The end of advertising as IBM knows it

A new IBM study provides an outlook on how the ad industry will change dramatically in the next decade. IBM interviewed 2,600 consumers and 80 ad executives, and the result is a straightforward trend: Money will shift away from traditional TV, radio, and print, toward internet, mobile, and social media.

But the real news in the report is that intermediaries — web designers, ad agencies, media planners, and all the other ad distributors — are at risk. IBM predicts that the ability to manage ad inventory (get it out there) and the ability to create ads (YouTube video-style) will erode the business models of the entire ad industry.

Here’s the scenario. Imagine you’re a marketing executive in 2010 planning a TV campaign and so call around for help:

Jim, at Ad Agency 1, responds: Sure, we can do that. We’ll produce a TV spot for $300,000 and run it on a cable network that most people record with DVR boxes so they can skip your commercial.

Jane, at Ad Agency 2, says: Sure, we can do that. We’ll produce it for free with video from YouTube and run it on an internet network where everyone will watch it, then forward it to 2 million of their friends.

No brainer, eh? IBM notes the future is here. 25% of Americans now use DVR boxes, and 7% have created and uploaded video online. Compare those data points with the current cost for producing a professional TV spot — $100,000 to $350,000 — and you’ll see why many ad agencies may be threatened. Nearly half of ad executives interviewed said they believed at least 10% of media funds would shift from TV to interactive in the next five years.

The study points to a simple solution, and it comes down to data. The fragmenting forces of consumer control, consumers blocking ads, and 360 degrees of millions of media channels mean it WILL get harder to make advertising work. Long gone are the days when you could buy a few broadcast networks and reach all of America. The ad agencies and media planners who can track hard results to see what works will be able to give CMOs what they want — proof.

Think of the irony. The future of creative lies in data.

(Nice work by study authors Saul J. Berman, Bill Battino, Louisa Shipnuck and Andreas Neus. Complete study is here.)

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