The Future of Advertising in a Digital World

Faster, Better, Cheaper

Andrew Green, Chief Marketing Officer, Ipsos MediaCT

Digital storage, processing power and bandwidth. These are the technologies powering the digital revolution. All have advanced in leaps and bounds over the last few decades, getting faster, better and cheaper.

For content creators there is now a pressing need to re-examine business models, refresh their understanding of what customers want and, most important of all, figure out how they can maintain advertising revenues in the new digital environment.

In 2008, the global television business attracted over $200 billion in revenues from advertising and subscriptions.

The good news is that people are watching more television than before. Analysis of viewing data from 50 countries by Eurodata, for example, found that daily viewing time per individual across these territories rose from 3 hours 31 minutes in 2000 to 3 hours 43 minutes in 2008.

More people are watching video in other ways as well, though it remains small. In the United States, on-line viewing accounts for about 1% of total viewing hours, time-shift for 1.5%, and viewing on mobile devices about 0.1%. In other words, just over 97% of total video hours consumed are still watched on the household television set.

Over 320 million households across Asia are already accustomed to paying directly to receive their television signals. Will they still want to pay if programmes can be accessed and viewed more cheaply and conveniently on-line or on their mobiles? And will they want to sit through commercials if non-programming clutter continues to increase and they are offered technology enabling them to avoid the advertising altogether?

Hulu, the on-line service set up by some of the main US broadcasters to allow free streaming of programmes to computers, currently shows just one commercial in each break, compared to half a dozen or more on live television.

According to an Ipsos MOTION study carried out earlier this year, 67% of on-line adults had streamed or downloaded video content at some point, while their awareness of Hulu has jumped markedly in the last two years.

There has been some discussion as to whether a premium version of the Hulu site might be created, perhaps offering advertising-free programmes to stream or download in return for a monthly subscription fee. Higher-quality video could be offered to premium subscribers or even access to a better back catalogue.

But as well as providing an alternative distribution channel for television content, the internet offers competitive sources of video. On-line sites like YouTube, Joost, Dailymotion and others allow people to stream or download thousands of short-form and longer video clips, both professional and amateur. Research is beginning to show that content from these sources work in tandem with broadcast media, confirming and sharing the popularity of specific content.

It may well be that the current popularity of traditional television viewing means people actually prefer watching television to interacting with a PC or mobile screen. New technologies that bring the internet onto the living room set may gradually start to change these habits and our business models will need to be agile enough to follow.

As market researchers, our job is to try and get under the skin of consumers and understand how these different distribution channels fit into their lives and how important media branding will be in helping them decide what to watch.

The multimillion dollar question will be what role will advertising play in funding new video distribution sources. Will viewers watch it rather than pay, or will they pay to avoid it?

andrew.green@ipsos.com