Media to rely more on advertising

Advertising, driven by growth in digital advertising, could become the most prevalent business model within five years, according to half the media executives polled in Accenture’s Global Content Study 2007.

Traditionally, media revenues have been split between end-user spending (65%) and revenue from advertising (35%). End-user spending is defined either as subscriptions to media or buying media off the shelf.“… in our survey, respondents indicated that advertising could grow to become the most prevalent business model in the industry within five years — 50% of those surveyed selected this option,” Accenture said.

Accenture’s Global Content Study 2007 surveyed more than 100 decision-makers in the media and entertainment sectors, including television, film, music, radio, video games, publishing interactive entertainment and advertising. It polled executives across North America, Europe and Asia-Pacific, to gauge their views of where the greatest opportunities and challenges will come over the next five years.

The previous year’s survey gave a different picture, with only 38% of respondents seeing advertising as a leading revenue stream. The researchers attributed the increase in optimism to the “strong traction that digital advertising has experienced, particularly in online”. The trend has been driven by the success of search-based advertising on the internet, which is complemented by video-based brand advertising.“The promise of this digital revenue format has been buoyed by major deals in the online space, including acquisitions such as Google and DoubleClick, Microsoft and aQuantive, Yahoo! and Right Media, Publicis and Digitas and WPP with 24/7 Real Media,” Accenture said.

The researchers predicted that this could lead to “as much as US$30-billion of online advertising revenues within 12 months”. This would be driven particularly by search, such as Google’s keyword ads and video advertising.

Spend on advertising worldwide is estimated to be around US$500-billion, and is dominated by TV, newspapers and magazines.

Traditional agencies concerned
Some traditional advertising executives fear that their skills might become redundant, as technology players dominate digital advertising. Sir Martin Sorrell, chief executive of WPP and a respondent to the survey, labelled certain internet advertising providers as “frenemies” to traditional agencies. Thus they are seen as both “friend” and “enemy” to traditional media players.

The researchers recommended that media planning groups within agencies will need to adapt, particularly in the areas of data mining and analytics, to ensure they remain relevant.
“Regarding analytics, one of the major benefits of digital advertising is its measurability, which allows advertisers to track impact and Return On Investment (ROI) for their spending. As such, expect to see a shift in the way  digital advertising is priced. While 39% of our respondents said that Cost Per Thousand (CPM) pricing would remain dominant, a combined 33% believe that Cost Per Transaction (CPT) and Cost Per Action (CPA) pricing would be more Important,” the researchers said.

Where will the money be spent?
The majority of respondents (86%) said “mainstream media portals” would be one of the top three areas on which they would spend their digital advertising budgets.  

Additionally, 41% and 38% of those interviewed see “user-generated content” and “social networking sites” respectively as the most attractive area for online advertising budgets.

While they are aware of emerging platforms — such as mobile and video gaming — these are still seen as untested.
The researchers suggested that media owners should keep in mind that digital complements traditional media, rather than replacing it. “To paraphrase Mark Twain, reports about the death of print media are greatly exaggerated. People will still read newspapers and magazines, and they will still go to the cinema. Digital merely enhances the experiences these media offer, enabling wider and more potent distribution.

“And one day soon, the ‘digital’ moniker will be irrelevant and ‘new’ media will revert to simply ‘media’.”