IBM: ‘End of Advertising as We Know It’

Consumers are more in control than ever and savvier about filtering marketing messages, according to a report partly based on an IBM survey of digital media and entertainment habits, writes MarketingCharts.

The IBM Global Business Services report, “The End of Advertising as We Know It,” forecasts greater disruption for the advertising industry in the next 5 years than in the previous 50.

Increasingly empowered consumers, more self-reliant advertisers and ever-evolving technologies are redefining how advertising is sold, created, consumed and tracked, IBM said.

Overview of report findings:

• Traditional advertising players risk major revenue declines as budgets shift rapidly to new, interactive formats, which are expected to grow at nearly five times that of traditional advertising (see chart of IBM’s forecast of global ad spend and growth rates, by medium).
• To survive in this new reality, broadcasters must change their mass audience mindset to cater to niche consumer segments, and distributors need to deliver targeted, interactive advertising for a range of multimedia devices.
• Advertising agencies must experiment creatively, become brokers of consumer insights, and guide allocation of advertising dollars amid exploding choices.
• All players must adapt to a world where advertising inventory is increasingly bought and sold in open exchanges vs. traditional channels.

Change Drivers and Trends

The report observes four change drivers tipping the advertising industry balance of power: control of attention, creativity, measurement, and advertising inventories:

• Consumers have tired of interruption advertising and are increasingly in control of how they interact, filter, distribute, and consume their content, and associated advertising messages.
• Half of DVR owners watch 50 percent or more of programming on replay; moreover, traditional video advertising doesn’t translate online: 40 percent of respondents found ads during an online video segment more annoying than any other format.
• Amateurs and semi-professionals are increasingly creating low-cost advertising content that threatens to bypass creative agencies, while publishers and broadcasters are broadening their own creative roles.
• Advertisers are demanding accountability and more specific individual consumer measurements across advertising platforms.
• Self-service advertising exchanges are attracting revenues that were once exclusively sold through proprietary channels or transactions.

Ad Experts’ Expectations in Line with Consumer Trends

IBM’s research found that advertising experts recognize the changing nature of consumers and also anticipate dramatic changes on the horizon:

• More than half of ad professionals polled by IBM expect that in the next five years open advertising exchanges (currently led by companies like Google, Yahoo, AOL) will take 30 percent of current revenues now commanded by traditional broadcasters and media.
• Nearly half of the advertising survey respondents anticipate a significant (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 (greater than 25 percent) shift.
• Two-thirds of advertising experts surveyed by IBM expect 20 percent of advertising revenue to move from impression-based to impact-based formats within three years (see chart).

U.S., Europe, and Asia highlights from the IBM Media & Entertainment Consumer Household Survey (on which the current study is based, in part) are available at MarketingCharts.

About the report: “The End of Advertising as We Know It” is based on an IBM global survey of more than 2,400 consumers and feedback from 80 advertising executives worldwide collected in conjunction with Bonn University’s Center for Evaluation and Methods.