2008: The year digital takes the lead?

Of all the ‘watershed moments’ in last year’s advertising calendar, perhaps the most telling was when Google’s UK ad revenue surpassed that of ITV1, Britain’s most watched commercial TV channel. 

The figures- £327m versus £317m - were totted up by an analysis at The Times, based on third-quarter results. Within that yawning ten million pound gap, the message was clear: Ignore online at your peril. 

With almost all ad spend on traditional media in decline, it has fallen on digital to prop up growth in the UK. For the first-half of 2007, advertising across all traditional media combined fell to £466.1m year-on-year, representing a 2.9% decline. However, taking on board the increase in online advertising spend, the entire market grew by 1.1% (IAB figures). 

Of course, the Internet still has some way to go before it starts matching the big bucks generated by TV, and initial results from the US indicate that the Internet’s growth may even slow this year as it becomes more established in the overall marketing mix.  

However, some analysts think this tipping point is not so far off. Ad behemoth WPP predicts that by the end of 2008, the Internet will account for 24.8% of UK ad spend, just behind the 26% share held by TV.  

What’s more, while the UK feels the tremors of a jittery US economy, online looks set to benefit further as brands seek solace from more accountable Web campaigns to justify their spend.  As Allison Fennah, executive director at the European Interactive Advertising Association (EIAA), puts it, this is the “perfect time for online to demonstrate its cost efficiency compared with traditional media”. 

Despite this exodus online, TV will remain the big cheese for many larger brands this year, but its integration with other media looks set to deepen.  2008 is likely to see PVRs and IPTV expand beyond the realm of early adopters, while a digital TV is already nestled in nearly 20 million UK homes, according to Ofcom. As such, consumption habits are changing, with increasing audience fragmentation and viewers expecting control over what they watch, when they watch, as standard.  

The result? Commercials as a disruptive format are becoming less acceptable, placing a premium price on programme sponsorship, product placement and even branded channels. TV’s superior reach is now being used as a ‘starting point’ to pique consumer interest and point prospects to a website where they can find more in-depth information.   

So, how is this affecting ad agencies? Kieron Matthews, head of marketing at the IAB, thinks that integration is key. “For all disciplines in the advertising community, the biggest challenge in 2008 is to work together. This has always been a problem in the communications industry, but never more so than with the advent of digital,” Matthews said. 

He warned that while many agencies are now able to offer ‘full service’ to their clients, either in-house or through partnerships, many were still hobbled by a ‘siloed’ approach, failing to get people and systems to gel effectively across departments.  

With an increasing demand for new talent, recruitment could also cause a real headache for agencies. The rapid rise of digital has left a skills gap in its wake, but Dan Clays, MD at agency BLM Quantum, sees better internal training as the industry’s salvation. “It’s not so much about finding new talent, as it is about the adjustment of skills within an agency as the industry evolves,” he said. 

As lines between media become blurred and the number of platforms increase, the need for a more dynamic relationship between brands and agencies will also become paramount. Matthews emphasised the need for agencies to be “given a higher seat at the table in the campaign decision process, so they have more input into the strategy, rather than just being handed a task.” 

Externally, agencies will find themselves caught in an increasingly competitive market. Battle lines are being drawn as media owners team up with technology suppliers (such as Google and DoubleClick, Microsoft and aQuantive) to provide the most attractive platform, with the best audience reach and metrics, to appeal to advertisers.  

In terms of convergence, this year looks set to be the most tumultuous yet, with the results of the Yahoo! bid war likely to have the biggest effect on the shape of the ad landscape by the end of 2008. The formation of a ‘Microhoo!’ would create a serious threat to Google, with Microsoft championing a CPA model in an attempt to shift the industry away from Google’s market-leading PPC platform. 

Indeed, Matthews believes revenue models and metrics will take on a heightened importance this year. “For advertisers, an adequate form of measurement will be their biggest requirement. Not just qualitative, but the softer side of metrics such as brand retention and engagement,” he said. 

Social media was the dotcom success story of 2007, and this year is likely to see the ad community catch up. As Clays suggests: “Undoubtedly, the defining trend in advertising will be how brands can utilise social media across multiple channels. Not just networks, but community sites, forums and blogs. Social media is a crowd for people to follow, so it represents a huge opportunity if brands are able to steer this crowd.” 

This people powered phenomenon presents a double-edged sword for advertisers- not only in ‘steering the crowd’, but also preventing it from becoming an angry mob. Agencies will increasingly need ‘damage limitation’ initiatives to stem negative reviews, Facebook protest groups and bad press in search results. Social media is no longer a fad, if brands ignore it, it won’t just go away. 

However, harnessing the power of new media is not enough, and it will fall back on tried and tested mix of talent and planning that will give the real winners of 2008 the edge. As Fennah concludes: “It’s not enough to throw money at new media and expect results. Advertisers still need compelling creative coupled with robust planning, based on brand strengths and consumer insights.” 

 In this brave new world of consumer control, it’s reassuring to think some things never change.