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© 2009 IBM Corporation

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Beyond Advertising:Opportunities for creativity and growthKaren FeldmanGlobal M&E Lead, IBM Institute for Business Value

September, 2009

© 2009 IBM Corporation2

IBM provides primary research and insight on digital media distribution, most recently advertising-focused


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


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)


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”


Let’s hear directly from the “KoolKids”


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



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


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


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


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



Addressing consumer









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



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)



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



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)


Consumer-centric marketing:Nike Plus creates a seamless consumer experience and shifts ad dollars to marketing


Consumer-centric marketing:Vitamin Water creates Facebook App to crowd-source new product development

Source: Facebook.com, Fast Company.com


Consumer-centric marketing: Hearst develops contextually relevant, integrated campaigns for LG


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.

+ =



Addressing consumer









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


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


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


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%


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


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


For more information:

Karen Feldman

Global Lead, Media & Entertainment

Institute for Business Value

IBM Global Business Services

[email protected]

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