Media: All about ... Digital developments in 2006

campaignlive.co.uk, Friday, 08 December 2006 12:00AM

Will the latest dotcom bubble continue to balloon? Alasdair Reid asks.

Let's hope that history isn't about to repeat itself. Not too precisely, at any rate. Because 2006 has been spookily reminiscent of 1999 in terms of the way the media world has turned itself inside out and upside down in its frenzied enthusiasm for all things digital.

This phenomenon has touched every media sector, even outdoor. Publishers across the spectrum, from glossy magazines to national and regional newspapers, have been investing in the web products as never before - and restructuring accordingly.

Where TV is concerned, hardly a week has gone without someone on some conference platform making wild claims about how mobile technologies are going to change the medium utterly. Meanwhile, broadcasters have been accelerating their brand diversification projects in the digital domain, and the issue has fuelled speculation about all sorts of mergers, diversifications and acquisitions.

Rupert Murdoch, who has emerged from five years of scepticism to become an evangelist of Web 2.0, has been demanding a change in business philosophy across all parts of his media empire, from newspapers to his minority interest television business, Sky. After all, News Corporation started this latest phase of land-grab frenzy when it bought MySpace for $580 million in 2005.

In other words, this time it's serious. Online advertising revenues are booming on both sides of the Atlantic, and structural changes within the marketing community would tend to suggest that the revolution is now not only sustainable, but actually irreversible.

1. The most significant marker was the announcement made in October by the Internet Advertising Bureau that the UK internet advertising market was for the first six months of 2006 just a whisker shy of £1 billion - representing a whopping 40 per cent year-on-year increase. As the headlines pointed out, that means it is now roughly half the size of the TV ad market.

2. Most online advertising (ie. search listings and classified activities such as recruitment) comes from what were traditionally regarded as below-the-line budgets, but display advertising, including banners, skyscrapers and other embedded formats, are now growing rapidly (33.2 per cent year on year for the first half of the year). The first major initiative of Wayne Arnold, who became the chairman of IPA Digital in July, was a campaign to change industry standard guidelines to allow larger advertising file sizes. This is no mere technical issue - bigger files will allow for far more sophisticated creative executions, thus, it is predicted, making the medium more accessible for mainstream brand advertisers.

3. At a global level, the most significant acquisition in the online medium was Google's purchase of YouTube in October. The $1.65 billion price tag was ten times previous estimates of the company's worth. This set alarm bells ringing: YouTube seeks to be profitable on an ad-funded model, yet its running costs are exorbitant, as video sharing burns prodigious amounts of bandwidth. This, commentators argued, could be the Web 2.0 version of the crippling AOL Time Warner deal that helped prick the first dotcom bubble.

4. The biggest story in the UK market was the outbreak of the broadband price war when TalkTalk, a division of Carphone Warehouse, launched a free 8Mbit broadband service to all subscribers signed up to its Talk 3 tariff. Sky hit back with the launch of a free broadband service for all of its existing TV subscribers.

5. All of the national newspapers put an increasing emphasis on digital in 2006, but one publisher embraced the digital revolution with particular enthusiasm - the Telegraph Group. It has moved to new offices and restructured its editorial side so that journalists can mutate into multi-platform content suppliers, able to file traditional print copy, then turn their hands to producing blogs and editing video packages for Telegraph.co.uk.

6. Most publishers are also looking to restructure their ad sales operations to sell across digital and print platforms. News Group Newspapers, for instance, poached Mark Chippendale, Yahoo!'s European vice-president of sales, to fill a newly created role of media director. He assumes responsibility for internet and mobile revenues, as well as exploring the broadcast potential of the division's Sun and News of the World brands.

WHAT IT MEANS FOR ...

ADVERTISERS

- Since the first dotcom crash, mainstream packaged goods advertisers have, by and large, declined to get ahead of themselves where online advertising is concerned. But there's a growing determination, not least on the part of the IAB, to convince major clients that this can and should be a brand advertising medium. The fact that revenues are growing so vigorously and major media owners now seem committed to an increasingly digital future, will not exactly hinder those initiatives.

AGENCIES

- Although the creative agency map remains fragmented where online advertising is concerned, the impact of growth is already being felt in the media agency sector. Previously regarded as a black art, online buying was formerly the exclusive province of segregated specialist teams. Now, increasingly, it is being integrated as a mainstream discipline, both within individual media agencies and group negotiation units.

This article was first published on campaignlive.co.uk

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