Advertising: the customer data war

20% of ad spending on social networks are from local advertisers, according to Borrell Associates in a report dated July 12th. They are forecasting that: "local advertisers will account for about $641 million of nearly $3.3 billion this year trying to reach consumers via these sites".

This Monday, Josh Bernoff, VP-principal analyst at Forrester Research, wrote: "In this recession, marketers have learned that interactive marketing is more effective, and advertising less effective, per dollar spent." Following the findings of the IBM study: Beyond advertising. Mansha Daswani wrote about it, in Worldscreen.com, "To succeed—especially in the current economic environment—media companies will need to develop a new set of capabilities to support the industry's evolving demands which include micro targeting, real-time ROI measurement and cross-platform integration." [...] "Advertisers are following consumers to new platforms; the study indicates that 63 percent of global CMOs expect to increase interactive/online marketing spend while 65 percent expect to decrease traditional advertising."

My partners and I have been warning traditional media companies that the advertising business was shifting from a brand awareness paradigm towards a ROI/data driven paradigm. That we could not assume that advertising was going to subsidize media for ever, at least the way it does it today. Outsell Inc, in a recent study, predicts that "$65 billion will be siphoned away from traditional advertising channels in 2009 and spent instead on companies' own Web sites and Internet marketing" (source : Forbes via Éric Scherer).

Traditional media companies have to enter the "customer data war" if they want to keep attracting advertising dollars and compete in the interactive marketing world. Or they are going to have to partner with companies that have the customer data. The Yahoo! deal is leveraging this idea. But, when 80 to 100% of your business is advertising driven, don't you want to own the data?

It is one of the main issues that traditional media brands are facing: how to stay relevant for marketers/advertisers? This is the war to win to stay in business. Or it is going to be necessary to find new ways of subsidizing information while downsizing the newsroom. One source will not be enough... and readers will not cover the advertising revenue loss.

FYI: Study Finds Correlation Between Social Media and Financial Success (via Richard Ting)