Trad Media to Lose 30% of Ad Revenues to Digital, Predicts IBM

12 November 2007

ARMONK, NY: Following a global survey of more than 2,400 consumers spiced with feedback from eighty senior advertising executives, IBM has published a new industry study apocalyptically titled The End of Advertising as We Know It.

It is based on telephone, online and face-to-face interviews with industry executives (representing marketers, agencies and distributors) plus responses to a digital questionnaire that reached some 2,400 consumers worldwide.

Led by Dr Saul J Berman of IBM Global Business Services, the study predicts that over the next five years some thirty percent of global ad revenues currently accruing to traditional media companies - amounting to billions of dollars - will migrate to online ad exchanges such as Google and Yahoo.

That's the verdict of more than half the executives polled. Moreover two-thirds of them expect 20% of today's ad revenue to shift from media channels with rates based on numbers of impressions to those tied to actions, such as click-throughs on web ads.

The next five years will see more changes in the advertising business than in the past fifty, prophesies the report. "As the advertising value chain reconfigures, broadcasters, advertising agencies and media distributors in particular will need to make a number of 'no regret' moves."

Such moves include how to more effectively connect with consumers in a multichannel world, and how to create new business models.

Four drivers of change will shift control within the industry, the report foretells. They are ...

  • Attention
    Consumers are increasingly in 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, sharing and rating tools.

  • Creativity
    The new technology and rising popularity of user-generated and peer-delivered content, and new ad revenue-sharing models (eg, YouTube, Crackle, Current TV), now enables amateurs and semiprofessionals to create lower-cost advertising content.

  • Measurement
    Advertisers are demanding more individual-specific and involvement-based measurements, putting pressure on the traditional mass-market model. Two-thirds of the advertising experts IBM polled expect 20% 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 professionals polled expect that open platforms will, within the next five years, take 30% of the revenue currently flowing to proprietary incumbents such as broadcasters.
Concludes the report: "There is no question that the future of advertising will look radically different from the 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."

The complete report can be downlowded by clicking here.

Data sourced from multiple origins; additional content by WARC staff