The Institute of Practitioners in Advertising, which will publish the “Social Media Futures” report compiled by Future Foundation next week, has warned that advertising agencies face growth of just 1.2 per cent a year by 2016 if the industry fails to tackle the changes to the media created by sites such as Facebook, YouTube and Twitter.Of course the landscape is changing! Social networking and personal recommendation for products is ensuring that word of mouth "advertising" is becoming a much much larger factor in product evaluation and decision making. That does NOT mean that less money will be spend on brand promotion, but it does mean that agencies that don't know how to market in the new world will get much less of it. Darwin's law will prevail again - there are agencies that have/will adapt and they will thrive and grow on that same hoard of cash. Industry growth will not be hampered, but wealth will be redistributed.
Movie studios have known about word of mouth and its direct influence on product success for years. That's why there is so much drama about release dates, pre-release advertising, pre-release availability, limited distribution, press screenings, etc. If your movie is going to suck, you want as many people as possible to pay and find that out first-hand rather than hear it from another source.
Online, personal recommendations are nothing new either. It started with eBay's seller ratings, CNET's gadget reviews by customers, and Amazon's comment system. It's been going this way for years. Just because social media has accelerated it and made buyer recommendations more trusted and more personal doesn't mean that word of mouth hasn't been influential, it just means that ad agencies are in denial and too comfortable to do anything about it.
Agencies who can't adapt or haven't started to adapt to this should go out of business. Advertisers that think creating a 'brand' is about commercials, imagery, spokespeople, graphics and point of sale communications are done. Even in Marketing 101 they teach you that a brand is the whole product experience, but in so many companies, this is completely forgotten. Branding means spending advertising dollars the "right" way to gloss over any product deficiencies, to ensure that products that are just OK have equal time in the eyes of potential buyers. In the 1960's (or maybe I've watched too many episodes of Mad Men) this worked - products relied on awareness and distribution to be successful. Today, distribution is free and awareness through traditional channels isn't the same - there's too much noise, too much hype, too many Tivo's, and people have become cynical about the promise of a brand. Rarely does a product or brand live up to it's billing, so everything is taken in with filters. And when a brand does keep it's promise, you want to tell everyone you know about it - it's that exceptional!
Where'd the FT dig up this guy? He's clearly clinging on tightly to his pension, and should be canned immediately:
“I don’t think [social media] is a replacement for paid-for media, it is just going to be a challenger for [consumers’] time and attention.” - Moray MacLennan, IPA president and chief executive of M&C Saatchi Worldwide.Social media is not going to compete with anything - everything online (and soon on TV) will BE social media. There will be no alternative, it will be pervasive - it's already starting. And it will cost just as much to market successfully - but the spend will be on skilled people and interaction, not on broad media buys.
Advertising (promotion of a product) isn't going to stop, it's not going to decrease, but its going to change. Promotional dollars will move out of 'traditional' advertisers hands and to ad agencies that 'get it'. Ad placement is definitely going to go down online, and probably offline - it will hurt both publishers and agencies that make significant income on media buying.
Agencies that "get it" understand that they need to become the first-person voice of the brand, not the third-person. They know they need to become a partner with the company they represent and actually contribute to closed-loop product improvement. Interactions with customers are centered around building trust - building web presences that provide authority and interest beyond the product, that create discussions about the high-level problem with transparency and authority.
Successful brands will become trusted advisers for their domain. Consumers will turn to brands for answers that are honest, even if they means that the brand calls out deficiencies or weaknesses in their product, or actually admits they have competition. This is the transparency that consumers crave, and agencies that can drive companies towards this will be hugely successful. Marketers will get honed feedback about their products that they can then incorporate into the next product version and improve their market share. Customer feedback and iteration will happen much much faster than it does now with CPG brands, much more like the software that makes rapid networked communication possible.
I see a bright future for agencies that understand things are quickly moving toward a "personal" trusted relationship with a brand. Projects will be different (the report the article quotes points to consulting services, creating new forms of web content, and analysing data). Social marketing won't look like display advertising. It won't be interruptive. It will be communicative and transparent, and results will make for better products and more loyal customers. This will in turn lower marketing and promotion cost by reducing brand 'switchers', and make forward-thinking agencies tomorrow's heroes.