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© 2009 IBM Corporation
This report is solely for the use of Client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the Client organization without prior written approval from IBM. [Optional: This material was used by IBM during an oral presentation; it is not a complete record of the discussion.]
Beyond Advertising:Opportunities for creativity and growthKaren FeldmanGlobal M&E Lead, IBM Institute for Business Value
September, 2009
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© 2009 IBM Corporation2
IBM provides primary research and insight on digital media distribution, most recently advertising-focused
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© 2009 IBM Corporation3
As dollars continue to migrate to digital, companies need to focus “Beyond Advertising”
Addressing consumer
needs through relevancy,
integration and choice offers opportunities
Consumer behavior and technology innovations
are blurring the lines between
advertising and marketing
But business models and capabilities
need to be put in place
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© 2009 IBM Corporation4
Dual strategies required to address distinct segments
Consumer Media ControlInvolved
Content
Access
OpenKool Kids
Gadgetiers
2007
2012
Generational Chasm
Passive
Limited
Massive Passives
Generational Chasm
Consensus Endstate for 2012
Source: IBM Institute for Business Value (IBV)
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© 2009 IBM Corporation5
Digital content adoption outpaces expectations, but with varying levels of engagement
84%
45%
31%
25% 25%
36%40%
89%
7%
13%
25%
68%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Passive Experiencer Engaged Influencers Authors
% who have watched online video
% who regularly watch online video
% who have rated video content online
% who have uploaded videos
Consumer Interaction with Online Video
Kool Kids
Gadgetiers
Massive Passives
Aggregate
Source: 2008 IBM Digital Consumer Survey. Total responses = 2800 across six countries: Australia, Germany, India, Japan, UK, US
Influence and Interaction driven by the digital “savvy”
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© 2009 IBM Corporation6
Let’s hear directly from the “KoolKids”
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© 2009 IBM Corporation7
An eye towards the future – is there a role for traditional brands with the Kool Kids?
Kool Kids are more than twice as likely to visit a social networking site on a daily
basis than an online newspaper site
Close to 50% suggest online television viewing is impacting their “regular”
television viewing
10% state the PC is now the primary source for accessing video content
Source: 2008 IBM Digital Consumer Survey. Total responses = 2800 across six countries: Australia, Germany, India, Japan, UK, US
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© 2009 IBM Corporation8
Advertisers shift spend to measurable, interactive channels…
US Advertising & Marketing Share
2002 – 2012E
47% 41%32%
46%46%
42%
7% 13%27%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2002 2007 2012 (E)
Alternative, Interactive Channels(e.g. online advertising, branded entertainment, word of mouth marketing))
Traditional
Marketing
(e.g. Direct marketing, promotions)
Traditional Advertising
(e.g. TV, print, radio, outdoor)
+20%
- 4%
- 15%
Share Change
Source: Veronis Suhler 2008 Communications Forecast, IBM Analysis
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© 2009 IBM Corporation9
In an IBM study,
50% of
advertisers
expected 20% of
deals to be
impact-based
within 5 years
… and expect to pay for impact, not impressions
Source: Forrester Research, “Advertisers Face TV Reality,” April, 2006
Source: IBM Advertiser Survey
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© 2009 IBM Corporation10
Digital migration blurs the historical distinctions between “advertising” and “marketing” platforms
“There is no longer a clear distinction between marketing and advertising
disciplines.
Every contact with a consumer is now an opportunity to impact your brand/reputation as well as an opportunity to drive action.”
(CEO North America, Global Advertising Agency)
Source: IBM Advertiser Survey
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© 2009 IBM Corporation11
Consumer
Agencies
Media
Device
Manufacturers
Advertisers
Networks/ Exchanges
Bypassing media, becoming Media Producers
Taking on creative roles, working directly with advertisers
Shifting advertising dollars
to marketing
Automating the advertising
process, selling the audience, not
the content
Becoming media distributors,
measurement providers
Participants’ roles in the ecosystem also blur
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© 2009 IBM Corporation12
As dollars continue to migrate to digital, companies need to focus “Beyond Advertising”
Addressing consumer
needs through relevancy,
integration and choice offers opportunities
Consumer behavior and technology innovations
are blurring the lines between
advertising and marketing
But business models and capabilities
need to be put in place
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© 2009 IBM Corporation13
Relevancy: Consumers will trade information for value
50%
72%
62%
49%45%
0%
20%
40%
60%
80%
Australia India Japan UK US
Willingness to Provide Information About Yourself
Source: 2008 IBM Digital Consumer Survey. Total responses = 2800 across six countries: Australia, Germany, India, Japan, UK, US
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© 2009 IBM Corporation14
Integration: Consumers desire integrated content and messaging
41%
50%58%
31%
0%
20%
40%
60%
80%
100%
Total Kool Kids Gadgetiers Massive
Passives
Desire for Content Portability Across
Devices (Global)
Source: 2008 IBM Digital Consumer Survey. Total responses = 2800 across six countries: Australia, Germany, India, Japan, UK, US
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© 2009 IBM Corporation15
Choice: Sizeable segment will pay for content
69%62% 64%
83%
70%73%
31%38% 36%
17%
30% 27%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Australia Germany India Japan UK US
Would watch advertising before or after content
Would pay to avoid advertising
Business Model Preference Ad-supported versus paid content online
Source: 2008 IBM Digital Consumer Survey. Total responses = 2800 across six countries: Australia, Germany, India, Japan, UK, US
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© 2009 IBM Corporation16
Beyond Advertising = Relevancy + Integration + Choice
TRADITIONAL
ADVERTISING
CROSS-
PLATFORM REACH
CONSUMER-CENTRIC MARKETING
ROI-DRIVEN ADVERTISING
EVOLUTIONARY BUSINESS MODELS
Insights
Impressions
Level of Granularity
Integrated Cross-Platform
Single Platform
Degree of Integration
Source: IBM Institute for Business Value (IBV)
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© 2009 IBM Corporation17
Consumer-centric marketing:Nike Plus creates a seamless consumer experience and shifts ad dollars to marketing
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© 2009 IBM Corporation18
Consumer-centric marketing:Vitamin Water creates Facebook App to crowd-source new product development
Source: Facebook.com, Fast Company.com
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© 2009 IBM Corporation19
Consumer-centric marketing: Hearst develops contextually relevant, integrated campaigns for LG
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© 2009 IBM Corporation20
Consumer-Centric Marketing:BabyCenter and First Response create online/mobile campaign, Booty Caller
"Booty Caller is the new and modern way for busy women everywhere to keep up with their
fertility timing and options," said Linda Murray, editor-in-chief, BabyCenter.com.
+ =
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© 2009 IBM Corporation21
As dollars continue to migrate to digital, companies need to focus “Beyond Advertising”
Addressing consumer
needs through relevancy,
integration and choice offers opportunities
Consumer behavior and technology innovations
are blurring the lines between
advertising and marketing
But business models and capabilities
need to be put in place
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© 2009 IBM Corporation22
Industry realities continue to hinder progress in moving towards consumer centricity
Current Industry Realities
� How to spend and allocate investments in light
of current economic situation (e.g. targeting,
video, social media)?
� How to drive standards in metrics, processes,
and formats?
� How to integrate across platforms to offer
consistency and relevancy to the consumer?
� How to turn the explosion in information into real-
time, actionable insights?
Industry Choices
NEW FORMAT UNCERTAINTY
SILO’D OPERATING
MODELS
DATA GLUT
FRAGMENTATION
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© 2009 IBM Corporation23
Competing in the new era requires new capabilities…
Manual and analog
Media centric development
Cross-platform innovation
Proprietary modelsOpen
collaboration
Data Glut Insights and Impact
Automated and digital processes
Historical Going Forward
Creative
Insights
Collaboration
Workflow
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© 2009 IBM Corporation24
The music industry is a clear example of the impact of risk
$0
$2
$4
$6
$8
$10
$12
$14
2003 2004 2005 2006 2007 2008 2009(P)
2010(E)
2011(E)
2012(E)
Digital(Internet,Mobile)
Physical
US Music Industry Retail Revenues2003-2012
US $B
Sources: PwC Global Outlook 2008-2012; Billboard Magazine; Apple Annual Report 2007;
Nielsen; IBM Analysis
-9%
84%
-12%
19%
2008-2012 CAGR: -5%2003-2008 CAGR: -4%Historical
CAGR
Future
CAGR
’03 – ‘08 ’08 – ‘12
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© 2009 IBM Corporation25
Lessons from music -- value was not lost, but shifted closer to the consumer
Consume ServiceCreate Manage Distribute
Music Value Chain
CAGR 10%
CAGR 11%CAGR 18%CAGR -1%
Record Labels Retailers Devices
Promoters
In-Home Services
Global CAGR* -3%
KEY
Decreasing share
Increasing share
Sources: PwC Global Outlook 2008-2012; CEA Market Research 2008; Veronis Suhler, 2007; eMarketer, 2007; IBM Analysis
“CAGR is 2003 - 2008
2008 Size: $20 billion Size: $8 billion Size: $37 billion Size: $2 billion
Size: $13 billion
US CAGR -5% US CAGR -5%
CAGR 118%
Digital Distributors
Size: $4 billion
US CAGR 90%
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© 2009 IBM Corporation26
Focus on multiple business models is required
Beyond traditional advertising
Tiered pricing
strategies
Seamless experiences across the value chain
Payer Innovation
Pricing Innovation
Product Innovation
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© 2009 IBM Corporation27
Regardless of path, players need skills in innovation,
collaboration, analytics and
workflow
In summary, the ongoing evolution of advertising will continually disrupt, and provide opportunity for players
Supply chain must evolve through dual emphasis on insights and integration
The industry is moving “beyond
advertising”to consumer-
centric marketing
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© 2009 IBM Corporation28
For more information:
Karen Feldman
Global Lead, Media & Entertainment
Institute for Business Value
IBM Global Business Services
[email protected]