Down Year Will Bring Opportunities
ADOTAS EXCLUSIVE — To paraphrase Thomas Paine, “These are the times that try advertisers’ souls.”
The start of 2008 maintained the upward trajectory of the previous few years, but it is ending roughly, and 2009 will bring no panacea. Yet despite the economic storm, unique opportunities in the marketplace are ripe for companies that can deliver a solid ROI by demonstrating that they understand and can deliver on the shifting media and entertainment consumption habits of consumers. In particular, look for the following trends in 2009:
- Economic recession will shelve experimental ads, reduce advertising spending and sharpen focus on ROI.
Given how dramatically the economy has slowed in the last few months, 2009 is looking particularly bleak on the advertising front. The simple math of an economic downturn means fewer sales, smaller profits (or bigger losses) and slashed marketing budgets. Expect most companies to shelve any advertising project that does not have a proven methodology to drive returns.
Larger, branded destination sites will suck up most of the ad dollars as they can be the most flexible in terms of their offerings, and can, presumably, demonstrate a track record of success for advertisers. Meanwhile, expect to see advertisers focus their spending on performance advertising, including search and low cost display. Of course, ROI driven advertising has always been a double edged sword— “proving” what works continues to be a challenge. However, the 2009 picture isn’t all about downsizing. Interactive will see an increasing percentage of the budget, although nominal dollars will likely still be cut.
In short, if your business is based on selling ads, your sales reps will have to work extra hard, but they’ll be glad they don’t work in radio or print.
- Advertisers will seek creative ways to generate a ROI
While most ad dollars will seek the shelter of safe spending, smart marketers are always on the lookout for creative opportunities to achieve superior results by differentiating and finding ways to appeal to traditionally hard to reach audiences such as tweens, teens and young adults. Unique advertising products that engage users (beyond “eyeballs” and “branding”) and can be measured will become a more important part of the online mix. In particular, “advertainment” products - games, quizzes, interactive forums, etc. - where the ads are integrated into or presented as content will be particularly interesting to marketers. These types of casual entertainment content distract us from our real world worries.
- Lots of Web 2.0 companies will shut down or go into hibernation
Companies are re-trenching, and workers are being laid off. Look for this to continue, particularly among the legions of Web 2.0 companies with weak balance sheets, ill-defined and unproven or non-existent business models. Many companies will be forced to close their doors. Those that do not shut down will let go of “nonessential” employees, and remaining workers will take pay cuts (or work for equity and Chinese takeout). Asset firesales to larger, more established companies will increase as those companies with greater resources look to expand at bargain prices.
- Social gaming and interactions will increase in popularity and in penetration across platforms
Less disposable income will result in an increased focus on less expensive entertainment options. Social gaming and interactions, already growing pastimes, will continue to expand as individuals seek out new, cheaper entertainment and as the appeal of online gaming spreads beyond the “traditional” gaming set. In addition, while Americans are likely to make many sacrifices and spending cuts in the months ahead, cuts to mobile phone service and high speed internet, important elements for gaming and social networking, are among the last items consumers will cut. In addition, the proliferation of smart phones will help fuel the rapid expansion of social gaming.
- IPhone and android mobile applications will continue to be a big business but modest dollars
The third party application market for smart phones is poised to explode in 2009. The smart phone user base grew exponentially in 2008, making it worth it to invest in applications for these phones. When coupled with low development costs, open development platforms, and simple distribution options, it is clear that it is only a matter of time before, for most routine tasks, the smart phone replaces the PC as the computer/communication device of preference. Lots and lots of applications of increasing sophistication and quality will launch in the months ahead, albeit with low (free) prices - at least initially. In particular, look for integrated and branded applications that blur the line between advertising, content, functionality and entertainment.
The new year will certainly show an “advertising correction” along the lines of the economic correction. Weaker companies, or those that cannot prove their value, will be particularly hard hit as marketers scale back. However, those companies that do have the cash, management, and ability to demonstrate a positive ROI, will be well positioned to take advantage of opportunities and strengthen their position for the years ahead.
Reader Comments.
Just as an addendum, I can say from my experience at Hydra that CPA ad networks are benefitting from the downturn. Our pay for results model is attracting new advertisers. And we are increasing revenue and hiring!
Great! I like the idea that a Economic recession will shelve experimental ads, reduce advertising spending and sharpen focus on ROI. morover the issue that Advertisers will seek creative ways to generate a ROI is amazing. the concep that Lots of Web 2.0 companies will shut down or go into hibernation will enhance betters oportunities. I Like! but the best is that Social gaming and interactions will increase in popularity and in penetration across platforms the the most important matter, so the best of all is that mobile applications will continue to be a big business but modest dollars. It is grat!
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