Thinking Strategically About the Interactive Advertising Industry

The digitization of content and communications has changed the advertising models traditionally used by media, entertainment, broadcasting and publishing companies. And, the challenges of monetizing digital advertising are profound—both for marketers and for those companies offering the advertising channels themselves.

All companies face the difficult task of bringing a new business model online while still maximizing profitability from the old model. They also operate in a more volatile consumer and business world—one with dramatically shorter lifecycles for products and services.

The Interactive Advertising Bureau (IAB) and Accenture collaborated in a research-backed scenario planning process to contemplate the future of the interactive advertising industry and how the IAB can best prepare itself to serve its member companies.

After considering multiple potential futures, IAB and Accenture characterized the most likely evolutionary path and the role of IAB in shaping this future: Encouraging successful business models; highlighting developments that can be successful in bringing brands and audiences together; helping the interactive advertising marketplace grow; and increasing both interactive’s share of total marketing spend and its member companies’ share of total marketing spend.

New technologies, devices and media consumption patterns are altering the trajectory of the interactive advertising industry’s growth and expansion in real time. Given the uncertainty produced by unproven business models and technologies, how can companies make sound or at least defensible—strategic decisions about advertising that can generate profitable growth?

The IAB and Accenture initiative asked, and answered, that very question. And based on current trends and market drivers in the interactive, digital advertising marketplace, both online and mobile, we wanted to find out how the IAB could best prepare itself to serve its member companies? Thinking and planning in an informed way about the complex interactive advertising marketplace is critical to the IAB as well as to the 375-plus media and technology companies it represents—companies that collectively are responsible for selling more than 85 percent of all online advertising in the United States.

This report highlights findings from a four-part methodology Accenture employed to assist the IAB in thinking strategically about its future, and the future of the interactive advertising industry in general.

Armed with information about trends, perspectives from media and advertising industry executives and a laser view of five key market drivers, Accenture and IAB characterized four different future scenarios that the industry may take:

• All for One, but Not One for All, where in a setting of extremely distributed content ownership, smaller organizations create new brands that quickly draw online traffic; larger players aggregate these smaller players to help consolidate content, and a significant amount of consternation exists on measuring ad effectiveness.

• Big Islands, where strong consolidation of content ownership drives centralization of the buying and selling process, creates a simpler way to transact deals across far fewer properties and lowers incentive to move online.

• Chain Gangs, where a highly distributed content ownership and buying/selling environment with a huge number of players leads to multiple chains of smaller destinations linked by common profile recognition, but without common metrics that make ad buying difficult.

• Everybody Knows Your Name, where a more consolidated, centralized environment exists, but not so consolidated that content ownership is monopolistic or oligarchic. Ad networks and exchanges serve even smaller players in large part due to agreement on standard metrics.

After considering these potential futures, IAB and Accenture characterized the most likely evolutionary path as one with more touch points, better data and deeper complexity. IAB is likely to have a more proactive role in shaping this future—helping to push for standards for interoperable profiles, for example, as well as more clearly defined and embraced definitions for metrics.

Through its strategy program, and the scenario planning process undertaken with Accenture, IAB has taken a major step forward in helping to define the advertising industry for a new age, and in positioning itself as a proactive player that can shape the future for itself and its members by encouraging successful business models and highlighting developments that bring brands and audiences together.

Accenture believes it is vital for media companies and marketers to use digital technology to:

• Move the industry to more relevant, more precise metrics to grow the advertising industry in general.

• Extract deeper insights into consumers which can then be translated into compelling, tailored offerings that create unique experiences and longer-term relationships.

• Adopt more flexible and scalable technology platforms capable of creating a tailored consumer experience over both online and mobile channels with a more predictable cost structure.

• Monetize and establish revenue models based on consumer relationship-based outcomes: a known quantity of consumers whose interests are well understood.