With the emergence of internet technologies such as Voice over IP (voIP), Internet Protocol Television (IPTV), and internet, these technologies have enabled the convergence of digital media and entertainment. Now, entertainment is centered around the consumer by virtue of all programs being on demand.
The traditional approach to entertainment with TV and Radio is waning. Consumers want creativity to contribute content, interactivity to engage in social networks, content on demand for their convenience. According to this survey by IBM, consumers are spending more time on the internet than watching TV.
For example, AT&T offers:
– video and programming (shows, events, etc.) on demand
– searching by title, actor and themes
– picture-in-picture channel surfing capabilites so the user does not miss anything
– guides to customize channels – for example organizing by favorites
– Digitial Video Recorder (DVR) that can record four programs at once
– DVR can record an entire series or individual program.
– Wireless phone or device, and on the internet, can manage the DVR which include selecting programming, saving, deleting previous programming
– Realtime customized weather, traffic, sport scores, stock tickers on TV screen and yellow pages available on the TV screen
Consumers are increasingly being more in control and can choose what and when to watch. With the DVR devices, this study done by Accenture illustrates that the number of ads viewed on TV has dropped significantly. With the user in full control, he/she would filter any content that is not relevant to them (e.g. intrusive ads, irrelevant programming, etc.). With less ads viewed, there is an increasing need for more accurate metrics. With the DVR, advertisers would have a more sophisticated method of obtaining information about the consumer by important criteria such as programs watched, frequency, time of day, etc.
The existing advertising agency business model will need to go through a major transformation. Accenture advocates a change in organizational culture to being able to adapt to the new technologies or be left behind.
The biggest threat to the existing advertising agency according to Accenture would be search firms. If they were to develop superior analytic tools, this would lead to a superior understanding of the consumer which is typically the traditional advertising agency’s strength. Also, media agencies could be endangered by these firms because if the online search firms understand the consumer better, they could target them better. To magnify the threat, the barrier to entry is quite low.
The entire value chain which links the advertiser to the consumer and the feedback from the consumer would be lost. Also, whoever (advertising agency, media agency, online search firms) embraces IPTV, Internet and mobile phone technologies would be advantageous. By embracing all three, an integrated communications campaign that could launched with rich multimedia.
A study by IBM forecasts a huge increase in advertising on the internet, through IPTV, in-game and mobile advertising. As both creative and media outlets are being increasingly centered around the consumer, the messaging in ads needs to resonate with an increasingly fractured and niche group.
The IBM study also states that with the low barriers to entry for ad makers, this would drive down the production and media costs. The negative effect of this, would be offset by the increased number of ads to be made to address the niche market. As advertising on convergence technology (Internet, IPTV, mobile multimedia ) increases, the role of geographical targetting for traditional local media (Newspaper and Radio) as well as tradtional national media (TV spots) will begin to blur. Local media needs to be better at making the message more interactive, and the national media needs to be more relevant to local consumers. This is where the opportunity lies.
Measuring for impact-based versus impression-based is the new future. Also, there will be a shift from having a small number of media buying/planning companies that control the buying process to a more open auction-style exchange, where a larger number of smaller companies can purchase media on the increasingly fragmented platforms. Existing examples include Open Ad , Department of Doing, and Google where there is a movement to outsource some of the traditional advertising agency functions.
The new business model needs to be transformed to adapt to a more open and fragmented consumer market. The following changes need to occur:
1) Consumer Innovation
2) Business Model Innovation
3) Business Design and Infrastructure Innovation