final digital ad brochure

Accenture Media and Entertainment

The Capabilities to Drive High Performance in theDigital Advertising Industry Results from the 2008 Accenture Global Digital Advertising Study

Last year's inaugural Global Digital AdvertisingStudy conducted by Accenture focused on the implications of the digital transformationunderway in the advertising industry. Analysis ofthe survey results led to a series of strong recom-mendations about how to advance toward highperformance in this challenging environment,including investments in technologies and capa-bilities that offer advanced customer interactivity,targeting and analytics.

Since last year's study, the digital advertisingindustry has experienced a year of impressivegrowth. Internet advertising revenues around theworld now exceed $45 billion. That representsabout 7 to 9 percent of the total advertising mar-ketplace (depending on which analysis one uses),

a percentage increase over the previous year thatputs digital advertising on a trajectory to reach21 percent of the market by 2012.1

Last year also saw a frenzy of acquisitions andinvestments as companies jockeyed for leadershippositions and competitive advantage. During one six-week period in April and May 2007, forexample, $12 billion in acquisitions took place,involving some of the biggest names in the business, both traditional and digital.

Partnerships and alliances are also an influentialphenomenon, leading to an aggregation of audiences and advertising inventory, and creatingeconomies of scale that will become the founda-tion of future growth.

Overview

Digital Advertising: Explosive Growth, High Potential

1 Kelsey Group, “The Kelsey Group’s Annual Forecast (2007-2012): Outlook for Directional and Interactive Advertising,” www.kelseygroup.com/press/pr080225.asp. See also ZenithOptimedia, "Western ad markets continue to slow, but surging developing markets propel healthy world growth in ad expenditure," press release, June 30, 2008.

Accenture Global Digital Advertising Study 1

2 Accenture Global Digital Advertising Study

As confidence increases, so does the prevalence of innovation.Increasingly sophisticated analytic capabilities are being pursuedby major digital advertising players. Such capabilities can enablemore effective ad targeting, better ad performance and a higherreturn on advertising investment.

New ad formats are emerging, as well,with the goal of better engaging theconsumer and improving the effective-ness of brand advertising. For example,banner ads targeted to certain profilesare not effective on social networkingsites such as Facebook and MySpace,so new formats have emerged.Advertisers are turning to so-calledwidgets, clusters of software in theform of games, quizzes, videos or other tools that users can download,customize and forward.

For example, “Parking Wars” is a gamecreated by the A&E Television Networkto promote a new reality show aboutparking-meter readers in the US cityof Philadelphia. Within eight weeks of its introduction, Parking Wars wasinstalled by more than 150,000Facebook users.2

Mobile advertising has also become ahot topic for discussion, exploration

and investment. Companies are inter-ested in mobile advertising for severalreasons. One has to do with respon-siveness. Advertising campaigns usingtext messaging, for example, haveachieved up to a 70 percent responserate. Another attraction is the abilityto target mobile users and personalizemessages down to an individual profilebased on a mobile ID number. Finally,the inherently interactive nature ofmobile means that companies cantrack, measure and build relationshipsbetween the audience and the advertiser.

In short, digital advertising is doingmore than simply "shaking up" theindustry; it has ushered in a period ofrevolutionary change. No wonder thatthe CEO of a traditional advertising and communications company notedrecently that all the changes and posi-tioning by powerful new competitorshad “unnerved” him.

The future looks very bright for digital,a technology that can deliver advertis-ing that is:

• Results-based and measurable

• Richer, more varied and interactive

• Targeted effectively at desired consumer segments

• Attuned to consumers' desires to control their media experiences

If the technology is adequately sup-ported by new business models thatsubsidize content, the value anddemand for digital advertising willcontinue to skyrocket.

Charting new territory:Standards, guidance and keys to success

At the same time, because digitaladvertising is a relative newcomer onthe scene, many companies are

2 “Building a Brand with Widgets,” by Rachael King, BusinessWeek, March 3, 2008.


struggling to understand how to assessvalue, how to measure progress andhow to benchmark performance. If astart-up looks to be acquired for twoor three times its annual revenue isthat a fair price or not? What is thepotential return on investment? For acompany with $15 billion in overallrevenue, is $50 million in annual rev-enue from an interactive advertisingdivision good performance or average?

What are the characteristics of a high-performance business in the digitaladvertising arena when it comes tosales, costs, operations, talent man-agement, organizational structures andleadership? What can be learned, bothfrom the new up-and-comers in theindustry, as well as the traditional,well-established firms? What are thebarriers to growth and what are somecompanies doing to overcome thosechallenges?

Answering some of these criticallyimportant questions about perfor-mance, standards, return on invest-ment and keys to success was the goal of this year's Global DigitalAdvertising Study conducted byAccenture. In general, the quest forhigh performance frames this year'sstudy. Accenture's ongoing HighPerformance Business research initia-tive continues to shine light on arange of industries today, detailingwhat it takes to be a high performer:a company that outperforms its peersover extended economic cycles andchanges in executive leadership.

Although it is too early in the maturitycurve of digital advertising to conductthe kinds of rigorous financial analysesthat would provide information aboutkeys to success over an extended timeperiod, it is not too soon to ask aboutwhat is working today for leadingcompanies, and about the perceptions

executives have about who the indus-try leaders are and what gives them anedge in terms of sustained excellence.It is not yet possible to know who thehigh-performance businesses in digitaladvertising will be over time, but wecan certainly probe various perceptionsof what high performance meanstoday and sketch out who the digitalleaders are and what has made themso, at least in the eyes of their peers.

The 2008 Accenture Global DigitalAdvertising Study surveyed executivesof start-up and acquired digital mediaorganizations, digital media divisionsof traditional firms and digital mediaservices companies. We asked execu-tives to think about keys to achievinghigh performance in digital advertising,phrased in terms of 14 attributesrelated to strategy, technology, busi-ness performance and culture. Whatare the attributes most important tosuccess? Which of these attributes do

they feel is most in need of upgradingat their companies if they are to compete effectively?

These two questions led to the emergence of three attributes that are seen both as most important tooverall success in digital advertisingand simultaneously in most need of attention:

Workforce talentAttracting and retaining top talent, so that a company has the right skills and experience to be innovative and to define the right operating models,technologies and business partnershipsnecessary to drive high performance.Improving sales force performance isespecially important.

Applied business analyticsDeveloping more effective informationtechnology and process capabilitiesthat support the timely application ofanalytic insight to business problemsand offerings—for example, taking

website traffic analytics and using it to target messages to a consumer.

Investments and businessdevelopment Creating more extensive and robustinvestment and business developmentplans that can meet the needs of amore dynamic environment, one inwhich alliances and partnerships inparticular are critical to success.

Although each of these attributes isimportant, the executives' self-assessed gap between their existingand desired capabilities in these areascreates an uneven sense of urgency.For example, although the develop-ment of workforce talent was namedas the most critical attribute, thegreatest self-perceived weaknessescame in the area of applied businessanalytics. These findings should soundseveral alarms, because developing thepeople and technologies needed toexecute strategy and grow marketshare is on the critical path to highperformance.

The digital leaders

When respondents were asked to namethe digital leaders in terms of themedia attributes and capabilities need-ed to achieve high performance in dig-ital advertising, one name rose mostconsistently to the top: Google. Othercompanies mentioned most frequentlyincluded Microsoft, WPP and Apple.

Why is Google so dominant across allattributes? “I think they are constantlyin sync with what their customerswant and have the data to supportthat,” one executive noted. “Google'sculture is very creative and open, sothere is no fear of failure there,“ saidanother. One respondent summarized:“Because they have creative know-how and strong management, they are a flexible and forward-lookingorganization capable of recognizingnew trends.”

In other words, Google occupies a topposition in the minds of this executivesurvey group precisely for showing



excellence across all the key attributesof high performance in digital advertising.

Imperatives for action

The need to adapt quickly to the worldbeing shaped by digital advertising iscritical to media services companies as well as traditional companies withinteractive departments. Talent man-agement presents one important setof challenges. For example, if thenewer, digitally-savvy entrants to theadvertising industry become a moreattractive destination for top talent,that reality will shift the balance ofpower away from traditional firms formany years.

Technology developments are alsoimportant to bear in mind. For exam-ple, if faster-moving competitorsdevelop superior technology-basedanalytics, traditional advertising agen-cies may lose their client relationshipsto companies that know their clientbase better than they do.

Accenture believes that capitalizing onthe opportunities of digital advertisingis, in large measure, a cultural issue.Indeed, this year's survey underscoreda similar finding from last year: thatthe cultural and people challenges foran established business facing rapid,disruptive change are profound.

The answer is, in part, strong leader-ship, but also attention to the detailsof managing change and putting newperformance measures in place. A different approach to recruiting andhiring is also important. All companiesneed to actively recruit net-savvy people who are well versed in criticalaspects of the digital advertisingworld, including Web 2.0 principlessuch as social networking.

Different tactics are necessary torecruit, develop and retain theyounger workers often referred to as“millennials.” For example, while manytraditional companies are hesitant to offer too much training and devel-

opment to newer workers—who mightsimply take the training and thenleave for another company—Googleapproaches the situation differently.They put their most promising recruitsinto management positions quicklyand provide two years of hands-ontraining. It's been a successful way toattract top talent.3

We also believe that the digital adver-tising winners in the coming years willbe those companies capable of com-bining leading practices both from thenew and from the old: for example,from traditional publishers that havelearned how to develop and sustaineffective relationships, and fromnewer entrants who are developingsuccessful ways to target relevantmessages to key consumer segments,methods of tracking and measuringresults, and more effective tactics toattract and retain workforce talent.

Digital advertising at Accenture

The global advertising practice at Accenture helpsdrive high performance for clients with significantpotential for revenue growth from advertising.

Accenture's focus in particular is on:

• Strategy formulation (e.g., from improving go-to-market strategies to developing a new digital advertising business strategy and capability)

• Yield management (with the goal of increasing average revenue per user)

• Ad operations outsourcing (working to help streamline processes and operational visibility)

Accenture has worked with more than two dozencompanies, from digital media and traditionalmedia firms to cable and telecommunicationscompanies, in areas ranging from business strategy definition to management of a client'smigration to a new ad-serving platform.

With a focus on developing research-basedinsights, and on helping clients leverage innova-tion for profitable growth, Accenture has exten-sive experience driving high performance forclients in the exciting area of digital advertising.

3 “Recruiting Gen Y: Four Killer Tactics,” by Andrew Tilin, BNET Business Network, www.bnet.com.

Detailed Findings

A changing advertising landscape

Any analysis of digital advertisingmust begin with a foundationalunderstanding that traditional televi-sion and newspaper advertising stilldominates the marketplace. Globally,estimates about annual spending ontelevision advertising range from $170billion to $200 billion, more thanthree times the market for onlineadvertising.4 Of the $479 billion spentglobally on advertising in 2007, 37percent was on television advertising.Newspapers constitute the second-largest advertising medium at 27 percent. (See Figure 1.)

Yet several vulnerabilities in tradition-al advertising models, lurking in theshadows for years, have now emergedinto broad daylight. With so manyalternative forms of entertainment

available, and as technology hasenabled consumers to skip or speedthrough commercials, the advertising-based revenue model for media suchas television is changing.

Although global revenues for newspa-per advertising have stayed strong,most of that strength is in emergingmarkets. Some of the numbers in mature markets, however, are troubling. Print advertising sales forUS newspapers, for example, wereprojected to fall $2 billion in 2007.Year-on-year comparisons acrossmajor US newspapers are indicative ofthe industry as a whole: The New YorkTimes, down 7.5 percent; The WallStreet Journal, down 10 percent; USAToday, down 14 percent.6

Respondents to the 2008 AccentureGlobal Digital Advertising Study alsostrongly affirm the growth trend of

digital advertising. (See Figure 2.)More than half (56 percent) of oursurvey respondents noted that thepace of revenue growth is faster thanthat of traditional advertising growth.

What’s behind such shifting revenuepatterns? In part, it’s the fact thatcompanies are being drawn to a num-ber of extremely attractive capabilitiesof digital advertising. The digital environment enables richer mediaforms, and provides interactive func-tionality that engages customers moreeffectively. Digital advertising alsooffers real-time measurement andconsumer-targeting capabilities, whichhelp companies reach the consumersegments they want. It also helps themdetermine what effects their advertis-ing is having on buyer behavior—and,therefore, what return companies are getting on their investments.

37% 27% 12% 9% 8% 6% 1%

TV Newspaper Magazines Internet Radio Outdoor Cinema


Figure 1: 2007 share of various media in the $479 billion global advertising business Source: ZenithOptimedia 5

56% 35% 9%

Faster The same Slower

Figure 2: Percentages of respondents answering the question, “Have overall company revenues grown at a faster or slowerpace than your company’s total digital advertising revenues?”

4 Kelsey Group, “The Kelsey Group’s Annual Forecast (2007-2012): Outlook for Directional and Interactive Advertising,” www.kelseygroup.com/press/pr080225.asp.

5 ZenithOptimedia, "Western ad markets continue to slow, but surging developing markets propel healthy world growth in ad expenditure,” press release, June 30, 2008.

6 "Drop in Ad Revenue Raises Tough Question for Newspapers," by Katharine Q. Seelye, New York Times, March 26, 2007.

What does high performancemean for digital advertising?

What are the attributes and capabili-ties—the business strategies, technolo-gies, processes, talents and skills—needed to achieve high performance in digital advertising? Here, arriving atanswers requires thinking creatively interms of research methods. Accenturedefines a high-performance businessas one that outperforms its competi-tors over extended global economiccycles and through multiple changesof executive leadership. To date, digitaladvertising is at too young a stage onthe maturity curve to have producedcompanies that can, technically, betermed high performers.

Yet asking the question about highperformance now is essential. That wasthe driving purpose behind this year'sAccenture Global Digital AdvertisingStudy. We sought out more than 80senior executives of digital mediaorganizations, traditional firms with

digital media divisions and digitalmedia services companies to ask themseveral basic questions:

1. What are the attributes and capabilities you believe are essential to achieving high performance in the future through digital advertising?

2. How does your company stack up against a perceived ideal when it comes to such attributes?

3. Who among today's companies would you classify as a digital leader within the relevant attributes?

Four types of players

The key to an assessment of the digi-tal advertising industry at this stage inits evolution is a healthy mix of thesubjective with the objective. Lackinglongitudinal data at this point—perfor-mance numbers over an extendedperiod—the research methodology at

the heart of the Accenture GlobalDigital Advertising Study was toassess the impressions of experiencedexecutives regarding high performancein the advertising industry. Details ofthis part of the research follow laterin this report.

First, however, Accenture researcherslooked at the financial and marketperformance of 17 different players inthe advertising industry, both tradi-tional and new-media companies.Plotted against both total advertisingrevenue and digital share of advertis-ing revenue (see Figure 3), the compa-nies naturally form groupings accord-ing to four categories:

1. Traditional players still generate the majority of their revenues from non-digital advertising activities. Their share of total advertising revenue is high, but their digital share is low.


Figure 3: Analysis of current market leaders and digital share leaders show four primary groupings of players

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New Entrant Converging DigitalEmerging Digital

* Designates tie

Numbers indicate ranking by survey respondents of who future high performers in advertising are likely to be

2. New entrants are those only get-ting into the advertising business, but who show promise of being significant players in the future.

3. Emerging digital companies are focused mostly on a limited number of channels but who are leveraging those channels to be serious con-tenders in the future.

4. Converging digital companies are trying to do more than just compete in the online world. They are working to push the envelope in all dimensions, both traditional and digital, and in fact are working to create a converged advertising presence across all dimensions.

Evidence of dramatic changeahead in the advertisingindustry

One major headline from our researchis that the rumblings of major changein the advertising industry can already

be heard based on a comparison ofcurrent industry performance with perceptions of executives about whowill dominate in the long term.

As part of our analysis, we created aranked ordering of advertising compa-nies according to total advertising revenues (see left side of Figure 4). We then compared that evaluation tohow executives in our survey rankedthese same players according to theperception of the companies' ability toachieve high performance in the future(right side of Figure 4).

This analysis shows that many tradi-tional advertising companies drop pre-cipitously in ranking, meaning thatexecutive peers are less than confidentin the ability of traditional advertisingcompanies to meet the challenges ofthe digital advertising age.

On the other hand, Figure 5 demon-strates that today's executives believethe future lies with the kinds of com-panies who are already dominating interms of digital market share. Thesecompanies (marked in blue) are perceived by their executive peers tobe better equipped to achieve highperformance as the advertising indus-try evolves in a digital age. Severalcompanies rise in ranking based onperceptions of their potential to behigh performers in the future.

The importance of this disparity—between current performance and perception of performance potential—is clear: executives realize that dra-matic change is at hand. The attributesand capabilities needed to drive highperformance in a digitally driven mediaage are not the same as those thathave produced success to this point.


Market rankingaccording to totaladvertising revenues

Executive perception of who the potential high performers are

Digital share leader Designates tie

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Figure 4 (left): Many of today'sadvertising leaders are perceived to beless viable as high performers in thedigital era of the advertising industry.(Source: Accenture analysis)

Figure 5 (right): Many of the compa-nies that currently lead in terms ofshare of the digital advertising mar-ketplace are perceived by their peersto be more viable as high performers inthe future. (Source: Accenture analysis)

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Market rankingaccording to totaladvertising revenues

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Digital share leader Designates tie*


Ranking the attributes of high performance

We asked our survey respondents torate the importance of 14 attributesand capabilities, on a five-point scale(1 = Not important; 5 = Extremelyimportant) that must be mastered, if a company is to achieve long-term success and high performance in digital advertising. The attributes considered included: • Advertiser/Agency service level• Advertising management technology• Advertising operations• Advertising product performance• Advertising yield management• Applied business analytics• Business intelligence• Impact on average revenue per user • Investments and business

development • Long-term business strategy• Operating model• Planning and forecasting• Sales force performance• Workforce talent

Figure 6 ranks the averaged responsesin the survey.

The results reveal an interesting mixof strategy, technology and workforceperformance concerns. From a strate-gic point of view, concern aboutinvestments and business developmentrose to the top. From a technologicalperspective, capabilities such as analytics, business intelligence, adver-tising management and planning and forecasting all scored above anaverage of “4.” From a workforce per-spective, general talent managementcapabilities were a concern, as werethe specific skills and capabilities ofthe sales force.

In terms of perceptions of digital lead-ership, Figure 7 shows that Googleleads all others in terms of beingranked best-in-class in at least one ofthe 14 digital media attributesexplored in our study.

Further clarification about the mostcritical attributes needed at this pointin the digital advertising maturitycurve was reached in our study byasking an important follow-up ques-tion: For each of these attributes, how do you rank your own company'scurrent capabilities on that same five-point scale?

This question enabled us to narrowthe list of critical digital advertisingattributes even further, to three capa-bilities that ranked high both in termsof overall perceived value and in termsof the differential between companies'current status and where they wouldlike to be. These three capabilities asshown in Figure 8 are:

• Workforce talent• Applied business analytics• Investments and business

development

1

NotImportant

ExtremelyImportant

2 3 4 5

Workforce Talent 4.54

Applied Business Analytics 4.30

Investments and Business Development 4.28

Business Intelligence 4.25

Sales Force Performance 4.24

Planning and Forecasting 4.14

Advertising Product Performance 4.09

Advertising Management Technology 4.00

Advertiser / Agency Service Level 3.95

Operating Model 3.91

Advertising Yield Management 3.84

Advertising Operations 3.82

Impact on Average Revenue per User 3.79

Long-Term Business Strategy 4.14

Figure 6: The relative importance, according to survey respondents, of a range of attributes for achieving high performance indigital advertising


1

NotImportant

ExtremelyImportant

Gap between the importance ranking of the attribute and the company's self-assessment

2 3 4 5

Workforce Talent 4.54 -0.73

Applied Business Analytics 4.30 -0.98

Investments & Business Development 4.28 -0.65

Figure 7: Companies mentioned as best-in-class in at least one of the essential digital media attributes (percentage ofrespondents)

Figure 8: Top priorities in digital advertising capability development: Combined analysis based on perceived importanceand on gap between self-assessed and ideal attributes

Accenture recently worked with a major sportingleague to enhance the capabilities of its websiteand to better leverage its content assets by providing such things as video game highlights,real-time game statistics, photo galleries andplayer details. Given the popularity of the sportand its website, and a need for the website to beself-funding, online advertising was a core part of the strategy. Accenture worked closely with the client's chosen ad server supplier to enable targeted advertising—specifically, IAB7-standardbanners, AJAX-based photo galleries and Adobe®Flash®-based) video advertising.

The site’s advanced digital advertising capabilitiesnow enable targeted advertising across the sitethat has achieved high sell-through rates at high-er than average cost-per-thousand impressions(CPM) and cost-per-click (CPC) rates. With peakweekends seeing more than one million videosviewed, video advertising has been a huge successfor the league. In addition, the ad operations teamis able to effectively track, monitor and optimizeadvertising campaigns to ensure successful delivery.

New digital advertising capabilities for a major sporting league

Google 93%

53%

42%

42%

Microsoft

Apple

WPP

7 The Interactive Advertising Bureau (IAB) works with publishers, marketers, agencies and other industry associations to formulate and develop interactive advertising standards and guidelines. These standards and guidelines play a vital role in creating efficiency in the interactive marketplace.

Leaders raise the bar on recruiting and culture

The task of finding and managing tal-ent has become more complex, turbu-lent and challenging than ever before.Once-familiar talent pools are dryingup as new ones are rapidly opening—creating significant challenges formanagers and leaders of advertisingcompanies and digital media servicescompanies:

• A demand for digital experience that is outpacing the supply of skilledresources.

• An aging workforce, with many workers headed toward retirement and not enough younger workers to replace them.

• Rising demand for new skills aggra-vated by educational shortcomings.

• New methods of working and new relationships between users and suppliers of talent.

• More diverse and remote or even virtual workforces with different

attitudes to work across the generations.

• Steady change in the nature of work—from a product orientation to one based more on a deep understanding of a customer's needs and desires.

• Employee turnover rates that can exceed 18 percent annually, costing some companies as much as 40 percent of earnings.8

In the digital marketplace, the talentchallenge is especially severe, for several reasons. First, it’s a new areathat is growing at a double-digit rate,leading to a shortage of available tal-ent. Second, the work is still very laborintensive. So when one considers digi-tal advertising growth targets set at20 percent or 30 percent, one mustremember that such growth must besupported by a comparable increase inhiring talent. One has to be able toscale the organization as revenue

scales. This problem should becomeless of an issue over time, as moreefficient tools and processes arebrought online. For now, however, the challenge is particularly intense.

Third, companies are witnessing a battle for top talent and an increasein movement as employees move morefluidly from one company and oppor-tunity to another. Statistics from theUS Department of Labor, for example,show that workers aged 25 to 34 havean average tenure with their compa-nies of only 2.9 years, compared with9.3 years for workers aged 55 to 64.9

One executive in our survey noted anemployee who had worked for a med-ical information website, left to join amajor portal company, returned brieflyto the medical website company andthen immediately left to join an onlinelifestyles website—of course receivinga salary increase with each move.


8 "Driving the bottom line: Improving retention," Saratoga, © 2006 PricewaterhouseCoopers LLP. 9 United States Department of Labor, Bureau of Labor Statistics, www.bls.gov/news.release/pdf/tenure.pdf.

Workforce Talent


The importance of sales talent

The sales organization is critical to thepursuit of high performance in digitaladvertising. Sales force performance is also an area where the executives in our study perceived a wide gapbetween the importance of theattribute and their own capabilities.

Other Accenture research10 has shownthat corporate executives in a majorityof companies believe their sales forceperformance is no better than aver-age—and sometimes actually worse ormuch worse than average. Even moretroubling is the fact that most ofthese executives do not point the fin-ger at tough economic conditions asthe cause. Rather, they are more aptto find fault with the performance oftheir salespeople, or with how thosepeople are managed and measured,than with customers’ tight budgets orincreased competition.

Perceptions of digital leaders

Asked to name the digital leaders inthe area of attracting, developing andretaining top talent, Google was theoverwhelming choice, followed byApple and Microsoft. (See Figure 9.)Respondents cited both "soft" and"hard" factors in ranking Google topswhen it comes to talent. That is, exec-utives noted cultural strengths atGoogle—an open and creative culturewhere failure is not punished. At thesame time, the company's rigorousrecruiting process was also men-tioned: the willingness to invest considerable time and resources inscreening employees for the attributesGoogle believes are critical to theirsuccess.

Talent imperatives

From Accenture's perspective, digitalleaders need to be thinking about several things when it comes to developing and managing talent.

Consider core vs. non-core skills and capabilities and expand thescope of outsourcing.Carefully consider the company's corefocus: which strategic capabilities areessential to develop internally andwhich are better sourced elsewhere?In our experience, traditional compa-nies are often superior when it comesto understanding within their organi-zation what capabilities they need toown within their own workforce andwhat capabilities they can outsource.Fifty-seven percent of executives inour survey believe that ad sellers willoutsource their high-volume but low-value advertising operations tasks(e.g., trafficking, invoice reconciliation)

Google 43%

15%

14%

Apple

Microsoft

10 "Changing Sales Force Behavior to Achieve High Performance," Accenture, www.accenture.com <http://www.accenture.com/>.

Figure 9: Perceptions of which industry players excel at attracting, developing and retaining top workforce talent (percentages of respondents)


to third parties so they can focus on higher-value business needs.Outsourcing can be an importantmeans to help increase profits andimprove efficiency; it can also provideimportant flexibility and fixed costsfor capabilities that may be neededonly seasonally or during certainpoints in the economic cycle. Many ofthe newer media companies are justbeginning to sort out their sourcingstrategies. For example, one of themajor portals has just recently begunconsidering outsourcing its ad opera-tions for their small- and medium-business group. Given there’s a war for talent, outsourcing is a criticalmechanism for optimizing talent.

Focus on developing the right culture for success.On the other hand, traditional compa-nies have something to learn fromnew media when it comes to culture.

The newer companies are, at least fornow, enjoying more success when itcomes to using an innovative cultureto attract and retain top talent. Allcompanies must think in new ways.For example, many younger employeesare not taking the traditional route toa job: looking for job postings andthen trying to fit into the mold of ajob description. Instead, they are goingto a potential employer saying, "Here'swhat I can do; let's try to create a jobfor me." That kind of model is difficultfor traditional companies that have amuch more regimented hiring process.

Analyze the current workforce basedon capacity for repurposing.Workforce analyses must consider theextent to which workers currentlyfocused on traditional aspects of thebusiness can be retrained for the digi-tal age. A sales force for a newspaperthat has sold only offline newspaper

advertising for the past 10 years can-not, overnight, sell online advertisingat the same volume levels and effec-tiveness. That capability will requireretraining and the implementation ofdifferent incentive programs.

Although knowledge of products andservices is obviously important to asalesperson's success, the greatervalue comes in the relationship theperson has established with clients.The traditional direct sales force has built those relationships and nocompany on the quest for high perfor-mance should ignore them. This meanssignificant retooling is necessary toleverage relationships while also giv-ing salespeople the knowledge, skillsand tools needed to succeed in a digital environment.

Many younger employees are not taking the traditional route to a job: looking for job postings and then trying to fit into the mold of a job description. Instead, they are going to an employer saying, “Here's what I can do; let's try to create a job for me.”

11 Competing on Analytics: The New Science of Winning, by Thomas H. Davenport and Jeanne G. Harris (Harvard Business School Press, 2007). 12 Ibid., p. 98.


This year's Accenture Global DigitalAdvertising Study affirmed last year'sfindings that more sophisticated, tech-nology-based analytics capabilities areessential to achieving high perfor-mance in digital advertising. As one ofthis year's survey respondents put it,"Leaders refuse to live without deepand extensive analytics capabilities."

There's good reason to care about thisattribute in particular. Accenture'sresearch finds that high-performancebusinesses are twice as likely to use analytics strategically comparedwith the average company, and fivetimes more likely to do so than lowperformers.11

Our digital advertising study foundthat executives clearly believe that theincreased capability to make moresophisticated measurements is a pri-

mary value point of digital advertising(see Figure 10). Respondents over-whelmingly agreed or strongly agreedwith the statement, "There will be avast proliferation of digital ad formatswith an associated increase in thecomplexity of accurate measurement."

Companies are now awash in a floodof data about customers. (Considerthat Wal-Mart's legendary data ware-house of sales and inventory data wasassessed two years ago at 583 ter-abytes; by comparison, the UnitedStates Library of Congress's entire printcollection takes up only 20 terabytes.)12

The data is there; the big question iswhether companies can become morenimble at manipulating that data.

For example, Accenture has beenworking with a large communicationsprovider in Asia to help the company

develop deeper business intelligenceand analytics capabilities. The compa-ny is looking to use the data that itgathers from its traditional wirelessand wireline communications andapply it in a way to do targeted onlineand mobile advertising, given the con-sumer overlap among its businesses.This is a good example of taking datathat already exists and using it in adifferent way.

All companies, therefore—not justthose in the advertising industryitself—need to determine whether ornot they have the requisite informa-tion technology capabilities related tobusiness intelligence and customeranalytics to react to data quickly as itcomes in and use it to target cus-tomers more effectively.

Applied Business AnalyticsLeaders refuse to live without it

Figure 10: Percentage of respondents agreeing or disagreeing with the statement, "There will be a vast proliferation of digital ad formats with an associated increase in the complexity of accurate measurement." (Note: Data includes a 2 percentrounding allowance.)

Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree

47% 21% 12% 1%17%


Figure 11: Percentage of respondents agreeing or disagreeing with the statement, "Consumer privacy fears will significantlylimit the growth of targeted advertising capabilities." (Note: Data includes a 1 percent rounding allowance.)

The sophisticated analytics possible indigital advertising will drive a declinein the use of many traditional successmeasures in advertising, such as costper thousand impressions (CPM). Atthe same time, analytics will enableadvertisers to realize a better returnon investment through more accuratetargeting of audiences.

Analytics becomes even more impor-tant in a down economy, in whichchief marketing officers need to domore with less. Some recent surveydata suggests that chief marketingofficers have had budgets reduced this year as much as 25 percent.13

So more sophisticated targeting canhelp companies get more impact for a lower advertising spend.

Data privacy issues are a concern formany when it comes to targeting customers based on better analytics.That's one reason why many are mov-ing fairly cautiously when it comes tomobile advertising, for example. Thepotential backlash could be huge forcompanies perceived to be engagingin mobile spamming.

This year's Accenture survey showedthat executives are certainly aware ofthe potential pitfalls presented bymobile advertising. For example, 64percent of respondents agreed orstrongly agreed that mobile carrierswill not begin to enable any unsolicit-ed, commercial mobile advertisinguntil consumers give their permissionthrough an opt-in capability.

Nevertheless, half the respondentsalso feel that there are opportunitiesfor more targeted mobile advertisingthat will not necessarily be limited byconsumer's privacy concerns. (SeeFigure 11.)


Digital leaders in the analytics area,according to survey participants,included Google, Microsoft, WPP,Apple and BT. (See Figure 12.)Executives noted, in particular, theanalytical tools that come withGoogle's advertising system. Google"pretty much invented analytics fordigital media," one participant noted,"and they understand all this betterthan anyone else." "Google is proac-tive," said another, "while everyoneelse is reactive."

33% 2%26%21%17%

Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree

13 "Advertising Analytics: Doing More with Less," www.podtech.net/home/4904/advertising-analytics-doing-more-with-less.


Figure 12: Perceptions of which industry players excel at applied business analytics (percentages of respondents)

Analytics imperatives

As the digital leaders in digital advertising embrace more powerful,forward-looking techniques such aspredictive modeling, forecasting andoptimization, they are relying onsophisticated IT tools, of course. Butthey are also making sure they abideby four fundamental factors:

Leaders who "get it." Taking a broadanalytical approach to business callsfor big changes in culture, process,behavior and skills. One CEO of amajor entertainment company regu-larly asks employees, "Do we think thisis true, or do we know?" Effectiveexecutive leadership when it comes to analytics pushes to create a fact-based culture that extends even tosuppliers and other business partners.

People who love numbers. If compa-nies are going to excel at analytics,they need employees who are datasavvy or who can quickly become so.Clearly, this calls for hiring, trainingand rewarding for analytical skills.

Processes that revolve around facts.High performers when it comes toanalytics work toward a "single ver-sion of the truth"—not the clashingviews of the same metrics that bogdown other companies. Newerprocesses take an integrated, cross-enterprise view of the data.

Technology to capture, sort andmake sense of the data. There is no shortage of processing power tosupport analytics efforts. New tech-nologies are available that can plowthrough enormous databases at speed.Much of the necessary analytical soft-ware is available, too.

The good news for those who want tobecome analytical aces is that theyalready have much of the data theyneed. Knowing what to do with it isanother thing entirely. But the effortmust start now. Experience suggeststhat at least 18 months of data is nec-essary before one can begin derivingmeaningful insights. That's a year anda half in which your competitors mayalready be well down the same road.

Google 30%

6%

4%

4%

4%

Microsoft

WPP

Apple

BT


Investments and Business Development Leaders are bold and selective

This year's Global Digital AdvertisingStudy both confirms and strengthensAccenture’s view that the encroach-ment of digitization of content andInternet-originated business modelsinto other forms of media such astelevision will cause an even greatershake-up than the online revolution.There will be two particular conse-quences for participants:

• A threat to the survival of incum-bents—primarily traditional media companies and advertising agencies—that do not embrace new technologies and business models.

• Huge new opportunities in the digital advertising sector for service and media providers with experience in delivering digital content and access to deep customer insights.

These consequences will, in turn, create a wave of change in advertisingmodels. Yet our research and experi-ence suggest that the future high per-formers will be those who are bothbold and selective in their acquisitionsand in the development of new busi-ness and operating models needed tosucceed in a digital environment.News Corporation, for example, wasprescient in acquiring MySpace a fewyears ago, anticipating the risingimportance of social networking web-sites to the advertising industry. Andthe $22 billion in acquisitions madeindustry-wide during 2007 suggestthat these kinds of approaches tobusiness expansion will be a perma-nent part of the landscape.

A number of questions and concernsdominate the discussion of invest-ments, development, competition andbusiness models, based on our surveyfindings.

What kind of company owns thehousehold? This question is importantbecause the providers who, in essence,own the bulk of a household's activitycan earn a premium from marketers tothose households. We asked surveyparticipants whether cable andtelecommunications companies arebest positioned to own the householdbecause of access they provide intothe home. Only 38 percent agreed orstrongly agreed; 32 percent disagreed;and more than a quarter of them (28percent) were not sure or had noopinion. Clearly the competitive land-scape is uncertain at this time.

The role of new trends such associal networking sites is uncertain.Executives in our survey were dividedover the ease with which money canbe made through advertising associat-ed with social networking sites. Onlyjust over half (54 percent) agreed orstrongly agreed with the statement

that, "Over the next five years, socialnetwork revenues will continue to trailthat of content owners because socialnetwork site traffic is less easy tomonetize than content owners' sitetraffic." Nevertheless, executives areclearly drawn to the possibilities ofsocial networking. As one respondentput it, "Once a social network sitebecomes popular and continues togrow and gain new readers, the possi-bilities for advertising opportunitiesare endless."


Asked to name the digital leaders inthe area of business development andinvestments, Microsoft, Google andNews Corporation rose to the top. (SeeFigure 13.) Survey participantsreferred to Microsoft strengths suchas its large research and development

budget, and a track record in effectiveresearch. "Microsoft is playing catch-up," one executive noted, "but theyhave a ready pool of investmentmoney that will continue to positionthem as a strong player."

Business development imperatives

Accenture believes several imperativesare foremost when it comes to theinvestments and developments neededto achieve and sustain high perfor-mance in digital advertising.

Invest in more sophisticated cus-tomer segmentation capabilities. Themost important areas for focus todayare in customer understanding and indeveloping sophisticated, appropriatecustomer segments to target advertis-ing. This can be done by aggregating

customer insight data from multiplepartners, or by investing in sophisti-cated customer data analytic solu-tions. These capabilities can enablecompanies to use dynamic, behavioraldifferences in customer segmentationto target and drive response rates onadvertising.

Effectively manage the transition toa performance-based environment.One of the biggest shifts in the adver-tising industry today is toward perfor-mance-based advertising. This meansthat customers want to do more than"establish brand value" in some gener-al way; they want to understandexactly how consumers are interactingwith their brands. This is focusingindustry players to look specifically athow their advertising offerings driveconversion with their partners—how acompany can provide more assurance

Figure 13: Perceptions of which industry players are strongest at the business development and investments necessary toachieve high performance in digital advertising (percentages of respondents)

Microsoft 28%

23%

9%

Google

News Corporation


that customers driven toward one oftheir advertisements will be a qualitylead. Providing that kind of assurancecan increase the value of a company'sadvertising compared to competitors.

Think mobile gaming. Gaming, andespecially mobile gaming, are the"next big things" in advertising.Because of the traffic driven to thesegame sites, companies have theopportunity to sell advertising byworking brands into these digitalinfrastructures. WiFi-enabled mobiledevices mean that such games areavailable to users anytime, anywhere.To date, mobile gaming has not beentargeted by advertisers with the samelevel of sophistication as online, PC-based gaming. This will change in thevery near term, and companies mustbe ready to compete in this new arena.

Carefully analyze the buy-vs.-buildquestion. Because of the speed necessary to get out in front of themarketplace in critical areas of digitaladvertising—areas such as social net-working or mobile—companies mustengage in detailed analysis of whatcapabilities they can realisticallydevelop internally and which theyneed to create through outsourcing,acquisition or other means.

Consolidation is key to achievingmarketplace dominance. Aggregationis an important development in thisfield and it has really changed thegame. The four major portals (Google,Yahoo!, MSN and AOL) have beenmoving aggressively to make acquisi-tions so that they can create the dominant platforms on which everyoneelse will run. Business developmentsthat can raise the bar for entry quitehigh can extend a company’s ongoingshare of the market.

The most important areas for focus today are in customer understanding and in developing sophisticated, appropriate customer segments to target advertising.


The path to high performance in digital advertisingThe 2008 Accenture Global Digital Advertising Study creates a new set of imperatives for different kinds of companies when itcomes to developing and sustaining the capabilities discussedhere—the capabilities that can drive high performance.

Accenture believes that, over time, alltypes of companies in the advertisingmarketplace must be moving towardthe converging digital space. (SeeFigure 14.) All players must be think-ing about comprehensive ways to integrate their advertising capabilitiesacross all major channels, traditionaland digital, while bearing in mind thatthe future clearly belongs to digitalhigh performers.

In terms of specific recommendations:

If you are a traditional media company:

• Exploit all digital content and advertising, and repurpose where necessary to fit the changing needs of consumers across different com-munication mechanisms.

• Target segments more effectively so that content and advertising are appropriate to consumer interests and to different ways of consuming information.

If you are a new media company:

• Build and integrate systems for sales, reporting, delivery, etc. to support products across multiple channels and delivery systems or devices.

• Equally important, develop processes and knowledge transfer capabilities to create new, needed skills in the workforce.

If you are a telecommunications,cable or satellite company:

• Increase the potential for revenue growth by building enhanced, differentiated and complementary services to your core business that can be monetized through new advertising inventory.

If you are a technology developmentcompany:

• Focus on creating extensible systems that have application programming interfaces that can reuse widgets and capabilities built by the developer community as well as open-source programmers.

If you are a device manufacturer:

• Focus on developing features and functions that enable data collection for targeting and advertising. These kinds of devices will be most highly prized by service providers and consumers alike.

The advertising industry—and, indeed,any company that purchases advertis-ing—is currently experiencing one ofthe most disruptive periods in the history of any large business sector.But companies that get it right—through the mastery of technologytrends, the adoption of more sophisti-cated analytics, the ability to developmore nimble and collaborative busi-ness and operating models, and thecapability to attract, develop andretain top talent—will have an edge inattaining and then sustaining highperformance in the years ahead.


Figure 14: The move to convergencein the advertising industry

Tota

l A

dver

tisi

ng

Rev

enue

Digital Share of Advertising Revenue

Traditional Player Converging Digital

New Entrant Emerging Digital

Copyright © 2008 Accenture. All rights reserved.

Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

Contact us

For more information on the 2008Accenture Global Digital AdvertisingStudy and what Accenture can do tohelp you become a high-performancebusiness, please contact:

Emily O'Halloran, Accenture SeniorExecutive Digital Advertising Lead [email protected] in the subject line write”DigitalAdStudy2008”.

About the research

The research that forms the basis ofthe 2008 Accenture Global DigitalAdvertising Study was conducted byAccenture in association with TheBPRI Group. Research was based onface-to-face and telephone interviewsfrom January to March 2008 with 81advertising industry leaders in NorthAmerica, Europe and Asia. The surveyparticipants include CEOs, chief strat-egy officers and key business unit

heads from agencies, media, technolo-gy providers and major advertisers.Quantitative outputs from the inter-views were analyzed by Accenture andcombined with our industry insights todevelop the points of view expressedin this paper.

About the Accenture Media &Entertainment Industry Group

Accenture helps entertainment, broad-cast, publishing, printing and portalcompanies adapt to the realities of the digital evolution and capitalize onnew opportunities to improve businessperformance. Its dedicated profession-als provide media and entertainmentcompanies with a distinctive combina-tion of business and technology consulting, systems integration andoutsourcing capabilities. Accenture has worked with 19 of the 20 largestmedia and entertainment companies in the world.

About Accenture

Accenture is a global managementconsulting, technology services andoutsourcing company. Combiningunparalleled experience, comprehen-sive capabilities across all industriesand business functions, and extensiveresearch on the world’s most success-ful companies, Accenture collaborateswith clients to help them becomehigh-performance businesses and gov-ernments. With more than 180,000people in 49 countries, the companygenerated net revenues of US$19.70billion for the fiscal year ended August 31, 2007. Its home page iswww.accenture.com.

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