Television holdsits ownLatest devicesmake viewingincreasinglyinteractivePage 2

Inside »

Rush to find thenext big thingLaunching productsrequires exquisitetimingPage 3

Data industryscrutinisedConsumer groupsworry about theuse of informationPage 4

FT SPECIAL REPORT

Digital and Social Media MarketingWednesday April 24 2013 www.ft.com/reports | twitter.com/ftreports

The year was 1994. JonathanNelson, then 27, was huddledround a computer in the SanFrancisco offices of HotWiredas a team prepared to push

the button on the world’s first websitefeaturing both original content andads.

Bright pink cables were strungthrough the ceiling to his offices onthe floor above, providing internetaccess to his hot digital marketingstart-up Organic. The ad agency,which he had founded the year before,had designed half of the then tech-savvy, now rudimentary, banneradvertisements featured on the origi-nal HotWired site for marketers,including telecom company AT&Tand carmaker Volvo. The team was

exhausted, having put in countlessall-nighters to make the technologieswork. The excitement in the roomwas palpable as the site wentlive, ushering in a vast digital trans-formation that continues to upendtoday’s $518bn advertising and mediaindustries.

Fast forward two decades. Mr Nel-son now works as chief executive ofdigital at Omnicom, one of the world’slargest advertising and communica-tions companies. While marketershave shifted nearly a fifth of theirbudgets to digital outlets and largelybelieve in the value of online advertis-ing, crucial challenges remain thatwill shape the next generation ofmedia, when the divide betweendigital and traditional is blurred.

“It’s the calm in the eye of the hur-ricane,” says Mr Nelson. “You knowthe winds around you are swirling,and the times are changing.”

The pace of change is both exhila-rating and exhausting. Advertisersare sifting through a proliferation ofdata and technologies that are makinga reality of the promise of targetingthe right ad to the right person at the

right time, whether those ads appearon the web, a mobile phone, a bill-board, in store or on television.

Despite the ability to measure eachclick that an ad generates, marketersstill are challenged to understand howdigital ads, especially those on socialmedia, translate into a change inperception of their brand or sales oftheir product.

Meanwhile, marketers are also fig-uring out how to crack the code on anew era of crafting digital stories. Therise of social media, combined with asurge of internet-connected televi-sions and digital video viewing, areproviding a new creative palettefor commercials. The explosion ofsmartphones is leaving media compa-nies and advertisers alike struggling

to figure out how to pitch to consum-ers on the matchbox-sized screens.

“Back in 2000, banner ads were thebig thing. That is where the moneywould go, and click through rateswere the focus. Now, a lot of thatstuff is being done by machines,” saysBob Lord, global chief executive ofPublicis’ Razorfish digital advertisinggroup.

“Where we are growing the most inour business is the next generation ofstory telling.”

Indeed, the obituary for the televi-sion ad industry was written yearsago but the rise of social media, cou-pled with the development of newtechnologies, is granting the $205bn

Continued on Page 2

Advertiserslook for waysto followconsumersEver-growing online outlets offermarketersmore varied points of contact and fresh formsof doing business, reportsEmily Steel

‘Marketers are challengedto understand how digitalads translate into a changein perception of their brand’

FT Digital MediaConference

Takesplace inLondon,25-26April.

Sign upor followit live at:www.ft-live.com/digitalmedia

On FT Live »

2 ★ FINANCIAL TIMES WEDNESDAY APRIL 24 2013

Digital and Social Media Marketing

The Silicon Valley talentwar is spilling over on toMadison Avenue.

Advertising-backedtechnology companies suchas Google and Facebookare not just looking for thebest engineers anddesigners to design amobile app – they want thebest technical and strategicthinkers in advertising too.

Creative and digitalmarketing agencies in NewYork are not simplycompeting with each otherto recruit the nextgeneration of talent. Nowthey must fend off thetechnology giants in theValley and their promisesof stock options, free foodand the opportunity tochange the world.

“The agency industryhas done a bad job overthe past decade of keepingthe industry appealing totop-tier talent,” says BrianWieser, analyst with thePivotal Research Group.

The technical landscapein marketing is changingrapidly, creating adramatic rise in demandamong agencies for peoplewith digital skills.Competition for peoplewith a specialisation insearch advertising washigh about four years ago,then it was social mediamarketing, notes NigelMorris, chief executive ofAegis Media, Americas andEmea. A year ago,everyone was chasing appdevelopers. Now the hotcommodity is people whocan build sophisticateduser experiences.

It is rare to find peoplewho understand thetechnical side and thebroader strategic thinkingof the marketing world –people who can move fromtelevision to mobile, yetconnect different media tothe goals of the advertiser.

“We have people who aregood at digital strategy butthey see everything from adigital perspective,” saysMr Morris.

“There are relatively fewpeople who have a strongenough understanding ofall the different emergingopportunities in digital,with a broad enoughbrand and businessunderstanding in order toprovide the strategiccontext under that.”

The advertising andmarketing world mustcontend with the shiftingcultural values of theyounger, millennialgeneration. The Mad Menappeal of working inadvertising has narrowedamong younger people,who are increasinglyinterested in joining acompany with a boldmission statement.

“In the past, advertisingwas sexy, it was the coolthing to do,” says JanaRich, managing director atRussell ReynoldsAssociates, a recruitingfirm. “Now there’s a wholeother option that is quitedifferent that speaks tothe same group of people.Many younger folksare making choices tojoin high-growth, exciting

companies, where theremay not be a financialupside but, first andforemost, is about beingpart of a mission.”

While cash salary maybe 20-30 per cent lower inthe tech world comparedwith advertising, the stockoptions, if the person waitsthe four years until theyvest, make the overallpackage higher, Ms Richsays.

The work environmentplays its part. Tech start-ups have pioneered flatleadership, open planoffices, beer and Red Bull-stocked fridges that havebecome a signature ofSilicon Valley offices.There, people in their mid-twenties with a few yearsexperience can get seniorpositions with seriousresponsibility. In the adworld, young people haveto earn their stripes andmove up through theranks, while opportunitiesto move beyond middlemanagement are limited.

“It’s as much peopleescaping agencies asjoining something new,”says Mr Wieser.

Executives at AegisMedia are taking a leaffrom the Valley playbook.They are trying to flattenthe hierarchy so thatyoung people have moreopportunities. They nowinclude social media-stylesoftware that allowsgreater collaboration and

the leadership is trying tobe more transparent sopeople feel more motivated.

Even the way they pitchtheir business to youngcollege students thinkingabout which industry to gointo is changing.

“I wouldn’t use the word‘advertising’,” says MrMorris. “We talk aboutpeople, we don’t talk aboutconsumers.”

Other agencies still findthat young people see theprospect of working withbig brands such as CocaCola, Wells Fargo, or Appleas more important andexciting, says Ms Rich.

Don Scales, the chiefexecutive of iCrossing, adigital marketing agency,says this gives promisingtalent an opportunity todevelop their own voicebetter than a techcompany with a singularfocus. “You can createyour own personal brandquickly, as opposed tostart-ups where personalbranding for the most partis limited to the CEO.”

The company tries tokeep up with SiliconValley, where campaignsare prototyped every twoweeks and changes can beseen in real time.

“You can bring thesekids in and can pumpthem full of Red Bull allday, but if the CEO doesn’tknow their name anddoesn’t say ‘hi’ to themand doesn’t know thethings they’re working onand congratulate them ona good job, then they’regoing to get disenchanted.”

Struggle to stayon top of amoveable feastPeople

April Demboskydiscovers an industrydesperate for talent

‘We talk aboutpeople, we don’ttalk aboutconsumers’

Nigel Morris

business a new lease on life.“I don’t want you to think

that television is going tolose here,” says LauraDesmond, global chief exec-utive officer of Publicis’Starcom MediaVest Group,whose clients includeProcter & Gamble, Samsungand Walmart. “Screens thatcan allow more relevantmessaging, based on morepersonalised data will win.”

Marketers develop sophis-ticated systems to targettelevision commercials toparticular consumers basedon who is likely to be inter-ested in their product.Think dog food ads for dogowners and nappy ads forparents of a newborn.

Advertisers increasinglytap into the proliferation ofsocial media data to help

Continued from Page 1 determine the videos,graphics, pictures and othercontent that they create.The goal: to understand themessages that will best res-onate with a target audi-ence and make it easy forpeople to share thosemessages with their socialnetworks, catapulting thebrand to the centre of dig-ital chatter.

“In the last 50 years, wehave been working in blackand white,” says Mr Lord.“What technology does is itbrings you new talent andit brings you into colour.”

Samsung worked withNetworked Insights, asocial media analytics com-pany, to help design itsmuch-talked-about cam-paign for its Galaxy S IIIAndroid mobile phone.

A Networked Insightsteam followed social media

for critiques on the iPhone5as Tim Cook, Apple’schief executive, announcedits launch. Copywritersinstantly worked the com-ments into a series ofacclaimed print, digital andtelevision ads that Samsungcredits with helping toboost its market share.

Marketing executives saythat, without doubt, socialmedia have emerged as acrucial and valuable newtool for understanding con-sumer sentiment and com-municating with customers.

What they are still seek-ing to understand is exactlywhere social media shouldfit into their broader adbudgets, where televisionand print still compete forvaluable resources.

Previously, Facebookfocused its sales pitch onthe small but growing por-

tion of budgets that market-ers spent on social media.Now, with an audience ofmore than 1bn, the socialnetwork sees itself as beingpart of mass media.

That puts it in direct com-petition with television,where marketers still spendthe largest portion of theirad dollars.

“The biggest challenge ismaking sure that we do nothave a conversation that issolely focused on a socialmedia budget, but that weactually are having theright conversations at theright levels as Facebookas a brand-building plat-form,” says CarolynEverson, Facebook’s vice-president of global market-ing solutions.

The quick rise of new dig-ital ad players increases thecompetition for some of the

companies that have longdominated the industry.Google faces a wave of newcompetition for ad dollarsin the $48bn search adver-tising business, from play-ers ranging from Facebookto Amazon.

Some new media are

wildly popular among con-sumers but have yet todevelop sustainable ad mod-els. Mobile media isexpected to capture morethan 20 per cent of mediaconsumption in the nextfive years, but just a minus-cule portion of total adver-tising revenues.

A glut of advertisinginventory is flooding themarket at the same time asmarketers raise questionsover the value of mobileads. As a result, ad ratesare plummeting, causingconcern for publishers.

Sleek Hollywood studioshave emerged to producehigh-quality online videocontent for a generation ofviewers who are just aslikely to watch contentonline as they are on televi-sion. Questions loom overwhether the advertising dol-

lars will follow. These vastchanges are transformingthe type of people who rulethe advertising business.The 1960s era of three-mar-tini lunches and “creatives”who ruled the advertisingworld depicted in the MadMen television show is nomore. It is being replacedwith employees armed withdata and schooled in tech-nology. Marketers andadvertising agencies strug-gle to compete with techcompanies to recruit thenext generation of talent.

Indeed, the change hasonly just begun. Accordingto Omnicom’s Mr Nelson:“You are seeing the indus-try really shift fast rightnow, the budgets aremoving really quicklyto digital. But we’veonly just scratched thesurface.”

Advertisers look for ways to follow consumers

Search remains the undis-puted king of online adver-tising and Google the undis-puted king of search. Butthe monolithic keyword-driven system that hascome to dominate theindustry over the past dec-ade is facing a sea change,according to advertisingindustry experts.

The result will be a moresophisticated system thatresponds to a wider rangeof signals, where companiesother than Google are likelyto play an influential role.

Keyword search has beenin a transition that hasbrought reassessment of itsimportance. One reason hasbeen the greater refinementthat has come to measuringthe effectiveness of differ-ent forms of advertising.

Because the response tosearch advertising can bemeasured precisely andadvertisers can track whenconsumers go on to makepurchases, it has come to beseen as an unrivalled formof online direct-responsemarketing. But other formsof advertising play a partearlier in the process.

“People are getting moresophisticated about wheresearch fits in,” says BenWood, UK and Emea headat iProspect, the digitalmarketing agency. That hasled to greater awareness ofthe value of other forms ofadvertising, from televisionadvertisements to socialmedia, he says.

The shift to mobile hasbrought a direct challengeto the importance of searchin the online world.

“A lot of traffic is goingto mobile devices – and alot of that is in apps, whichare unsearchable,” notesKarsten Weide, vice-presi-dent of media and enter-tainment at researchersIDC.

Search’s share of overallonline advertising has beenslipping, though at a veryslow pace. From 56 per centin 2009, it will fall to 50 percent by 2017, forecasts IDC.

However, the biggestshifts in search functionsare only just starting to befelt. They involve the com-bination of new typesof data with traditionalkeyword search to producemore refined forms of tar-geting.

“Keywords are certainly asignifier of intent but thereare so many differentsignals now,” says RebeccaLieb, an analyst atAltimeter, a research group.

As a result, she adds,“what once looked like ahighly targeted form ofadvertising looks like ablunt instrument now.”

Foremost among the newtypes of data is the informa-tion that comes from thesocial media world. Face-book did not announceany new forms of advertis-ing to accompany therevised “graph search” it

launched this year, thoughfew in the industry doubtthat such a move is far off.

“If they decided to switchit on in a big way, theyhave tremendous distribu-tion. Overnight, it would bea big threat to Google’sdominance,” says MrWeide.

An indication of Face-book’s potential to disruptthe search market can beseen in its influence in localsearch, argues Greg Ster-ling, an analyst at OpusResearch. He points to datafrom online measurementbody ComScore showingthat, thanks to its largescale, the social network issecond only to Google as a

local search source andahead of specialist localsites and directories.

A second source of datahaving an impact on searchcomes from mobile devices.Adding information aboutlocation can help advertis-ers target more precisely.Mobile searches often hap-pen when people are closeto a decision about a pur-chase, making them morevaluable, says Mr Wood.

If mobile search priceshave been rising, however,it may not entirely bebecause advertisers havereassessed their value.Google this year combinedits PC and mobile searchadvertising services, endingthe pricing divisionbetween them.

The move has inevitablybrought complaints that thecompany set out deliber-ately to force mobile adver-tising rates higher. Mostbrand owners are contentwith the changes, whichhave resulted in a simplersystem that makes it easierto buy campaigns and track

user behaviour acrossdifferent devices, says MrSterling. One of the mostvaluable bodies of data thathas yet to be fully appliedto refining search advertis-ing involves individualusers’ purchasing histories.

The prospect of combin-ing data about a person’spast purchases with signalsabout their future intenthas advertisers salivating,according to analysts.

Were a company likeAmazon to make this dataavailable to others, allow-ing it to be combined withother sources of informa-tion to create new targetingpossibilities, “it would beincredibly powerful”, saysMs Lieb.

Such an advertising net-work, while long rumoured,has yet to see the lightof day. Like Facebook,though, Amazon lookspoised to move in on amarket that has effectivelybeen built and owned byGoogle, with far-reachingimplications for onlineadvertising.

Keyword-driven system requires refinementFuture of search

Richard Waters seesfresh challenges toGoogle’s dominance

What can the secondscreen do for the first?Television was once a“lean-back” experience,passively consumed

from the comfort of the couch, but theproliferation of laptops, smartphonesand tablets is making media multi-tasking the norm.

As viewers’ eyes flick from the setin the corner to the device in theirhand, how do television companies –and their advertisers – turn a poten-tial distraction into a tool for deeperengagement?

The scale of the distraction isimpressive. A survey by TimeWarner’s Medialab found that 52 percent of people with both a televisionand a laptop habitually multitaskedwhile watching TV. Add a smart-phone and a tablet and the figurerises to 65 per cent.

Some of those screens are beingused for emails, texts and contentunrelated to what viewers are watch-ing. Yet much of the growth is insocial media discussions of TV showsand digital content designed to deepenengagement with programmes.

PwC found that “social TV” activityon Facebook, Twitter and Googlenearly tripled in the second quarter of2012 from a year earlier. This year’sNCAA basketball tournament simi-larly generated 16.3m social mediacomments, an increase of 112 per centover 2012, Turner Sports reported.

Audiences’ appetite for digital alter-natives to shouting at the screen hasspawned several second-screen appli-cations and analytics companies andsome prominent deals. Viggle, whichoffers loyalty rewards to fans who“check into” shows, bought GetGlue,a social TV app developer with 3musers who have checked into, rated orreviewed 500m shows.

In November, Nielsen bought Social-Guide, a social media analytics group,and in February Twitter boughtBluefin Labs, which analyses socialTV chatter.

“Twitter is an amazing complementto live television viewing,” AliRowghani, Twitter chief operatingofficer, said in announcing the deal.

TV networks seem to agree. “Thereality of the second screen is thatbroadcasters are already on board,”PwC’s report concluded. A secondscreen is a second opportunity to selladvertising and networks increasinglycite social media buzz as part of theirpitch to brands.

Time Warner’s Turner BroadcastingSystem recently boasted, for example,that Conan O’Brien’s late-night com-edy show on TBS generated 20 percent more social media comments perepisode than those of his peers.

To demonstrate that those commen-tators were not ignoring the show,TBS used biometric monitoring toshow that people using Facebook,Twitter or GetGlue while watchingTV were 1.3 times more engaged thanthose watching without social mediasites or apps.

Such figures suggest that socialmedia can heighten viewers’ interestwithout much effort on programmers’part, but TV executives are puttingincreasing resources into social mar-keting and digital content to deepenengagement further.

MTV has invited viewers to tweet

their votes for its Video Music Awardsand CBS recently staged a“TweetWeek”, with stars – and evenset designers – live-tweeting showsfrom NCIS to the venerable The Priceis Right.

Philip Bourchier O’Ferrall, seniorvice president of Viacom InternationalMedia Networks, says the GeordieShore cast’s combined 7m socialmedia followers have helped build theMTV UK show’s TV audience. “I haveno interest, frankly, in just growingthe successes of Twitter and Face-book,” he points out: “My number onerole . . . is to drive TV ratings.”

To do so, he says, VIMN has startedto look differently at the “story arcs”of its shows to make sure each onehas enough “digital media peaks”,which will drive social chatter ordirect viewers online for additionalcontent.

When a Geordie Shore cast membergets a tattoo the scene may last just30 seconds on TV but a tweet from thestar can direct fans to 30 minutes ofextra footage.

Such second-screen content needs tooffer the audience value, Mr O’Ferralladds, but the definition of value con-tent varies between genres. Statistics

may be what persuades a baseball fanto download the MLB.com At Bat app,whereas HBO's Game of Thrones appcan inform fans exactly where Aegonthe Conqueror landed in Westeros ordistinguish Tysane Frey from TytosBrax.

Not all shows generate such obses-sive interest and some caveats areworth remembering. In many mar-kets, tablets remain relatively rareand audiences of different agesrespond differently to social media.

Nielsen’s SocialGuide found that an8.4 per cent increase in Twitter vol-ume correlated to a 1 per cent rise inratings for new shows among viewersaged 18 to 34. For 35 to 49-year-olds,however, it took a 14-per-cent jump intweets to produce the same 1 per centratings bump.

SocialGuide’s finding that 32m peo-ple tweeted about TV last year in theUS – just 10 per cent of the population– sets social TV into perspective.

The average American still spendsabout five hours a day glued toTV, which suggests that the firstscreen has staying power but,as viewers lean in to social anddigital media, broadcasters and adver-tisers can ill afford to lean back.

Watchingtelevision nolonger rates aspassive pastimeMediaBroadcasters findways tomakeviewing increasingly interactive, writesAndrewEdgecliffe-Johnson

‘What once lookedlike a targeted formof advertisinglooks like a bluntinstrument now’

Casting shot:Charlotte LetitiaCrosby of thereality TV series,‘Geordie Shore’,which has 7mfollowers

Getty

A scene may last just 30seconds on TV but a tweetfrom a star can direct fansto an extra 30 minutes

Emily SteelUS Media and MarketingCorrespondent

Andrew Edgecliffe-JohnsonMedia Editor

Tim BradshawApril DemboskySan Francisco Correspondents

Richard WatersWest Coast Editor

Robert BuddenChief Media Correspondent

Robert CooksonDigital Media Correspondent

Matthew GarrahanLos Angeles Correspondent

Aban ContractorCommissioning Editor

For advertising, contact: JamesAylott: +44 (0)20 7873 3392;email: james.aylott@ft.com

Contributors »

On FT.com »Interactivegraphic and videoDigital andSocial MediaMarketing

www.ft.com/dsm

FINANCIAL TIMES WEDNESDAY APRIL 24 2013 ★ 3

Digital and Social Media Marketing

It was a typically polished confer-ence presentation by Google –until its sci-fi goggles came out.

Ending a session at a marketingassociation event on its latest

mobile advertising products, Googleshowed a video of Project Glass, itsexperimental wearable technologythat places a camera and tiny screeninside a pair of spectacles.

“It was so random,” said oneattendee of the event. “We were allpretty confused by it.”

Google Glass is a technicallyimpressive achievement yet, in thewrong context, it risks looking like agimmick. What goes for Google goesfor the rest of the marketing world.

Although agencies often attempt it,leaping on the “next big thing” doesnot always bring long-term value.

“We don’t hunt for new things, justfor the sake of jumping on the ‘shinynew thing’ bandwagon,” says BabsRangaiah, Unilever’s vice-presidentfor global media innovation.

Unilever identifies trends and com-panies “that we feel have potential forthe longer term”, he says. These arecompanies such as Jawbone’s health-monitoring devices and the “Quanti-fied Self” movement for self-monitor-ing, and content “curation” apps suchas Flipboard. “Within that, companieswill come and go, there will be someconsolidation, there will be some win-ners and many that will lose.”

Labour-intensive campaigns incor-porating buzzy new apps, such asFoursquare in 2009, may give brands ashot of good public relations forappearing innovative. In hindsight,however, the costs probably outweighthe benefits. Even Pinterest, lastyear’s hot startup, has seen itsmomentum falter.

“Within the social space it’s veryhard for newcomers to break thesocial monopolies held by Facebookand Twitter,” says Norm Johnston,global digital leader at Mindshare, aWPP media agency.

“Both have done a good job inacquiring, adding to, or augmentingtheir experiences to the detriment ofFoursquare and Pinterest.”

At the same time, early adopters ofphoto-sharing app Instagram havebeen handsomely rewarded. Within ayear, the Facebook-owned app hasseen its audience grow from 30m to

more than 100m. A handful of brands,including Starbucks, Nike, MTV andForever 21, have attracted more than1m followers on Instagram, while doz-ens more – mainly retailers, fashionlabels and media companies – havehundreds of thousands of fans.

Instagram highlights the rise ofimages in social networking, an areawhere brands have a natural advan-tage, with access to professional pho-tographers and celebrity endorsers.

“I think increasingly – and arguablysince the beginning of time – peoplefind they can express so much more

than words through imagery,” saysJustin Cooke, chief marketing officerat the fashion retailer Topshop, whobelieves that Instagram and Pinterestare “scratching the surface – we areat the beginning of their capabilities”.

Dan Calladine, head of mediafutures at Carat, part of the DentsuAegis Network, has noticed that manybrands’ posters and in-public stuntsare being created in Instagram-friendly square formats. “It’s a won-derful way to get your brand personal-ity across,” he says of Instagram.

Brands are finding that slogans and

catchphrases are making a resur-gence, embedded in photos on Pinter-est or Instagram. “I love images withquotes from great authors and leadersand I see that as a big trend combin-ing the two,” says Mr Cooke.

As marketers scramble to find theInstagram of video, Twitter’s app forsix-second clips, Vine, has proven anearly contender, topping the iPhoneUS app charts in April, three monthsafter its launch. Mr Calladine says theapp has attracted interest from clientssuch as Adidas, who sent out newshoes to Vine users who run sneaker

blogs, and Fox, which made a six-sec-ond trailer for its film The Wolverine.

“It’s analogous to Twitter,” says MrCalladine of Vine’s enforced brevity.“When it came along people said youcouldn’t do anything in 140 charac-ters. But people are.”

In March, British agency veteranTrevor Beattie became the latestadman to declare “the death of the30-second TV ad”, this time because itwas “too long”. “Five seconds is theright length,” he told the AdvertisingWeek conference in London, notingthat brands using YouTube’s skipp-able pre-roll ads have only that longto grab viewers’ attention before theymove on. “People know within twoseconds if they like something.”

Mindshare’s Mr Johnston says that,while the likes of Vine have seen“some limited interest” from his cli-ents: “Most are still struggling towork out the new six-second format.”

Yet mastering short, snappy contentwill become only more important asmedia consumption goes mobile. Chatapps such as Whatsapp, Line, WeChatand Snapchat are gaining huge follow-ings on smartphones, with hundredsof millions of users between them.

Some of these are starting to allowbrands to join what have largely beenprivate conversations betweenfriends. Starbucks and Nike areamong the early adopters of WeChat.

Unilever’s Mr Rangaiah says suchapps are “clearly generating tractionin various markets and hitting scaleamong younger users”.

“So, we’re interested, but we’ll haveto work with them to create a modelfor marketers because there doesn’tseem to be one yet,” he says.

The makers of Whatsapp have saidthey are generally opposed to adver-tising and some brands are concernedthat people may not expect to beinterrupted by brands in private mes-saging apps. Mr Calladine suggeststhat in spite of a few marketers exper-imenting with Snapchat such activityis more likely to be for the PR value.

So, if the lure of the gimmickremains alive and well, will brandssoon be vying for the ultimate in geekchic, Google Glass? Mr Johnston saysthere is a limit to just how geekybrands want to be, suggesting it is“arguably ahead of its time. It’s animperfect glimpse into the future”.

Agencies scramble to find the next big thingNetworking apps Innovative ideas can offer rich rewards but launching products also requires exquisite timing, reportsTimBradshaw

Geek chic: Sergey Brin,Google co-founder, wears itsexperimental Project Glass Getty

‘Within the social space it’shard for newcomers tobreak the monopolies heldby Facebook and Twitter’

There is a new kid on theblock in the advertisingworld, with online videoevolving rapidly and audi-ences on the rise. Forgetabout skateboarding catsand the amateur, user-gen-erated videos that used todominate YouTube: thesedays the internet is fullof slick, professionally-pro-duced programming thatwould not look out of placeon prime time television.

Whether it’s Vuguru’scomedy Little Women, BigCars, which attracted bigaudiences on AOL, BurningLove, from Ben Stiller’s RedHour Films, airing exclu-sively on Yahoo, or any ofthe new YouTube channelspacked with professionally-made content, the quality oforiginal online video isbeginning to comparefavourably with TV.

The question for produc-ers of this content and theplatforms that distribute itis whether advertising dol-lars will follow viewersmoving from TV to online.Analysts say it will, eventu-ally. Total advertising ondigital video is forecast toalmost double from about$4bn in 2013 to $8bn by 2016,according to eMarketer, theresearch company.

TV will continue to be theprimary home of videoadvertising, with revenuesprojected to rise from $66bnin 2013 to $73bn. Despite thefragmentation of audiencesand time-shifting viewerswho use DVRs to watchprogrammes when theychoose – and skip the ads –TV will “continue to domi-nate spending”, says theeMarketer report.

“These two worlds –online video advertisingand television advertising –are going to collide,” saysTracey Scheppach, execu-tive vice-president of inno-vation at VivaKi, a divisionof Publicis specialising in

digital advertising. “Whatwill emerge is the idea ofaddressable advertising.” Inother words, advertisingthat is targeted specificallyto the particular viewerbased on available data.DirecTV and Dish Network,two satellite operators, arealready experimenting withtargeted TV ads.

Online video can person-alise ads – some sites, suchas Hulu, allow viewers tochoose ads which are morerelevant to them beforeviewing. But, until they per-fect the art of online ad tar-geting, the digital video sec-tor has a potential problemto grapple with. The sheernumber of platforms, pro-ducers, publishers and pro-grammes out there mean anabundance of advertisinginventory is available forbrands looking to reach par-ticular audiences.

YouTube has bankrolledmore than 100 channelsfrom companies, includingVice Media and Machinima,to create original content;other operators, such asMaker Studios, which isbacked by, among others,the actor Robert Downey Jrand media executive Elisa-beth Murdoch, have createda network of online videostars.

These companies havebuilt vast online audiencesbut, with all the program-

ming available, advertisersare struggling to catch up.CPMs – the cost per thou-sand impressions, a keyadvertising metric for thesector – are under pressure.BrightRoll, a digital videoadvertising company, saysonline video CPMs in 2012were down by as much as15 per cent on 2011. CPMs,says eMarketer, will fallfrom $45 in 2010 to $31.20 by2014, where they are pro-jected to stay flat until 2017.

Is this decline bad newsfor the producers and dis-tributors of online video?“The people making theshows are seeing moreusers and [the number ofusers] is growing exponen-tially,” says Dan Mosher,general manager ofBrightRoll Exchange, thevideo advertising exchange.

This, he says, will offsetthe decline in CPMsbecause the number of peo-ple watching online video isgrowing faster than thoserates are falling. “This isabout the overall industrygrowing. Advertisers aren’thitting the kind of scale indigital video that they areused to in TV.” Advertisingspending will continue tomove from TV to onlineplatforms, he adds. “We’realready seeing that and itwill continue to happen.”

His confidence is echoedby Larry Tanz, chief execu-tive of Vuguru, one of themost prolific producers ofprogramming for the web.The company makes showsfor distribution on a rangeof platforms, includingHulu, AOL and Yahoo,which is airing Vuguru’spuppet comedy, The Fuzz,

“There’s been a bigincrease in volume [of view-ers] and there are also moreadvertisers,” he says.

The bigger issue for thesector is that it is so young,Mr Tanz adds: brands arenot used to buying advertis-ing time in the way theybuy airtime on TV.

That will change. “This isa great time to be a contentowner and creator becausenow you have distributionplatforms that are trying toincrease their inventory byincreasing their audiences,”he says. “They need pre-mium and original contentto do that.”

Web of creativity means greateropportunities to boost salesOnline video

Growth of platformsand content changesthe nature of thegame, writesMatthew Garrahan

Screen saver: Ben Stiller’s ‘Burning Love’ airs on Yahoo Getty

The number ofpeople watchingonline video isgrowing faster thanad rates are falling

4 ★ FINANCIAL TIMES WEDNESDAY APRIL 24 2013

Digital and Social Media Marketing

During the important back-to-school and holiday shop-ping seasons, a US nationaldepartment store chainwanted to steal customersfrom the competition.

The retailer sought helpfrom Acxiom, the globalconsumer data broker thatcollects information aboutmore than 700m peopleacross the world and sellsthat information to morethan 7,000 clients. Tappingcredit card transactiondata, primary research, geo-graphic information andother demographic details,the companies designed atargeted marketing pusharound Acxiom’s new Audi-ence Propensity models.

The system does not sim-ply track a consumer’s pastbut analyses a broad set ofdatapoints to predict whatindividuals are likely to do.The result: a 50 per cent liftin average purchases anda more than tripling ofreturn on investment in thecampaign.

“Modelling in the pastwas elementary,” says TimSuther, Acxiom’s chief mar-keting and strategy officer.“This development is gamechanging.”

The holy grail for market-ers has long been to showthe right ad to the right per-son at the right time,whether they are on theweb, mobile phones, digitalbillboards, in stores or ontelevision. A proliferation ofdata about the individuals –from credit card transac-tions and other finances tosocial media activity, onlinesearches and political lean-ings – coupled with cutting-edge analytic and targetingtechnologies makes thatdream possible today.

On Facebook, forinstance, a marketer canbuy ads targeted at peoplewho spend three timesmore than the nationalaverage on children’s cerealbased on purchase informa-tion from Datalogix, a datacompany. Marketers thencan tap the data to figureout whether or not peoplewho saw the ad end upvisiting the store and buy-ing the advertised product.

Other futuristic visions,such as a Verizon patentapplication that describes atelevision that can listen inon people’s conversations toselect personalised ads, arenot beyond the scope ofwhat is technologically pos-sible today.

But questions over digitalprivacy threaten to preventthat future from becominga reality.

Consumer privacy advo-cates fear a world wheresuch personal informationcreates a so-called “data-base of ruin”, where indi-viduals’ secrets about sensi-tive topics such as medicalconditions, sexual historyand financial details wouldbe mined and used againstthem. Imagine not beingable to obtain health insur-ance, a mortgage or a jobbased on those details. Theyworry about corporationsthat use the data to prey on

vulnerable populations,such as children or peoplewith mental health issues.

“I am concerned that therich profiles being createdabout consumers can beused to harm them at workand in their financial lives,”said Julie Brill, a commis-sioner with the US FederalTrade Commission, inDecember. “I’m equally con-cerned that consumers areunaware of this data collec-tion and use activity or thecompanies that engage in it,and so have very littleopportunity to exercise anycurrent rights they mayhave to opt out, access orcorrect this data.”

Prompted by concernsabout a data industry thatlong has operated in thedark, lawmakers and regu-lators across the globe arestepping up their scrutinyof the business.

In the US, for instance,the Federal Trade Commis-sion in December launchedan investigation into ninedata brokers, includingAcxiom and Datalogix. Theeffort followed similar que-ries raised by US lawmak-ers. The Obama administra-tion last year unveiled aConsumer Privacy Bill ofRights to create greater pro-tections for consumers andpledged to work with Con-gress to develop morerobust privacy legislation.

No laws in the US requirethat data brokers maintainthe privacy of individual’sdata unless they are usedfor credit, employment,insurance, housing or simi-lar purposes.

Some data brokers areattempting to fend off regu-lation by making their oper-

ations less opaque. Acxiomrecently said it was in theprocess of building a newsystem that would reveal toconsumers what it knowsabout them. Acxiom said itwas “not on the radar now”for people to be able to com-pletely delete their profiles.Facebook said other datacompanies are required tobuild similar systems to selldata as part of its new adtargeting initiatives.

Privacy advocates worrythat the developments arenot enough. “The fact of thematter is, yes, this is toolittle, too late,” says JeffChester, executive directorof the Center for DigitalDemocracy, which is con-ducting research into theinvasion of privacy tied toonline financial marketing,children, mobile, social net-works and the pharmaceuti-cal industries.

“Businesses have per-fected a model that allowsfor the millisecond-by-milli-second collection of data tocreate individual profiles onglobal consumers.”

Lawmakers may fall vic-tim to a conflict of interest,meanwhile, when develop-ing stronger privacy protec-tions. Increasingly, politi-cians deploy the sametracking, analytics, person-alisation and targeting tech-nologies as corporations intheir election campaigns.

Data industryscrutinisedover profilingPrivacy

Consumer groupsare worried abouthow information onthem is being used,says Emily Steel

‘I am concernedthe rich profilescreated aboutconsumers can beused to harm them’

It knows your most inti-mate details, from youronline browsing habits towhere you live, work andplay – and it demands yourattention wherever you go.

Marketers could hardlyhave dreamt up a bettermedium for advertisingthan the smartphone.

Yet, even as people spendan increasing amount oftime glued to their smart-phones and tablets, mobilerepresents less than 3 percent of total ad spendacross all media in mostmajor markets. But that isstarting to change asbrands wake up to theunique opportunities of themedium for immersive,highly-personalised ads.

As smartphone ownershiplast year surged past 50 per

cent of the US population,mobile ad spending hasbecome the fastest growingamong all media categories.

In the UK, at the leadingedge of the trend, mobileadvertisement expendituremore than doubled in 2012to more than £500m. Thisaccounted for a tenth of alldigital advertising.

Publishers, for their part,grapple with the speed atwhich visitors to their sitesare shifting from desktopcomputers to mobiledevices, says Rob Jonas, anexecutive at PubMatic, anad sales platform for pub-lishers.

The problem for publish-ers is that demand fromadvertisers for mobile adinventory has laggedbehind the huge increase inavailable space, causingaverage CPMs (cost perthousand impressions) tofall well below $1.

In an attempt to boosttheir revenues, a small butincreasing number of pub-lishers are allowing mediabuyers to place ads on theirmobile sites in real time,using exchanges whereindividual ad impressions

are traded like stocks. Real-time bidding, which nowaccounts for about a fifth ofonline display ads, is espe-cially powerful on mobile.

“On mobile, there’s anawful lot more informationabout the user. It knowswhere you are and it knowsmore about things thatyou’ve done than perhapsyour PC does,” says MrJonas.

“So, therefore, it’s veryattractive to advertisersbecause of that richness ofinformation.”

To illustrate the power ofmobile advertising, London-based ad technology groupBlisMedia recentlylaunched a showpiece cam-paign targeted exclusivelyat potential clients.

The company identifiedthe precise co-ordinates ofthe offices of big agenciessuch as WPP, and targetedany mobile phone it coulddetect at those locationswith interactive banner ads.

The ads, which showed asoapy screen, were expand-able and allowed viewers to“clean” away the soap bub-bles with their finger.Behind the bubbles stood

BlisMedia’s sales director,inviting viewers to call thecompany by touching thescreen.

“It was incredible,” saysKevin McGovern, chiefoperating officer at Blis-Media.

“We started running thecampaign at 9am on a Mon-day morning and by 11o’clock the phone was ring-ing with people asking,‘how did you do this, howdoes it work?’”

Brands have started tospend up to £100,000 a goon location-based mobile

campaigns, something thatwas unheard of a few yearsago. Tesco, the supermarketgroup, used BlisMedia totarget ads at people withina mile of competitors’stores.

Royal Bank of Scotlandused a combination oflocation and demographicdata to advertise its spon-sorship of the Six Nationsrugby championship only tomales aged 20 to 24 whowere in certain places, suchas four and five-star hotelsand airports.

Not everyone is con-vinced that location-basedtargeting is mobile’s biggeststrength.

“I’d say what makesmobile different is first andforemost the personalnature of the device,” saysVictor Malachard, chiefexecutive of Adfonic, a plat-form for buying ads onmobiles.

“If you’re engaging with aperson through a smart-phone or a tablet, you’regoing to have that person’sattention far more than ifyou were engaging withthem through desktop ortelevision or print.”

One of the biggest trendsthis year will be the rise ofimmersive, “rich media”ads on mobile, says MrMalachard.

Until recently, mobileshave mostly been vehiclesfor search and displayadvertisements.

The rollout of ultra-fast4G mobile broadband acrossthe world is expected to fuelthis shift to bandwidth-hungry interactive ads,which are able to make themost of the touchscreen fea-tures of mobile.

Innovations in mobileadvertising are cropping upalmost every month.

Nuance, a US companythat develops speech recog-nition technology, thismonth launched a productthat allows advertisers tocreate ads that respond to auser’s voice.

Gone are the days whenadvertising was limited tostatic images or dumbvideos.

Tomorrow’s ads will notonly be personalised, basedon where you are and whatsites you visit, but they willalso be able to ask youquestions, too.

Canny advertisers target your mobile phone

Carolyn Everson is in themidst of a marathon week.It started at Facebook’sheadquarters in MenloPark, California, with a day-

long meeting for its council of some ofthe world’s most powerful advertisingexecutives followed by a 20-hour dayon the launch of Facebook Home, thesocial network’s new “super app” forAndroid smartphones.

Facebook’s vice-president of globalmarketing then found herself flyingthrough Montclair, New Jersey, NewYork and London, evangelising Face-book’s advertising business. Theweek, which included a stop in Aus-tin, Texas, for the wedding of anotherFacebook executive, mirrors thewhirlwind of the past year, duringwhich she has circled the globe on amission to listen to marketers’ needsand convince them of the value ofadvertisements on the social network.

“The business is in a fundamentallydifferent position today compared to ayear ago,” she says, which has noth-ing to do with going public but rathera focus on building services to appealto both advertisers and Facebookusers. “We’re on a journey, and wealways say we are 1 per cent done.”

The bubble around Facebook’s ini-tial public offering started to deflatelast spring when major marketersquestioned the value of advertising onthe site. It wasn’t that they dismissedthe value of communicating with con-sumers on the site, which largely wasfree, but rather they didn’t knowwhether buying ads would spur sales.

The most prominent was GeneralMotors, which announced it wouldstop buying ads because of questionsover what returns the ads generated.

Facebook has spent the past yearworking closely with major advertis-ers to develop new advertising prod-ucts, including ads that feature moreprominently in the news feed as wellas on mobile devices. It launched aseries of measurement and data initia-tives that let marketers more pre-cisely target ads based on parameterssuch as actual shopping patterns andthen measure whether people who seetheir ad end up buying the product.

Conversations between Facebookand marketers have shifted fromsocial media speak about the numberof fans a brand has, executives say, tomeasuring the actual business results.“They were talking in a language thatmedia buyers and marketers didn’treally want to speak to them in,” saysColin Sutton, director of social mediafor advertising company Omnicom’sOMD media buying firm. “Theyneeded to talk the language – not ofmoney – but of marketing.”

While some questions linger, mar-keters are changing their tune andare expected to spend more than$5.6bn on Facebook advertising thisyear, up more than 31 per cent from$4.3bn in 2012, according to eMar-keter, the digital media analyst. Onmobile alone, Facebook is expected toearn $1.5bn this year, more than threetimes the $471m it earned in 2012.

Even General Motors recentlyannounced it would return to buyingads on Facebook by testing the site’snew targeting and measurement offer-ings for a mobile ad campaign promot-ing its Chevrolet Sonic sedan.

“It is generally accepted that Face-book does have an impact,” saysJonathan Nelson, chief executive ofdigital at Omnicom. “What we’restruggling to figure out is the exactimpact and how that fits into theoverall media mix.”

Laura Desmond, global CEO ofStarcom MediaVest Group, whoseclients include Procter & Gamble,Samsung and Walmart, adds: “Whenyou try to have the old systems of thepast measure what Facebook is doingwith consumers and brands, it doesn’twork. What Facebook is doing is amodel buster. Brands and measure-ment are catching up.”

Take Unilever, maker of Dovesoaps, Ben & Jerry’s ice cream andVaseline, which has boosted its Face-book spending in the past year. KeithWeed, chief marketing officer, is amember of Facebook’s client council,where he has provided feedback onmarketing initiatives, advocated newproducts and gained early access tonew capabilities. The developmentshave helped Unilever understand howads on the site lift sales, spurring big

promotions such as a recent campaignin Brazil for Seda hair products.Unilever designed a campaign withmobile ads featuring a soap operaactress. The company credits the cam-paign with boosting market share.

“The challenges and opportunitiesof online advertising . . . [revolvearound] the speed of change and inno-vation,” says Debbie Weinstein, Uni-lever’s vice-president of global media.

“We are confident that the degree ofcollaboration we have with them putsus in a good place to be able tocapitalise on this ever-changing land-scape, and shape what we are able todo with them.”

Ms Everson, a former ad sales exec-utive at Microsoft and MTV, says sheaims to continue to build mobile busi-ness and convince marketers to thinkabout Facebook on the same scale astelevision, where marketers spend themajority of their ad dollars to reachmassive audiences.

“The pivot from just being a socialmedia conversation to actually beingan indispensable media partner,” shesays: “That is my mission here.”

Facebook measures up for marketers

Global mission:Carolyn Everson,Facebook’s vice-president of globalmarketing, wantsto build servicesthat appeal tousers andadvertisers

Getty

Kevin McGovern, BlisMedia

The Super Bowl, climax ofthe American football sea-son, has long been one ofthe most watched televisionbroadcasts in the US, mak-ing it coveted real estate foradvertisers.

So much so that brandscompete to have the mosttalked about advert duringthe sporting event.

This year, it was arguablya single tweet that eclipsed

all this noise and at a frac-tion of the cost.

Oreo, a popular cookiebrand, was quick to capital-ise on an unexpected elec-tricity blackout shortly intothe second half of the game.

Within minutes of thepower failure, the companyhad released a simple imageinto the Twittersphere of anilluminated Oreo cookie ona black background withthe caption: “You can stilldunk in the dark.”

The image was retweetedmore than 15,000 times andhas been held up as ahighly creative – and suc-cessful – example of the lat-est buzzword in the adworld: real-time marketing.

Oreo’s success was not anaccident. Mondelez Interna-tional, maker of the cook-

ies, had assembled a teamof creatives with the remitof responding quickly toevents.

It was important that itgot its creative messageright. But, in the world ofsocial media, speed and rel-evance is key, say advertis-ing executives.

A separate tweet by Motel6, the hotel chain, made 16hours after the Oreo mes-sage, read: “Next Year’sSuper Bowl will be playedat Motel 6. They’ll leave thelights on.” It received lessthan 30 retweets.

Drew Burdon, head ofstrategy at digital agencyR/GA London, says the shiftto real-time response is forc-ing brands to question theirtraditional thinking.

“Brands have been broad-

casted entities rather thanparticipative,” he says. “It’salways been a pre-placedpiece of thinking. But therules pretty much changewhen you get into onlineand an always-on environ-ment. It’s almost the oppo-site of where campaignshave been.”

In the online world, saysMr Burdon, brands cannotreally get away with tellingconsumers they are inter-esting, they have to beinteresting.

And “being relevant onFacebook is probably com-menting on something thathappened five minutesago”, he says.

Big brands are starting torespond. Ron Peterson,practice lead of social atAKQA, a digital agency,

says that Coca Cola hascommitted to doing 30 percent of its marketing in anagile way, which meanstaking more risks and doingmore of it in real-time.

“We are starting to see alot of brands and businessesbeing able to take socialdata to personalise in areal-time way for the indi-vidual,” he says. “It will beinevitable for every brandto start thinking this way.”

Dan Plant, head of real-time marketing at mediaagency MEC, says this shiftto real-time will spread tomore traditional media,such as press and televi-sion. He says television adscan be put together in amore modular fashion, say,by creating two minutes ofcopy in 12 10-second

vignettes and tailoring afinal version based on liveuser feedback.

“It means making morepieces of copy than youneed to, but it’s the rightthing to do to make media-spend work that muchharder,” says Mr Plant.

The shift to digital adver-tising and the growing needto respond to live consumerfeedback has already seen

agencies and brands investheavily in data collectionand analysis systems sothey can track – and react –to user behaviour in real-time.

On the launch of EE, themobile phone network ofT-Mobile and Orange, MECtracked data from morethan 20 sources in real-time,examining informationsuch as footfall, searchbehaviour and user clickson adverts. This allowedthe marketing campaign onbehalf of the new mobilenetwork to be tweaked as itwent along.

“When you are spendingmillions of pounds, youdon’t have three or fourweeks to wait,” explains MrPlant.

However, to react to this

quickly requires culturalchange at brand owners,say advertising executives.Often this will mean havingto clear creative campaignswithin minutes rather thanmonths.

“When people look backat the success of that Oreomoment it was not just thatthe agency was set up readyto go, but it had the clientwith them so it could be 100per cent reactive,” says RobSellers, director at Dia-logue, a shopper marketingagency. “If they can’t getthe client at the end of thephone then they can’t doanything.”

MEC’s Mr Plant says:“Clients have to let go a lit-tle bit. That is going torequire courage and is a lit-tle bit scary.”

Instant response requires cultural change by brand owners

‘Clients have to letgo a little bit. That isgoing to requirecourage and is alittle bit scary’

Smartphones

As devices becomemore sophisticated,marketers upgradetheir pitches, revealsRobert Cookson

Real-time marketing

Need for speed andrelevance overtaketraditional models ofadvertising, reportsRob Budden

Social network

The site is moving closerto advertisers and developingtools to show it can delivercustomers for their products,writes Emily Steel