Monday, October 17, 2011

Media Trends and Big Data

What is in store next year?

The forecasts for advertising spend are coming out – relatively slow for 2011 and slight growth for 2012/13 with developing markets outpacing the developed ones. The relationship of ad spending to financial markets depends on the cause of the market change.  Either excessive advertising from over-valued companies (the 2000 tech bubble) or substantive decline in output are related to changes in ad spending not perceived risk, eg 9/11. So unless Europe melts down, spending is trending up for the next two years. Ad spending runs at roughly 3/4th of a percent of GDP; lowest levels since at least 1980. Despite the slow growth in the US (+3%) it will contribute the most net-new ad dollars $14b due to the sheer size – 3.3 times the next largest market; Japan. 

The growth media are TV, particularly cable, and Internet, growing $22b and $24b respectively over the next two years. 

In the case of 'direct marketing', or advertising geared toward generating a sale or a lead, growth is out pacing the overall increases in spend possibly due to the nature of tracking results.   Direct Marketing generates $12 of sales per dollar spent compared to $5.24 for general advertising.    Digital continues to grow faster than the rest and will exceed 20% of direct marketing spend in 2012 led by display and search. 

An outcome of the 'digital age' is the continued explosion of Big Data – an era when enormous amounts of data are collected and used to drive business operations and planning.  Big Data exists because of three intersecting factors:  1) the variety of data that can be captured increases, 2) the velocity of data increases, and 3) the volume is growing.  The average company with more than 1,000 employees collects more than 235 terabytes of data. Those TB's equate to 470,000 hours of music or about a third of the genealogy library at or 2 seconds or less of Internet traffic.    The implication is:   It isn't business as usual, only bigger because you can't report on big data; there isn't enough time to ask and answer the questions.  The half-life of a marketing question is 30 minutes in this day and age so some new thinking is required.    IBM's report on CMO's confirms the same issue – data explosion is one of the four key problem areas.

The intersection of digital marketing and data capture presents some client-related opportunities.
  1. Personalization and Customization of content – serving a series of unique packets of information to consumers.  This has been the premise of CRM for a long time but the opportunities to create and distribute items of interest are getting better. (slideshare re UX)
  2. Decisioning and Estimating – by taking mid-level judgement out of the equation and replacing it with 'machine learning', two things happen.  First, the consumer gets a better experience and second the business stays competitive with better odds of outperforming the competition.  Written up in "Competing on Analytics" five years ago.  (book)
  3. Business Simulation – all this data and analytics means clients can test assumptions before executing new tactics and strategies.  Both ThinkVine and Networked Insights (two young, venture-backed companies) focus on assessing the impact of marketing activity on sales.  The former is a simulation tool, the latter aligns communal commentary with broadcast media plans.  
Quote of the week:   "We propose that you need to merge IT and marketing."  from CIO-CMO Summit.  

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