Brave New World

2006 has been THE YEAR of Me Media, when consumers created media to fit their needs, then 2007 will be the year advertisers try to catch up to those consumers.

2006 has been the year advertising executives and marketers began to talk about “traditional” interactive marketing. It’s also been the year interactive—advertising on Web sites—began to seem old hat as even newer media opportunities emerged. Along with those opportunities have come new rules, new technological challenges and a fresh wave of creativity. The most intrepid marketers will spend 10 percent to 20 percent of next year’s ad budgets on what are essentially lab experiments, in hopes of understanding how to reach ever-more-technologically sophisticated, media-hungry consumers.

According to Tom Bedcarre, CEO of AKQA, an interactive agency based in San Francisco, agencies have seen a massive shift in Internet content that has shaken up the ranks of the Web’s top media properties. YouTube, MySpace and FaceBook have sucked up all the oxygen in the interactive atmosphere, and “clients cannot get enough,” he says. “Everybody is scrambling because of these tiny little companies.” Scrambling, because these social networking sites and the rest of the new media—podcasts, RSS, mobile and in-game—don’t lend themselves to traditional interactive marketing.

“Social networks are completely amorphous, a constantly evolving neural network composed of a bazillion minds,” says Lisa Voldeng, CEO of sugarlab, which owns uberbabe, a multimedia entertainment brand. “The wham-bang-thank-you-ma’am approach doesn’t work. Advertisers are afraid they’re going to get lambasted by the people they’re trying to reach.”

But not all clients are hesitating. In fact, while the big brands are often seen as conservative, they’re the ones testing the new technologies because their media budgets are large enough to support a few experiments.

OMD Digital has more than a dozen clients trying out new platforms, says David Goodman, West Coast director. Clients are working to understand which media work, which platforms can scale and which can achieve the objectives advertisers have in other media.

Right now, OMD, one of the largest media buyers, puts between 2 percent and 5 percent of its digital spend into emerging media. Overall, spending on blog, podcast and RSS advertising was $20.4 million in 2005, according to media research service PQ Media. It’s expected to more than double to $49.8 million in 2006, with podcast advertising a larger market than blog advertising by 2010.

Perhaps the medium that is most intriguing to marketers right now is in-game advertising. Videogames used to be their own alternate universe, requiring negotiations for product placements while a game was under production. And once that ad was inserted into the game, it stayed there, forever burned onto a disk. But today’s crop of games, played on Internet-connected machines, has the ability to serve ads dynamically into the gaming world.

Ads can be two-dimensional, such as a billboard, or 3-D interactive objects, such as a soda machine. Audio or video ads can play as part of the action, for example, when a gamer turns on the radio in a car. And these ads can be swapped out once the marketing message has played itself out.

Microsoft recently bought Massive, a technology and ad-serving company, and is in the process of integrating its ad platform with MSN’s own ad-serving and targeting platform, adCenter. Eventually, marketers will be able to use the same behavioral profiles they use across the network to find gamers as they play. “If an agency buys a video spot on MSN, that same video ad can run in the game environment,” says Chris Early, studio manager for Microsoft Casual Games, “and you’ll find me wherever I am on the network.”

Double Fusion is another provider of in-game advertising. It acquires the rights to sell game ads, then aggregates and sells the inventory.

“In order to offer advertisers ongoing reach in the marketplace, you need to bring together games from a lot of different publishers to create a critical and sustainable mass of audience,” says CEO Jonathan Epstein. He predicts the entire game advertising spend will double each year for the next two years, reaching about $560 million by 2009.

Another segment that’s grown quietly but steadily is casual games: simple, easy-to-learn and addictive. Casual game players tend to be mainstream, older, slightly more female and highly engaged. In a recent survey by PopCap Games, the majority of respondents rated playing as their most important leisure activity—higher than TV, reading or spending time with friends and family.

Ad placements can be on the Web site where people select games, in interstitials during pauses in play, such as between rounds, or the entire game can be sponsored. When Disney’s The Ant Bully sponsored PopCap’s “Bejeweled” game for a month, the game window was branded and the game pieces sported character heads. James Gwertzman, director of business development for Popcap, says that ad buys on the site range from $20,000 to $50,000, and the company expects spending to increase sharply next year.

Bruce Woolsey, head of emerging media, Avenue A/Razorfish, says that casual game providers have embraced advertising, but are struggling with the ad models. Too many copy TV, playing spots between games. “By the end of 2007, we could be spending a lot of money on casual games—if they pull it together,” he says.

Advertisers looking for technophiles are finding a home in RSS, or Really Simple Syndication, feeds. With RSS, users subscribe to content from various sites, which is then “fed” to the user. Bill Flitter, CEO of RSS ad network Pheedo, expects RSS subscriptions to take off in 2007 when feeds are integrated into the new version of Microsoft’s Internet Explorer.

“Right now, it’s the early-adopter market, and for some, that’s a beautiful audience to reach,” Flitter says. AOL, Microsoft, Subaru and the DIY Network are among the big brands testing Pheedo ads, which can be blocks of text or display ads inserted between columns of content. Flitter says the retention rate for advertisers is about 75 percent, with advertisers spending somewhere in the neighborhood of $10,000 for an initial 30-day test and then doubling the budget with a re-buy.

Mobile ads have been a tough nut to crack for some advertisers. While more handsets play video, advertising is hampered by low battery life, slow bandwidth and carrier charges for data usage. But they have not given up, not when it seems virtually every teen and young adult has one glued to their ear. “In mobile, it will be search and text-based promotions with short codes and vanity codes,” says Woolsey. Next year, he says, advertisers will have to create mobile-friendly sites. “Until they do, the experience will not be that great.”

Still, demand for mobile broadband ads could exceed inventory, OMD’s Goodman says. “In 2007, you will see all of the inventory bought out—even though you’re only buying 300,000 [consumers].”

Virtual worlds add scenery to social networking. Second Life, the online multiplayer game operated by Linden Lab, has become the venue of choice for the launch of youth- oriented products such as Adidas’ A3 Microride sports shoe.

Second Life is an online society where people can do pretty much anything they do in the real world: socialize, build homes, shop, attend classes, run businesses, have relationships. Coke and manage virtual storefronts, and there are even virtual ad agencies that have set up shop in Second Life, says Joyce Schwartz, principal of marketing consultancy Jcom.

Wells Fargo’s Stagecoach Island, an area within Second Life, lets teenagers learn about finance in an alternate universe. “Kids can chat and buy stuff with money from branded ATMs. And, they’re sitting around in there for an hour and a half or two hours,” Schwartz says. “I’m a big believer in the alternate reality stuff that you run with a cross-platform campaign. You can actually count the people who come to a virtual world event. You might only get a few thousand people, but those are the tipping-point people.”

That dedicated consumer base creates a type of buzz that can be deceiving. Although they seem to be on fire, most of these new media can’t provide the reach that marketers need. “With some of the emerging media, penetration and usage is not high enough that it will have an impact on [marketers’] objectives,” says Jason Kuperman, director of the interactive and entertainment practice of Tequila, a unit of TBWAChiatDay.

Andrea Millett, director of Media Contacts’ Fidelity account, sees mobile as a good advertising platform—someday. “I’m not sure, given the investment required for creative and administering the program, that it’s large enough in reach yet,” she says.

Most agencies expect the use of emerging media to boost total online ad spending, siphoning still more dollars from offline media, rather than pinching traditional interactive media. In the long run, if new media advertising pays off, traditional media, particularly television, will be the loser. “As broadcast television viewership declines, we see the big shift coming from television to digital,” predicts Avenue A’s Woolsey.

Tequila’s Kuperman believes that content and services will make the ad market. “It’s got to be the content providers and media companies themselves creating something people love and want,” he says. “Once [that happens], the penetration will grow. And then, it becomes extremely interesting to advertisers.”

Susan Kuchinskas often writes about interactive media

for Adweek magazines.