing campaigns,
relying on a panel of more than 100,000
consumers to evaluate the advertising.13
UGC impacts the industry through two primary
avenues: content production and attention
influence. We’ve already discussed the rise
of semi-professionals, user enthusiasts and
amateurs producing content. Now, let’s link
back to issues of attention, a circular topic of
sorts. As new types of content are created,
audience fragmentation increases. The advertising
executives we interviewed expect a
significant portion of content consumed on
different devices to be user-generated within
five years – nearly 15 percent of TV time and
about 25 percent of PC time. This means that
there is an opening for new aggregators and
distributors – the likes of YouTube, Grouper or
Current TV – to capture a share of revenue
that would have previously gone to traditional
programmers or channels.
FIGURE 4.
Percentage of global respondents who visit and/
or contribute to social networking or UGC sites.
Source: IBM 2007 Digital Consumer Study.
50
45
40
35
30
25
20
15
10
5
0
Social networking
Percent
UGC site
United States
Australia
Germany
Japan
United Kingdom
Contribute
Within five years,
advertising executives
expect 15 percent of
television viewing time
and 25 percent of PC
time to be devoted to
user-generated content.
10 IBM Global Business Services
The majority of the respondents in our panel of
advertising industry executives also indicated
that UGC is not “hype” and is here to stay. They
also felt that inexpensive video production
tools will increase competition among professionals,
amateurs and semi-professionals.
As a result, content owners, distributors,
advertisers and agencies are all becoming
more creative about how to reach the target
consumer. For example, broadcasters are
making use of content bleeds in advertising
pods – where characters become a part of the
commercial message. On the flip side, product
placement continues to become more popular
as a way to integrate the marketing message
directly into the program itself. There are also
an ever-increasing number of new ad formats
to capture the consumer’s attention, both on
the TV screen and on the Web. Formats like
short-form video, flickers, bugs, banners and
pop-ups continue to evolve. Finally, players
are doing a better job of matching the ad
content with the programming content to drive
relevancy. The recent results of an ongoing
study by TiVo Inc. concluded that relevancy
outweighs creativity in TV commercials.14
The ads least likely to be skipped were welltailored
to their audience – they were often
those ads that aired during the daytime on
cable (where shows have smaller, niche
audiences and it’s easier to determine viewers’
interests) or during prime time on directly
relevant programs.15
With a wider group of content creators contributing
to the mix, pieces of the creative value
chain may commoditize or experience price
pressure (similar to how independent films
have lowered the cost of one echelon of
filmmaking). The advertising value chain will
therefore need to proactively integrate the
more creative parts of its team, or others will
do so from outside.
Measures
“It is becoming increasingly easy to
measure actual viewership, engagement
and response. Having that
accurate information will greatly
alter the way advertising is produced
and disseminated and how
it is ultimately paid for.”
– Account Executive, full-service media agency,
North America
Evolving technologies, coupled with advertisers’
demands for improved targeting, accountability
and ROI, are driving changes in measurement
and associated advertising business models.
As consumer attention continues to fragment,
measurements will only remain relevant if advertisers
track finer segments and perhaps even
individual viewers.
We therefore predict individual- and microtargeting
becoming prevalent across all media
formats. In addition to requiring new partnerships
and investment, this kind of advertising
will also necessitate a major increase in the
number of creative spots and campaigns
to reach targets with niche or specialized
messages. More spots will likely mean lower
average price points on creative. Companies
like QMeCom are allowing for customization
with automation, so that hundreds of creative
outputs take the place of the mere one, two or
five variations common in days past.16
Hardware (i.e., set-top-box-based, headend-
based, portable device) and software
technology advances are enabling improved
targeting and response tracking capabilities
across media formats. Companies like TiVo
and Nielsen are beginning to supply realtime,
non-sampled measurements of ad-skipping,
11 The end of advertising as we know it
purchasing influence and the like.17 Other
companies are moving toward providing
targeted delivery capabilities across media
platforms, based on a combination of user
behavior and opt-in data.
Furthermore, a new breed of Chief Marketing
Officer (CMO), conversant with Internet
metrics, is seeking more focused targeting
and accountability (ROI) for marketing
budgets across channels. As the first generation
of professionals who have grown up with
the Internet rises to positions of responsibility
among advertisers, we are likely to see more
experimentation and a greater readiness to
adopt new platforms – especially if they can
demonstrate effectiveness.
Two-thirds of our global advertising industry
executive panel expects 20 percent of
advertising revenue to shift from impressionbased
to impact-based formats within three
years (see Figure 5). Targeting, measurement
and accountability capabilities will have to
evolve to reflect new advertiser goals and
demands. This shift will be particularly critical
for traditional TV, as it is increasingly delivered
digitally. New types of advertising, such as
pod management, skip-resistant creative
campaigns, greater creativity immersed
within ads (to entice people not to skip),
more dynamic product placements and more,
should produce greater impact.
Finally, while much of the current industry
discussion is related to new measures for
arguably “old,” one-to-many advertising
formats, the era of truly interactive, experiencebased
advertising is coming. For example,
in virtual 3D worlds, audiences can use and
interact with a brand, rather than just be
“exposed” to it. And these new advertising
experiences are marching forward largely
without leadership from established broadcasters,
agencies and advertisers.
These trends imply the boundaries between
“local” and “national” advertising will blur.
Media companies historically strong in local
advertising (e.g., cable, newspapers) will have
to improve their interactive capabilities, while
national advertisers (e.g., Broadcast TV) and
interactive players will have to improve upon
their local targeting capabilities (meaning,
know where the consumer is).
Advertising inventories
“The U.S. television advertising
upfronts are not likely to exist more
than another few years.”
– Executive, major online media aggregator,
North America
Today, most inventory systems, such as the
television upfronts in the United States, involve
relatively few buyers and sellers, most of
which are very large companies. For example,
GroupM, of the London-based WPP Group,
FIGURE 5.
Time horizon for shift from impression-based to
impact-based advertising.
Source: IBM 2007 advertising industry executive interviews and
panel discussions.
48% 3 years
33% 5 years
13% Shift already started
7% Never
5% 1 year
Two-thirds of the industry
executives we interviewed
expect 20 percent of
advertising revenue to shift
from impression-based
to impact-based formats
within three years.
12 IBM Global Business Services
sealed the first major deal of the 2007 upfront
season with a multiplatform, US$1 billion
agreement with NBC Universal.18
New platform players are offering advertisers
the ability to purchase ads via aggregated
networks. These capabilities provide key
benefits such as: improved inventory management,
improved pricing transparency, streamlined
buying/selling processes, and improved
analysis and reporting capabilities. These new
entrants/platforms are positioned to capture
an important part of the future advertising
and marketing value chain. Going forward, we
anticipate that inventory management systems
will become more open and transparent and
will involve a larger number of smaller buyers
and sellers.
The majority of our advertising industry executives
agreed with this directional trend. In fact,
they predict a significant shift in control of
advertising revenues, with more dollars flowing
from private to open markets over the next five
years. The panel also expects 30 percent of
advertising revenues to shift from traditional
proprietary sales models to placement/auction
platforms within the next five years. However,
changes to back-end platforms, along with the
increased willingness of suppliers to sell both
remnant and premium inventory through these
open systems, will be required in order for this
revenue shuffle to occur.
The reason for this trend? As revenues shift
in response to consumer fragmentation, it
will no longer be efficient to have dedicated
platforms for each channel. Market forces will
move the industry to open, dynamic platforms
capable of following a customer by serving
messaging across multiple channels. This is
a natural progression caused by the shift of
advertising dollars across channels, which, in
turn, is driven by advertisers seeking to follow
their customers’ interests as content is increasingly
divorced from devices.
Internet players have shown themselves to be
more adept at extending their predominantly
online platforms into other channels. Google,
for example, is leveraging its tracking capabilities
and matching algorithms for both new
and traditional channels, such as radio, TV and
print through its acquisition of dMarc, partnerships
with EchoStar and Astound Cable, and
the launch of Google Print Ads.19 This is a shift
in focus to adjacent growth opportunities from
Google’s initial focus on paid search.
Investments in the traditional advertising
space by new entrants may pose a threat to
current value-chain incumbents. As fragmentation
becomes a permanent fixture within
media and entertainment, advertisers will be
forced to move to more efficient and dynamic
platforms capable of managing inventory,
planning, delivering, tracking and measuring
effectiveness of advertising across multiple
channels and in realtime.
Future scenarios: Scenarios of
disruption
To assess the degree and depth of change
expected, we used a process called scenario
envisioning. In this process, the most disruptive
and uncertain variables are combined
to create and articulate a variety of extreme
outcomes for the year 2012.
Our scenarios are based on the following two
variables, which we believe will be the most
disruptive over the next five years:
• Marketing control: The propensity of the
consumer to control, interact with, filter and
block marketing messages
• Advertising inventory system control: The
degree of movement from controlled,
impression-based ad inventory systems to
open auction or exchange platforms for
advertising spots.
According to our
industry executive
panel, 30 percent of
advertising revenues
will shift from
traditional incumbents
to automated
placement/auction
platforms within the
next five years.
13 The end of advertising as we know it
In Figure 6, the x-axis illustrates how the
control of media consumption is shifting from
providers to consumers. As we move to the
right along the x-axis, consumers wrestle more
and more control over their media experiences
from providers.
The y-axis illustrates the change from closed
inventory to open auctions. As we move up
the y-axis, more television, print and interactive
advertising deals become accessible to
smaller, independent buyers and sellers.
Based on these two variables, four scenarios
emerge:
Continued Evolution is arguably the least
disruptive scenario, though it still involves rapid
change from today’s one-to-many advertising
model. Control, in large part, remains with
content owners and distributors, but growing
consumer demand for control forces some
progressive adjustments. The industry cannot
ignore the implications of the current DVR
penetration level and the associated adskipping
behavior it enables, the explosive
growth in popularity of UGC and related
advertising opportunities, or the measurement
capabilities now available to track ad viewership.
These factors imply a bifurcated market
– one in which a portion of consumers can still
be addressed through traditional advertising
models, while others must be attracted through
interactive and innovative strategies. Increasingly
sophisticated targeting, measurement
and accountability tools enable advertisers
to continue to allocate a greater portion of
dollars traditionally spent on direct marketing
to channels historically reserved for brandoriented
advertising. Traditional agencies
will continue consolidating in their efforts to
respond to advertisers’ demands for seamlessly
integrated, cross-platform planning,
buying, delivery and measurement services.
Similarly, broadcasters and distributors will
continue to focus on horizontal advertising
opportunities for advertisers.
Open Exchange represents a scenario in
which the industry changes behind the
scenes, primarily driven by distributors
– traditional players like Multiple Systems
Operators (MSOs) and Telcos, as well as
newer technology players – with little to no
additional consumer-driven change. In other
words, marketing stays the same as what
was described in Continued Evolution, but
the process of buying, selling and delivering
becomes more efficient. Also similar to the
Continued Evolution scenario, majority control
remains with content owners and distributors
rather than with consumers, and a majority
of consumers continue to passively ingest
marketing messages without a great deal
of interference or proactivity. However, efficiency
efforts – largely driven by new entrants
– shuffle profits and power within the industry.
A significant portion of advertising inventory
that was proprietary is now “open” – sold
through exchanges, as a result bypassing
traditional intermediaries. New exchanges take
major share in all advertising categories, and
inventory that was once exclusively available
to large advertisers – including historically
proprietary national television spots – is now
available to smaller buyers.
Open
Exchange
Ad
Marketplace
Continued
Evolution
Consumer
Choice
Providers Consumers
Closed Open
Media consumption control
Ad inventory systems
FIGURE 6.
Four scenarios of the industry’s future.
Source: IBM Institute for Business Value.
The two variables
likely to be most
disruptive to the
industry’s future are:
the increasing degree
of consumer control
over marketing and
the shift toward open
exchange platforms for
advertising sales.
14 IBM Global Business Services
Consumer Choice is a scenario in which
advertising formats change at the behest
of consumers who are tired of interruption
or intrusive marketing. Consumers exhibit
more control and choice over the types of
advertising that they choose to view and
filter. Advertising formats, therefore, evolve
to contextual, interactive, permission-based
and targeted messaging to retain consumers’
attention and to help minimize both irritation
and “tuning out.” To remain relevant,
distributors offer consumers choices – in
some cases, enabling the consumer to select
the appropriate advertising “packages” that
are most appealing or relevant. For example,
a consumer might request advertising
be confined to automotive, male-oriented
consumer products, travel and leisure. At
times, these choices will act as currency,
with consumers opting-in for messaging
in exchange for content. In other cases,
relevancy is determined by combining opt-in
information with behavior analysis of television,
the Web, mobile and beyond. New measurement
capabilities and consumer rating tools
become a crucial component of any advertising
deal.
Ad Marketplace, compared to all other
scenarios, is the most disruptive. Significant
change in back-end systems and consumerfacing
marketing enable new entrants to
emerge across the value chain. In this
scenario, consumers reject traditional advertising
and instead choose their preferred
ad types as part of self-programming their
media choices. The user-generated and
peer-delivered content trend explodes, and
consumers become much more involved
in ad development and buzz/viral distribution
of brand information. Further, back-end
players revamp the process behind the
scenes. Because this scenario involves a
truly open, dynamic exchange, virtually any
advertiser can reach any individual consumer
across any advertising platform – as long
as the advertising is relevant and appealing.
Consumers have significant choice over the
types of advertising they choose to see – and
can decide the specific content and form
of their advertising. And with new consumer
monitoring technologies in place, consumer
action directly impacts the price of an ad
– driving bids up and down. Advertisers can
know immediately whether a spot or interactive
experience is producing anticipated results.
Likewise, media networks will know immediately
if they have increased or decreased
reach – with prices calibrating elastically. The
definitions of “reach,” “effectiveness” and even
“marketing” itself change entirely.
Scenario evolution
Based on their legacy assets and ability to
develop new media capabilities, players
across the value chain will take different
evolutionary paths (see Figure 7). Though we
believe the industry will eventually become an
“Ad Marketplace,” multiple scenarios will likely
coexist for the near term.
Signs of this evolution are already evident
in the marketplace. Examples of Open
Exchange initiatives are currently limited to
niche areas, but they illustrate what the future
could look like.
15 The end of advertising as we know it
• Google
- Online: Adsense – Offers online media
publishers enhanced revenue opportunities
by placing contextual advertising sold
by Google on their Web sites20
- Cable/Satellite: Astound Me, EchoStar
– leverages Google online capabilities to
sell, deliver and measure targeted advertising
on cable (Astound Me) and satellite
(EchoStar) based on consumer behavior
patterns21
- Radio: dMarc – Acquisition made in 2006
that enables Google to offer its advertising
capabilities to the radio industry22
- Newspaper: Print Ads – 2007 initiative by
Google to streamline the buying/selling
process for the newspaper industry23
• NextMedium – Platform to sell, deliver and
track product placement for film and TV24
• BlackArrow – Ad platform for the cable
industry that aggregates inventory into a
network and focuses on delivering targeted
traditional and advanced advertising
formats.25
The following present-day examples of
Consumer Choice illustrate experiments
in new formats and marketing themes – in
reaction to consumers driving change.
• TiVo’s interactive advertising technology
enables pop-up messages while consumers
are watching programs, as well as while they
are fast-forwarding through programming.26
• Aerie Tuesdays is a Partnership between
American Eagle and The CW Television
Network to target teenage girls in more innovative
ways, by developing unique content
programming related to two Tuesday night
prime-time programs.27
• Sugar Mama from Virgin Mobile pays
subscribers one minute of free air time for
every minute spent interacting with ads. One
year after launch, Virgin had given away 9
million free air-time minutes and was experiencing
high response rates of around 5
percent.28
• NBC Direct announced its 2007 programs
will be available for free online for one week
after initial broadcast. The content must
be viewed on NBC proprietary technology,
which prevents ad skipping.29
Providers Consumers
Closed Open
Media consumption control
Ad inventory systems
FIGURE 7.
Potential scenario evolutionary paths.
Source: IBM Institute for Business Value.
• Online companies expanding inventory
management and auctions to non-Internet
channels
• Third-party platforms that trade piecemeal
advertising
• Online, do-it-yourself media buying
companies
• Self-publishing syndication platforms,
with consumer revenue-sharing model for
advertising dollars
• Cross-channel dynamic advertising buying,
serving and delivery for non-traditional ad
formats
• Content owners and product placement, adfree
sponsorship
• Mobile providers with opt-in permission
advertising
• Personalized television overlays from set-top
boxes/DVRs
Although we expect
the industry to
eventually become
an Ad Marketplace,
this scenario as well
as the other three –
Continued Evolution,
Open Exchange and
Consumer Choice –
will likely coexist for
the next few years.
16 IBM Global Business Services
Marketplace platforms that trade completely
new marketing formats through an open
exchange are still in the experimental phase.
But we are beginning to see examples of how
the Ad Marketplace scenario could play out
in the UGC segment of the industry through
evolving business models like those of Revver,
Narrowstep, Brightcove and YouTube.
Value chain impacts
Given consumer and supplier changes, we
believe that mid-term economic shifts will favor
consumers, advertisers and interactive players
over the other players in the value chain (see
Figure 8). And as advertisers, Internet/interactive
players and consumers gain power, traditional
agencies and broadcasters must evolve
or risk being disintermediated.
We believe looming changes and shifts in
advertising revenue and industry control will
affect a number of players in the industry value
chain, in particular:
Broadcasters: Arguably, broadcasters that
rely on linear television advertising to fund
operational and content costs are at risk in a
world of increasing consumer control, niche
content and fragmented attention. And yet,
broadcasters have the opportunity to leverage
their current mindshare with customers, while
transforming their operations to embrace the
plethora of new digital content distribution
opportunities. By delivering integrated, crossplatform
advertising programs tied to their
programming assets, they can migrate into a
successful future model.
Distributors: Both traditional distributors (MSOs
and Telcos) and newer interactive players
(Internet and mobile providers) have a small
share of the estimated US$550 billion 2007
global advertising market.30 Slowly but surely,
incumbents are introducing the new platforms
and formats needed to defend their positions
in the value chain. They are developing new
advertising capabilities (such as interactive
FIGURE 8.
Expected impact on the advertising value chain.
Source: IBM Institute for Business Value.
Advertiser
Creative
advertising
agency
Media planning
and buying
Content owner/
producer
Media
aggregator/
distributor
Consumer
Advertiser
Full service media/advertising agency
Traditional
media buying,
planning and
measurement
Interactive
media buying,
planning and
measurement
Traditional direct marketing Content owners
and producers
Traditional
distributor
(MSO, Telco)
Broadcaster
Interactive
distributor
(Internet, mobile)
Consumer
Relative economic value creation: Premier Moderate Non-differentiated Arrow represents change in
position from 2007
17 The end of advertising as we know it
and VOD advertising), integrating advertising
across in-home video, mobile and Internet
channels and focusing on local advertising
delivery opportunities. By opening their inventories
through dynamic platforms, distributors
create an aggregated inventory view that
makes it easier for advertisers to see the
full reach and volume a distributor can offer,
helping distributors capture a greater share
of advertising revenues. The race is on to
deliver cross-platform integration. Telcos and
MSOs currently have a window in which they
could take the lead on integrating wireless,
broadband and video campaigns.
Advertising agencies: Naturally, agencies
would like to protect their creative and
analytical positions as intermediaries and
consultants. To do that, agencies will need to
guard against increasing commoditization of
their services by experimenting heavily with
creative advertising content. If the rise of usergenerated
advertising seems “outlandish,”
consider how far-fetched the idea of a
consumer-generated encyclopedia was only a
few years ago. Agencies need to become the
masters of 5-, 10- and 30-second ads that are
not tied to linear formats – be the vanguard of
testing new alternatives. Agencies can mitigate
the risk of the open inventory trend by offering
robust planning and analysis capabilities –
helping their clients analyze massive amounts
of customer data and plan the optimal, integrated
advertising strategy across the everincreasing
platforms, formats and pricing
models available to them.
Recommendations: Refashioning
success
How can advertising value chain participants
prepare for the implications of these
scenarios? Broadcasters, traditional ad
agencies and media distributors, in particular,
will need to make strategic, operating and
organizational changes now to succeed in
a world with more fragmented communication
channels and new media interaction and
consumption habits. We believe there are
a number of “no regret” moves for industry
participants to work toward, regardless of how
scenarios evolve (see Figure 9):
1. Consumer innovation: Making segmentation,
micro-segmentation, communities and personalization
paramount in marketing
2. Business model innovation: Developing new
revenue-sharing, distribution and pricing strategies,
radically shifting the dynamics in the
industry
3. Business design and infrastructure innovation:
Improving horizontal organizational
capabilities and adjusting operations to enable
consumer and business model innovation.
FIGURE 9.
Three innovation types.
Source: IBM Institute for Business Value.
Business design and
infrastructure innovation
Consumer innovation
Business model
innovation
These prevailing trends
are shifting power to
consumers, advertisers
and interactive
players, leaving
traditional agencies and
broadcasters at risk of
disintermediation.
18 IBM Global Business Services
Consumer innovation
For all players, consumer innovation means
making marketing more interactive – bringing
users and semi-professionals into the content
development, delivery and response measurement
processes to make the content innovative
and relevant for consumers.
Building upon our recommendations for media
companies in the “The end of television as we
know it,” we believe the advertising industry
will also have to address a bifurcated market
of avant-garde, fashion-forward consumers
that we call Gadgetiers and Kool Kids, as
well as the large traditional segment we
refer to as Massive Passives.31 These vastly
different markets mean companies need
to adopt a dual strategy, focusing on both
traditional and emerging digital business to
address audiences. Regardless of advertising
vehicle, micro-segmentation and targeting are
necessary to drive relevancy for consumers.
For example, Kool Kids and Gadgetiers will
likely demand less intrusion, fewer interruptions
and a new interactive customer experience,
while Massive Passives may still require
a more traditional approach to advertising.
For broadcasters, these shifts imply the need
to create relevant campaign content and
marketing opportunities for diverse segments.
Retaining audiences will also require innovative
marketing tactics like campaign bleeds (in
which advertising capitalizes on well-known
characters and programming), pod management
during commercial breaks (focusing on
the order and length of commercial breaks),
cross-platform integrated messaging and
promotions and innovative ad-supported
content creation that limits ad-skipping. These
capabilities are part of an ongoing cycle of
“attention (re) invention,” which can help
generate increased affinity for broadcasters’
brands. Broadcasters can develop their own
enhanced, integrated brand marketing around
television content franchises to drive viewership
of television shows across media devices.
Finally, broadcasters that reach out directly to
consumers on the Web or contract with new
suppliers, such as mobile providers, are better
positioned to gather consumer data on their
own or through partners. This allows them to
mine aggregated consumer data for insights
that can lead to improved content and advertising
relevancy.
In this kind of market, distributors will need to
differentiate by delivering location-specific,
relevant content to consumers. This can be
achieved in part by marrying set-top box
and opt-in data with user behavior analysis.
Distributors must also integrate new platforms
(video, Web, mobile and beyond), allowing
advertisers to deliver fluid, follow-me content
and marketing programs. Finally, the explosive
growth in UGC will necessitate new distribution
channels for delivering self-published
videos and associated advertising messages
across devices – PC, mobile phone and TV.
Recent partnerships between media distributors
and user-generated content sites provide
an example of how distributors can exploit
the explosive growth in UGC to capture an
increasing share of advertising revenues.
Consumer innovation
means making
marketing more
interactive and
personalized – changing
how advertising is
developed, delivered
and measured.
19 The end of advertising as we know it
For their part, agencies should embrace
the ability to reach consumers, regardless
of their device preferences, and welcome
consumers as part of the traditional, agencydriven
processes by bringing users and semiprofessionals
into the creative dialogue. They
should also consider investing in differentiated
creative development to drive advertising
relevancy (micro-versioning). Agencies can
combine their creative and analytical capabilities
to develop multiple versions of an advertisement
for various customer segments, and
deliver the appropriate version based on a
consumer profile. Agencies are also well-positioned
to be “insight brokers” – aggregating
the required information to enable integrated,
cross-platform, targeted marketing campaigns
– across the advertising planning, buying
and analysis/optimization functions. All of this
implies the need for strong customer-data
analytic capabilities, as well as the increased
importance of the media planning role.
Agencies are developing new approaches to put
consumers at the center of marketing programs.
Niche-focused consumer research panels are
increasingly used to test concepts and develop
ongoing dialogues with target segments. Efforts
to target online influencers or “magnets” are
underway to fuel peer distribution of messages.
Micro-versioning delivery concepts are being
developed by combining consumer segmentation
and analytics with low-cost creative development
processes and dynamic ad-serving capabilities.
Business model innovation
All players must work toward differentiated
business models that can address the
changing business demands of advertisers.
Innovation related to how and where advertising
inventory is sold, the structure and forms
of partnerships, revenue models and advertising
formats are all applicable.
Broadcasters must diversify their traditional
focus to take on broader roles in driving
relevancy and creativity in advertising. Broadcasters
are in a position to strike strategic
partnerships directly with advertisers. By
combining consumer insights with their
creative knowledge, they can develop relevant,
integrated and innovative creative content
(both short and long form) and campaigns
that span media device platforms. Broadcasters
can also expand their advertiser buyer
base, by opening up select inventories through
media platforms. They will also need to think
through how to compensate broadcast affiliates
as content ubiquity continues. Finally,
broadcasters need to assess the alternative
go-to-market options available to them for
new distribution opportunities – whether that
be by linking more closely with peers (e.g.,
NewsCorp and NBC) or with platforms (e.g.,
Google, Joost, Apple).
Distributors can drive persuasion and
personalization by combining opt-in, permission-
based information, click-stream analysis
and data on existing customer relationships.
Distributors have a distinct advantage: the
information they already have about their
customers. This allows distributors to deliver
relevant, contextual advertising to consumers
and, thus, strong ROI for advertisers. It also
allows them to deliver truly personalized
portals of content and marketing across media
devices. Distributors can also offer advertisers
the ability to more accurately assess ROI
Business model
innovation involves
changes to advertising
formats, revenue
models and how and
where advertising
inventory is sold.
20 IBM Global Business Services
through targeting, measurement and analytics,
as well as response-based advertising and
impact-based pricing models. Advertisers are
increasingly interested in having these kinds
of capabilities (which are typically missing in
today’s world of television advertising) across
advertising channels.
Agencies can leverage their current stronghold
positions in traditional advertising and
creative aspects of the business to capture
revenues from the broader marketing communications
industry, such as market research,
media planning and customer relationship
management. For example, conversations
with Sir Martin Sorrell, CEO of WPP, confirm
goals to continue to diversify WPP’s revenue
streams and grow revenues from nontraditional
advertising sources, such as consulting
and customer relationship management, to
two-thirds of overall revenues in the next ten
years.32 Agencies also need to be fearless in
pursuing new formats and platforms, particularly
integrated, cross-platform advertising
opportunities. Finally, agencies need to seamlessly
integrate new digital businesses and
develop strategies to avoid conflict between
traditional and digital ad buying and ad
placement.
Distributors are piloting new models for advertisers
related to targeting, mobility and interactivity
across platforms. Online advertising platforms are
being developed to support the sales, delivery and
analysis of traditional and advanced advertising
formats. Initiatives are underway to enable content
and associated advertising portability across TV,
Web and mobile devices. Finally, distributors are
increasingly expanding UGC and social networking
tools beyond the PC.
Business design and infrastructure
innovation
For most industry players, significant shifts
in current business design and infrastructure
will be required to enable horizontal (meaning
cross-platform) customer communications.
Broadcasters must move from departmental
silos to a more integrated structure that
enables horizontal content development
and distribution, while also investing in “open
platform” capabilities and operating systems
to make portions of their advertising inventories
available to larger buyer bases. They
must also assess their current operating and
organizational structures to determine if they
have the right resources and appropriate
capacity to handle increased marketing
promotions and integrated advertising sales
across distribution platforms.
Distributors must continue their focus on
behavioral analytics, but expand to measure
outcomes holistically across platforms.
Distributors should also continue to invest in
commerce and community tools that enable
the delivery of interactive and response-based
advertising. By working collectively across the
industry, distributors can establish standards
for emerging advertising capabilities – and
sidestep the barrier that has historically
impeded growth in the early stages of other
new advertising formats, such as Internet
advertising.
Finally, agencies must work across media
platforms by integrating, or consolidating their
currently siloed agencies – this is particularly
relevant in areas such as horizontal customer
analytics. Agencies have a wealth of data;
however, much of this information cannot be
turned into insights because of disparate data
sources and incompatible underlying data
infrastructures. To fund advanced and innovative
advertising formats, agencies will need
to drive cross-unit efficiencies, for example,
21 The end of advertising as we know it
connecting and standardizing the back-offices
of all of their boutiques through the use of
shared-services or off-shoring.
Broadcasters are realizing that the rapid expansion
of non-linear distribution opportunities has
resulted in a dramatic increase in both the
number and variety of promotions materials. The
processes have become increasingly difficult to
manage with existing, often manual, processes
and disparate tools. Consequently, companies
are investing in tools to digitally transform
their internal content management, creative
development, production and sign-off processes.
Digital Asset Management and Marketing
Resource Management applications are being
implemented to automate processes, store
creative assets and facilitate approval processes.
The resulting time and cost savings can be
substantial.
Industry outlook
There is no question that the future of advertising
will look radically different from its past.
The struggle for control of attention, creativity,
measurements and platforms will reshape the
advertising value chain and shift the balance
of power.
As we have witnessed in previous disruptive
cycles, the future cannot be extrapolated from
the past. With incumbent and new players in
the advertising space, each attempting to turn
the tide in its favor, it is imperative to plan for
different future scenarios and build competitive
capabilities for all of them.
Regardless of their positions in the advertising
value chain, participants will need to cover
the three key bases of innovation – consumer,
business model, and business design and
infrastructure – to make sure they keep up with
the industry changes underway.
To learn more about this study, please contact
us at iibv@us.ibm.com.
Related publications
Please e-mail iibv@us.ibm.com to request a
copy of any of the following publications or
visit our Web site at:
ibm.com/iibv
• Navigating the media divide: Innovating and
enabling new business models
• The end of television as we know it: A future
industry perspective
• Media and entertainment 2010 - Open on
the inside, open on the outside: The open
media company of the future
• Vying for attention: The future of competing
in media and entertainment
• Beyond access: Raising the value of information
in a cluttered environment
• Profiting from convergence: Defining growth
paths for telecom service providers
Business design and
infrastructure innovation
centers on developing
flexibility to enable
horizontal, cross-platform
communications with
consumers and integrating
business unit silos to create
greater synergy.
22 IBM Global Business Services
About the authors
Dr. Saul J. Berman is a Partner and Global
Executive of IBM Global Business Services.
Renowned for his expertise in media and
entertainment, Dr. Berman leads the IBM
worldwide Media and Entertainment Strategy
practice and serves as the IBM Global
Services Leader for the Strategy and Change
practice for all industries. Dr. Berman has over
25 years experience consulting with senior
management and has published multiple
articles on the future of media and entertainment
and strategy, including “The end of television
as we know it,” “Navigating the media
divide” and “Beyond access.” Dr. Berman is
a frequent keynote speaker at major industry
conferences and was named one of the
25 most influential consultants of 2005 by
Consulting Magazine. Saul can be reached at
saul.berman@us.ibm.com.
Bill Battino serves as the Managing Partner of
the media and entertainment, telecommunications
and utilities consulting practices for IBM
Global Business Services. Mr. Battino has 24
years of consulting experience in the areas
of strategic planning, transformation, acquisition,
market assessment, financial analysis
and organizational assistance in the media
and telecommunications sectors. In addition
to being a frequent speaker at industry
conferences and events, Mr. Battino has led
and authored media and telecommunications
studies, including “Cable/Telco At The
Crossroads,” “Electronic Marketing, Electronic
Shopping,” “Fine Tuning Cable Television,” and
“Electronic Access.” Bill can be reached at
william.battino@us.ibm.com.
Louisa Shipnuck is the IBM Institute for
Business Value Global Media and Entertainment
Leader. She has worked with leading
companies on wide-ranging strategy and
operation projects, including market-entry
strategies, merger and acquisition planning,
and content distribution. Ms. Shipnuck
frequently speaks at industry conferences
and has coauthored other IBM publications,
including “The end of television as we know
it,” “Navigating the media divide” and “Beyond
access.” Louisa can be reached at louisa.
a.shipnuck@us.ibm.com.
Andreas Neus is the IBM Institute for Business
Value European Media and Entertainment
Leader. He focuses on innovation and disruptive
changes in the media industry and has
spearheaded IBM’s primary research on
media consumer behavior in Europe. Mr. Neus
has authored more than twenty articles and
book chapters on innovation and change and
regularly speaks at conferences and for postgraduate
programs. Andreas can be reached
at andreas.neus@de.ibm.com.
Contributing authors
Steve Abraham, IBM Global Business Services,
Global Media and Entertainment Industry
Leader
Dick Anderson, IBM General Manager, Global
Media and Entertainment, Communications
Sector
Steve Canepa, IBM Vice President, Global
Media and Entertainment Industry, Sales and
Distribution, Communications Sector
Karen Feldman, IBM Institute for Business
Value Media and Entertainment Leader
Steve Mannel, IBM Cable and Broadband
Solutions Executive
Ekow Nelson, IBM Institute for Business Value
Global Communications Sector Leader
23 The end of advertising as we know it
About IBM Global Business Services
With business experts in more than 160
countries, IBM Global Business Services
provides clients with deep business process
and industry expertise across 17 industries,
using innovation to identify, create and deliver
value faster. We draw on the full breadth of IBM
capabilities, standing behind our advice to
help clients innovate and implement solutions
designed to deliver business outcomes with
far-reaching impact and sustainable results.
References
1 IBM surveyed more than 2,400 consumers
across five countries: Australia, Germany,
Japan, the United Kingdom and the United
States. Questions covered a range of
topics including: consumer preferences
and adoption of multimedia devices and
content, impact to date on traditional content
consumption and preferred pricing models
for new digital content offerings.
2 Our interviews and panel discussions
primarily involved executives from the advertising
buy-side, including representatives
from advertising agencies and major advertising
companies across key advertising
segments.
3 By “linear TV,” we mean historical television
programming that is not interactive and
is available to viewers at a particular time
on a particular channel. The broadcaster
is in control of when and where content is
viewed. DVRs and VOD offer the opposite
environment – the viewer is in control.
4 Campaign bleeds combine programming
content with advertising to make the
advertising more relevant to the program;
micro-versioning means developing
thousands of versions of an advertisement
to make messaging more personalized and
targeted to consumers, based on preferences,
demographics and location; video
ad flickers are advertisements that are
displayed for a very brief period of time; and
by pod management, we mean determining
the appropriate number of advertisements to
include within a commercial break “pod” and
paying careful attention to the ordering of
the commercials.
5 IBM Institute for Business Value analysis.
6 Ibid.
7 Berman, Dr. Saul J. “Vying for Attention:
The Future of Competing in Media and
Entertainment.” IBM Institute for Business
Value. 2002.
8 Neus, A., P. Scherf and F. Pörschmann.
Media Study 2005 (Germany): Consumption
versus Interaction. IBM Global Business
Services, 2005.
9 “The Global Entertainment and
Media Outlook: 2005 – 2009.”
PricewaterhouseCoopers. June 2005. Not for
further distribution without the prior written
permission of PricewaterhouseCoopers LLP.
10 “The Global Entertainment and
Media Outlook: 2007 – 2011.”
PricewaterhouseCoopers. June 2007. Not for
further distribution without the prior written
permission of PricewaterhouseCoopers LLP.
11 “Do you still pay for content?” Current TV.
http://current.com/s/faq.htm#faq35
12 Story, Louise. “Publishers Creating Their Own
In-house Ad Agencies.” The New York Times.
June 4, 2007.
24 IBM Global Business Services
13 Ibid.
14 Helm, Burt. “Which Ads Don’t Get Skipped?”
Business Week. September 3, 2007.
15 Ibid.
16 “What is Qmecom?” QDC Technologies.
http://www.qdc.net.au/
17 Benkoil, Dorian. “TiVo, Nielsen Adding New
TV and Video Measurement Tools.” Media
Village. August 15, 2007. http://www.mediavillage.
com/jmr/2007/08/15/jmr-08-15-07/
18 “NBC, Group M Ink $1 Billion Upfront Deal.”
MediaBuyerPlanner. June 14, 2007. http://
www.mediabuyerplanner.com/2007/06/14/
nbc-group-m-ink-1-billion-upfront-deal/
19 Kane, Margaret. “Google to buy radio ad
company.” CNET News. January 17, 2006.
http://www.news.com/Google-to-buy-radioad-
company/2100-1024_3-6027499.html;
“Google Announces TV Ads Trial.” Google
Press Release. April 2, 2007. http://www.
google.com/intl/en/press/annc/tv_ads_trial.
html; “What is Google Print Ads?” Google.
http://www.google.com/adwords/printads/
20 “Google AdSense.” http://www.google.com/
adsense
21 Zimmermann, Kate. “Google
Announces TV Ad Partnership with
DISH Network and Astound Cable.”
Reprise Media. April 3, 2007. http://www.
searchviews.com/index.php/archives/2007/04/
google-announces-tv-ad-partnership-withdish-
network-and-astound-cable.php
22 dMarc from Google.” http://www.dmarc.net/
23 “What is Google Print Ads?” http://www.
google.com/adwords/printads/
24 “NextMedium.” http://www.nextmedium.com/
25 “BlackArrow.” http://www.blackarrow.tv
26 “TiVo Launches New Interactive Advertising
Technology.” TiVo Press Release. July
18, 2005. http://www.tivo.com/abouttivo/
pressroom/pressreleases/2005/pr2005-07-
18.html
27 “Aerie Tuesdays, Simple and brilliant
concept.” BrandNoise. October 5, 2006.
http://brandnoise.typepad.com/brand_
noise/2006/10/aerie_tuesdays_.html
28 “Sugar Mama.” http://www.virginmobileusa.
com/stuff/sugarmama.do
29 “NBC.com to offer users free, ad-supported
downloads of popular shows.” NBC
Universal Media Village press release.
September 19, 2007. http://nbcumv.
com/release_detail.nbc/entertainment-
20070919000000-nbc46comtooffer.html
30 IBM Institute for Business Value analysis.
31 Berman, Dr. Saul J., Niall Duffy and Louisa
A. Shipnuck. “The end of television as we
know it: A future industry perspective.” IBM
Institute for Business Value. January 2006.
In this previous IBM study, we segmented
the video market into three categories:
Massive Passives, who are generally
content with traditional, “lean back” television
experiences; Gadgetiers, who are
drawn to the latest devices and are interested
in participating and controlling the
time and place of their media experiences;
and Kool Kids, who also prefer interactive
and mobile media experiences and
rely heavily on content sharing and social
interaction. It is these last two groups of
consumers – the Gadgetiers and Kool
Kids that will likely lead the way with multichannel
entertainment consumption.