Avenue A | Razorfish Corporate Digital Outlook 2008 Report Online

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ten digital media issues

to watch in 2008 

By Sarah Baehr, VP, Media, New York

and Alyson Hyder, Director, Media, San Francisco

WIth continued changes in consumer behavior, a shift of media budgets to digital channels, and an active merger and acquisition market going into 2008, this year is sure to be another one of rapid change. for digital marketers in the united states, here are ten important issues to watch as the year unfolds.

 1. The move beyond media buyingthe digital media business is no longer simply about buying ad space. it’s a discipline focused on distributingexperiences—through social networks, videos, widgets and applications, branded content, and, yes, adplacements. make no mistake, the traditional practice of media buying is still a critical component of onlinemarketing. however, to view ads as the only way to promote a brand or product is to ensure that the brand isseen as stiff, commercial, and inward-looking. 

2. The impact of a recession on online advertisingin difficult economic conditions, the most accountable marketing channels will be best insulated from cuts inspending. this clearly bodes well for online advertising relative to other channels. however, there will be an impact, even in the most efficient digital channel—search marketing. search has become a powerful tool for shoppers, and in a recessionary environment, consumers will search, shop, and buy less frequently.revenue derived from the cost-per-click ad model is driven by the volume of clicks and the cost a marketer is willing to pay for each of those clicks. While a marketer may keep the same cost-per-click during a recession, it’s quite likely that a difficult economic environment will lead to fewer commerce-driven searches, which leads to fewer clicks. the end result is less money being spent in search. 

3. The redefinition of online media measurementthe long-accepted notion of the “last click” or “last view” of an ad receiving all of the credit for a subsequent sale or conversion is now dated. While this methodology was sufficient during the first decade of online advertising, it ignores ad exposures that occurred prior to the last view. avenue a | razorfish clients have found that custom attribution research (attributing value to several ad exposures, not just the last one) improves performance significantly. one of our clients implemented custom attribution methodologies and found that awareness-building display media had been undervalued using the old last-view measurement. based on the new attribution data, the client doubled its spend on awareness-building media, and subsequently saw a 23% increase in conversions. importantly, the cost-per-acquisition dropped 6%.as marketers start to see these kinds of results, settling for the old, familiar last-view methodology simply won’t do. 

4. A limited increase in average CPMsWith an ever-increasing number of advertising choices, it will be difficult for publishers to raise advertising rates substantially. in a January survey of 75 of our media planners, 37% forecasted a pricing increase of 1% to 5% in 2008, while 38% expected a rise of 5% to 10%. nearly 20% of the media staff felt prices would fall year over year. 

5. The fallacy of the “digital upfront”despite regular calls for a digital version of the annual television upfront, there is little interest in such an event from the buying community. While advertisers regularly commit in advance (9 to 12 months out) for valuable advertising,  these commitments represent a small minority of overall online media spend. marketers and agencies have come to realize that digital media can and should be constantly analyzed and optimized. they also know online audiences can be reached in a seemingly endless number of places, not just on a select few major properties. 

6. The slowing of ad network acquisitionsWith spending on ad networks increasingly concentrated with the largest players, it will become increasingly difficult for small ad networks to break through. ad network efficiency is largely a matter of matching the right advertiser to the right placement, and the likelihood of being able to do so increases as a network increases its ad inventory and number of advertisers. this means the largest players should be able to best monetize ad space for publishers (and provide the most relevant inventory for advertisers). the bigger and more efficient the large networks get, the more ad dollars will be directed to them. it will become more difficult for second-tier players to earn ad budgets, and therefore less necessary for the larger players to acquire them.one related area to watch closely is the growth of vertical ad networks. martha stewart living’s lifestyle network and forbes’ audience network are two recent examples of strong brands extending their reach by building out ad networks. it’s a reasonable extension for brands and helps the smaller sites and blogs within a vertical network gain needed exposure with large advertisers. look for more vertical ad networks in the year ahead. 

7. A breakout year for mobile—but notfor mobile advertisingthe mobile industry is poised for tremendous growth. mobile search and location-based services are growing in importance. Apple is opening the iPhone to third-party developers. Carriers are becoming more flexible—maybe. With all of these developments, mobile advertising is sure to gain momentum in 2008, but we are still a year away from seeing it break out and become a staple for marketers. 

8. Nokia’s emergence as a key player in the digitalmarketing industrynokia made two important moves in 2007 that will impact digital marketing in the coming year. it acquired both enpocket, a leading mobile advertising and marketing services firm, and navteq, a leader in navigation data and systems software. While there have been no formal announcements from nokia about how its assets will fit together, it is clearly going to be a company to watch in the coming year. nokia appears to be vying to expand its own business outside of consumer mobile devices and into the software and services that consumers are able to use on those devices. nokia now has assets that may accelerate the use of smart devices that use location-based services that know where we are. the potential benefit for marketers is the ability to deliver relevant, geographically contextual advertising opportunities to customers. accomplishing this feat in the u.s. today, while not impossible, often involves orchestrating a small army of carriers, devices, marketing services providers, and agencies whose interests are not always aligned. 

9. The continuing lack of video ad standards2008 should be a year in which significant progress is made in video ad standards but the industry is still at least a year away from having a mature, established video advertising marketplace. for several years, discussion around video ad standards was almost completely focused on pre-roll ads; in retrospect, that singular focus was misguided. With youtube’s 2007 introduction of interactive overlay advertising, the Web’s largest video destination eschewed pre-roll ads. overlay ads in video were not as interruptive and presented less of an obstacle for users accessing content. advertisers were still offered value in terms of impressions and interactivity. and it’s not an unfamiliar format for traditional television advertisers—many broadcast tv networks have been making great use of overlay advertising in programming for some time, though without the interactive features available online. on popular cable tv networks such as tnt, spike tv, and mtv, overlay ads are a near-constant presence on the bottom of the screen, which has not resulted in an exodus of cable customers annoyed by the overlays. the challenge online becomes how to value the overlays in the one-to-one environment. Beyond overlay ads and pre- and post-roll clips, there are other prominent video ad units. Companies like scanscout take standard overlays one step further, offering contextually targeted ads based on the content of the accompanying video. vibrant media offers in-page, keyword-targeted video ads. and advertising “skins” that surround video clips (such as those offered by heavy.com) have proven to be attractive placements for advertisers. there will continue to be interest and investment in video advertising in 2008, and justifiably so. in the end, as with many new-media advertising channels, the consumer will vote with attention, engagement, and traffic—and will ultimately determine whether overlay advertising on broadband video will become the next great revenue stream for platform or producers, or if it is simply the next step in the transition away from 30-second commercials. 

10. The Internet’s impact on the2008 presidential electionthe Web will be the most impactful and influential medium in the 2008 presidential race, not only for presidential hopefuls but for voter self-education and self-expression. much like radio for roosevelt and tv for JfK, the 2008 race for the White house will be determined by candidates’ abilities to connect with and galvanize supporters online. the internet has changed the political environment. despite the importance of digital channels in the elections, online ad spending by campaigns will continue to lag well behind television spending. the importance of digital in the 2008 elections is rooted in connecting with and motivating communities, but online advertising is likely to play a secondary role in doing so. 

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