How the digital revolution is changing the advertising industry

People%20talkingBusiness readily acknowledges that the digital revolution of the last decade has transformed trading practices and commercial models. In many cases, it has revolutionised the buyer-seller relationship – especially when putting the end consumer (buyer) directly in touch with the producer (seller).

As a result, there have been some profound shifts in consumer behaviour. We now book flights and check-in online, compare prices and deals for cars before visiting the showroom and many of us bank or shop for groceries online.

Huge changes in the breadth and scope of distribution have also occurred. New channels have been developed, liberated by the Web and in particular social networking, while Google has established the concept of search, and spawned a whole industry delivering search engine optimisation. We are now beginning to see the next generation of changes in how content is distributed, with the nascent success of the iPlayer, the upcoming launch of Kangaroo and early reports of launch success for Hulu in the US.

But all these changes are largely about channels and distribution. The business model for advertiser, media owner and media agency broadly remains the same – agree objectives, set a budget, brief your agency, engage media owners and deliver a plan. The media owner/advertiser relationship still depends on the media agency intermediary to plan campaigns and to close deals. So, while it’s now more complicated to plan a multimedia schedule in a digital media world – deciding whether to include Google, or YouTube or “Skins” via 4oD on the schedule, as well as primetime TV, radio or press – the practice of buying media has remained largely unchanged.

Digital departments in agencies, whether standalone or embedded in client teams, look at digital through this lens of new digital distribution and channels. It’s revolutionising planning but not (yet) buying.

Only now are we beginning to see how the wider disruption to business models will begin to have a profound effect on the practice of buying and selling media in the next few years, too.

I see two clear trends, both of which could turn conventional media thinking upside down.

First, we all know content is king. That’s the mantra we all repeat: great content engages audiences. But, in the digital world, important prizes are going to those who understand how to generate and monetise an understanding of users or viewers.

This sort of profile of your viewer or reader is the ace in sales terms – even if content is king for programmers. So, what Google does is bring known individuals who are interested buyers (real people, searching for your service or product) to your website for you to advertise (or sell direct) to them. In real time. That’s a very direct value chain for a business.

By contrast, a media owner bringing content (around which you can spot advertise) to some broad demographics is very indirect. While the two channels tend to play very different roles for advertisers – research demonstrates how offline media such as radio are effective in driving people to search for brands online – it is unsurprising that brand owners are increasingly attracted by the lure of immediate and quantifiable results offered by search. This is changing the fundamental nature of the ad business from an exclusively above-the-line display advertising model to what will probably become predominantly a performance-based sales model.

Second, media buying and selling has always been about relationships, but so was going to the travel agent or the bank. Transactions historically processed via relationships are now processed online. If our advertisers engage in sophisticated online trading (whether via auctions, marketplaces or exchanges) as they are doing – to drive down cost – for key supplies for their business, it’s axiomatic that the same will happen for media in due course.

The real eye-opener will be media companies that seize the opportunity. It’s a process already starting to happen: Google radio, Bid4Spots, Media Equals, getmemedia.com. We’d all like to believe that buying raw materials or ingredients or commodities at our advertisers is different from buying media. But, believe that at your peril!

The reality is that relationships have always been critical, too, for ingredient suppliers to manufacturers (our advertisers cease production if the supply chain fails – so relationships underpin confidence and trust in security of supply or quality) – but neither that intimacy of relationship nor criticality to production has prevented the buyer-selling negotiation increasingly taking place online. So we, too, should all get ready for our opening bids in media.

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