Traditional Ad Spending Worldwide Outlook

The traditional advertising industry is not the place to be right now -- unless you have a very high tolerance for stress. eMarketer reports that the decline in overall ad spending is not only continuing, it is getting steeper on a month-to-month basis.

As an example, ZenithOptimedia revised their ad spending forecasts downward. After forecasting a 6.9 percent decline in advertising spending worldwide in April, they're now estimating a drop of 8.5 percent.

Zenith analysts predict a recovery to begin in 2010, but not in North America. Q1 spending was lower than expected and Q2 outlays continued to slide. Zenith says total worldwide spending for 2009 will be $456.5 billion, down from nearly $500 billion last year.

Few markets are growing, such as China and India. Zenith predicts ad spending in China will increase by 5.4 percent in 2009, exceeding the UK to become the world's fourth-largest ad market.

The Internet is the only medium that will enjoy spending growth this year -- rising to an estimated $56.8 billion worldwide.

The Internet share of total ad spending will grow more than 2 percent. Shares for other media will remain relatively flat -- with the exception of newspapers, where the downward spiral has accelerated.

Business magazine advertising is apparently the next sector going into a free-fall of decline. Here's an example of the ad revenue results for some leading B2B publications.

Ad-Supported Music, Alternative to Litigation

A recent Ipsos market study demonstrates that ad-supported models could provide an important new channel for many U.S. consumer music file sharers. The models are already helping to reduce file sharing, and have the potential to become part of a long-term trend.

Moreover, this proactive approach would surely be more advantageous to music record labels that have previously used litigation as their primary reactive method -- in an attempt to dissuade consumer file sharing.

A majority of downloaders and streamers currently operating outside of the fee-based market may simply be unwilling to pay for music. However, given the choice, many fee-adverse consumers may prefer to avoid MP3 file sharing as well.

These consumers value music, but in the absence of an ad-supported offering, the desire not to pay is greater than the desire not to file share with friends and family members.

The annual Digital Music Discovery and Purchase Process study -- part of TEMPO, an Ipsos bi-annual study of digital music behaviors -- is an in-depth examination of how U.S. consumers discover and acquire or purchase digital music.

Findings from the study indicate that ad-supported downloading is a key channel the music industry should embrace in conjunction with the efforts currently being undertaken to combat file sharing -- if it is to reach the largest consumer audience possible with valued music offerings.

Key findings from the Ipsos market study include:

-Currently, ad-supported and fee-based approaches to music have roughly equal appeal.

- If forced to choose something other than ad-supported, a little over a third of those users would enter the fee-based market. The rest are unwilling to pay and either take up file sharing or become inactive.

- If forced to choose something other than file sharing, about two-thirds of those currently involved in it would enter the market -- almost entirely on the ad-supported side.

- Only about a third of current file sharers are truly lost customers from the traditional music industry.

Next-Generation Content Delivery Networks

New video content hosting technology -- known as Content Delivery Networks (CDNs) and Next generation Data Centers -- will dramatically change the business model and the user experience for video delivery services, according to the latest market study by In-Stat.

CDN provisioned Video-on-Demand (VoD) will allow content owners more control over their creations and provide viewers with more choices in programming and delivery methods.

"As Content Providers build or out-source their own data centers, they will be in charge of every aspect of their content," says Gerry Kaufhold, In-Stat analyst. "We will see flexible, complex, and creative ways to derive every last penny out of every piece of content."

In-Stat's market study found the following:

- Over the next five years, the worldwide value of Content Delivery Network services will nearly double, to more than $2 billion.

- The Information Technology (IT) industry is aggressively driving forward with cost-cutting technologies that simplify storage, virtualized servers, and standardize networks.

- Traditional TV and Subscription TV Services need to migrate their existing siloed VoD infrastructure to more efficient Data Center and CDN models.

- Internet protocol networks that connect from Data Centers and CDNs to access networks provide a lean delivery system that can profitably support Advanced Advertising and more personalized video delivery experiences.

- North America will remain the dominant geographic segment for CDNs through 2013. However, Europe and Asia Pacific will see significantly higher growth rates.

- Adaptive Bit Rate Video approaches will permit IP-networks to deliver a high-quality User Experience at lower bit rates, and will cross over to TV-based services.

Singapore: Home to Social Media Innovation

Results from IDC's ongoing survey reveal that 59.1 percent of Singapore CIOs are increasing their investments in new business applications based on Web 2.0 technologies (Portals, Mashups).

An amazing 59.1 percent are also actively revamping social media networking and collaboration services for employees in 2009.

"We are at an interesting juncture", says Dr. Patrick Chan, Chief Technology Advisor for IDC's Asia-Pacific Emerging Technology Council. "As a result of the financial downturn, corporations are under mounting pressure to invest only in IT technology that can help their businesses save costs and grow at the same time."

As a result, CIOs today have very challenging roles to play. They need to balance savings against IT investments in order to achieve optimal growth for their organizations. To date, 71 Singapore CIOs have responded to the survey which is ongoing.

The current market study findings include:

- In 2009, 62.1 percent of the Singapore CIOs surveyed are investing on Business Intelligence (BI) tools. 59.1 percent of the enterprises are also more active in data center server virtualization projects with 42.4 percent also spending in client/desktop virtualization initiatives.

- 45.5 percent of the Singapore CIOs interviewed are currently deploying an IT refresh strategy that focuses on service-oriented architecture (SOA). 42.6 percent of them plan to move major applications to flexible, on-demand web-services SOA environment.

- 37 percent of these CIOs are trying out new IT financing strategies. These companies are shifting from IT leasing to subscription of IT software and hardware rental over a period of 36 months.

- 66.7 percent of the Singapore CIOs surveyed are preparing to outsource and interestingly, 37 percent of them are willing to host their IT infrastructure and business data in a third-party environment. This indicates that Singapore CIOs are open to newer IT business operating models like cloud computing and software-as-a-service (SaaS).

- 53 percent of the respondents in Singapore say that their key focus areas are to reduce costs and improve profit margins through IT. As majority of these CIOs saw a decline in their IT budget, high priority has now been placed on optimizing their existing IT infrastructure, and reviewing IT service and cost alignment with business in response to the existing economic crisis.

People Trust Strangers Before Online Adverts

Recommendations by friends and opinions posted by consumers online are the most trusted forms of purchase influence globally, according to the latest Nielsen market study.

The Nielsen survey, the largest of its kind, shows that nine in every ten Internet consumers worldwide (90 percent) trust recommendations from people they know, while seven in every ten (70 percent) trust total stranger opinions posted online.

However, in this new age of consumer influence, advertisers may be encouraged by the fact that brand websites -- the most trusted form of advertising -- are trusted by as many people (70 percent) as consumer opinions posted online.

"The explosion in consumer-generated media (CGM) over the last couple of years means consumer's reliance on word-of-mouth in the decision-making process, either from people they know or online consumers they don't, has increased significantly," says Jonathan Carson, at Nielsen.

The Trust in Advertising element of the survey was first conducted in April 2007 and the two years since then reveals that brand sponsorship has seen the greatest increase in levels of trust from 49 percent of Internet consumers in April 2007 to 64 percent in April 2009 -- an absolute increase of 15 percentage points.

Brand sponsorships are closely followed by ads before movies which have increased from 38 percent to 52 percent -- a 14 percentage point increase -- and personal recommendations which have increased by 12 percent from 78 percent in April 2007 to 90 percent in April 2009.

Consumer opinions posted online tend to be trusted most by Vietnamese Internet consumers (81 percent) and their Italian (80 percent), Chinese and French (both 77 percent) counterparts.

However, online opinions tend to be trusted the least in Argentina (46 percent) and Finland (50 percent). In comparison, 72 percent of U.S. Internet consumers trust this form of advertising -- meaning the U.S. ranks 12 out of the 50 countries represented in the survey for trusting consumer opinions online.

When it comes to trusting brand sponsorships, Latin American countries lead the way with 81 percent of both Colombian and Venezuelan Internet consumers and 79 percent of Brazilians trusting this form of advertising.

In contrast, sponsorships hold the least sway amongst Swedish (33 percent), Latvian (36 percent) and Finnish online consumers (38 percent). In comparison, 62 percent of U.S. Internet consumers trust brand sponsorships, placing the U.S. 21 out of the 50 countries surveyed.

Brand websites, globally the most trusted form of advertiser-led advertising, hold the greatest sway in China (82 percent). Following China are Pakistan (81 percent) and Vietnam (80 percent).

However, brand websites tend to be trusted least amongst Swedish (40 percent) and Israeli (45 percent) Internet consumers. The U.S. ranks 22 amongst the countries surveyed with 70 percent of U.S. Internet consumers trusting brand websites.

Although brand websites score highly amongst Internet consumers, the survey shows that other forms of digital advertising are trusted less than ads appearing in traditional media such as TV billboards, radio, magazines and newspapers -- despite the latter being the only form of advertising to experience a drop in levels of trust since the 2007 survey.

Text ads on mobile phones (24 percent), online banner ads (33 percent), online video ads (37 percent) and ads in search engine results (41 percent) are the forms of advertising least likely to elicit a degree of trust.

Benefit of Coax or Phoneline Home Networks

Wireless home network connections are fine for many routine Internet access applications. However, when people need to stream high-definition video to other devices within the home -- such as an HDTV set -- wired network connections tend to provide better performance.

Coax and phoneline networking is becoming increasingly important among home network connectivity alternatives, particularly for service provider provisioned networks.

Cumulative households with an in-home provider network utilizing coax or phoneline technology will more than double from 2008 to 2010, according to the latest market study by In-Stat.

"Consumers want web video on their TV and also increasingly want whole-home DVR capability" says Joyce Putscher, In-Stat analyst.

Networking over coax makes particularly good sense in North America where 90 percent of homes have pre-existing coax wiring.

In-Stat's market study found the following:

- In 2010, average PC home network throughput will exceed 150 Mbps in North America, ahead of throughput in Asia-Pacific and European households.\

- Nearly two-thirds of consumer respondents from In-Stat's survey expressed an interest in watching Internet Video on their TV.

- Two segregated home networks (HN) have been evolving -- a service provider-centric network, and a PC-centric network. Each is leveraging different business models and technologies.

Why the Buying-Cycle Starts and Ends Online

Current business information has always been important to executives. In the past, they read newspapers and trade magazines for information on trends and developments. Not any more. Times have changed, and so has the source of buying-cycle influence.

According to the "Rise of the Digital C-Suite" study from Forbes Insights and Google, the Internet has become the most valuable information resource -- by far -- for U.S. executives.

Online ranked ahead of at-home and at-work contacts, personal networks, trade publications and outside consultants as an information resource. Newspapers and magazines trailed way behind.

When it comes to locating business information online, search engines were rated higher than other digital tools, such as blogs, social networking sites and subscription search services.

Although, ironically, the search results may lead executives to influential blog content that's typically ranked highly by Google and other search engines.

The most important type of information executives searched for online was competitor analysis (53 percent), followed by customer trends (41 percent), corporate developments (39 percent), technology trends (38 percent) and compliance and legal issues (26 percent).

Surprisingly, 53 percent of executives preferred to gather information themselves -- rather than delegate research tasks to lower level employees. Senior executives of all ages found the Internet to be a profoundly useful tool, according to the survey authors.

Online information sources will likely grow in importance, as executives under age 50 use new media tools more often than their older counterparts.

eMarketer, who reported on the results, says that C-suites will be transformed by this activity. I believe that Internet savvy executives will be more inclined to start and end their information discovery online, particularly in the process of procuring unfamiliar products or services.

Global Broadband Leaders Raise Bandwidth

Market penetration of broadband access services continues globally, with total subscribers on track to reach 500+ million next year, according to a market study by Futuresource Consulting.

"More than 60 percent of all fixed broadband households on the planet are connecting using xDSL, where digital data transmission takes place over a local telephone network, while cable accounts for a little over 20 percent," says Patrik Pfandler, Senior Market Analyst, Futuresource Consulting.

Although markets in many developed countries are becoming saturated, alternative hot spots are starting to emerge -- Africa and the Middle East will experience spikes this year that equate to 33 percent growth.

Longer term, India is the country to watch. With one of the lowest household penetration rates for fixed broadband -- at just over 2 percent, or five million subscribers -- they're projected to grow five-fold by 2013, to almost 25 million access lines.

Asia-Pacific is still the global leader, with Japan and South Korea offering average download speeds of approximately 30Mb/s. Sweden leads Europe, averaging 14Mb/s last year. In the U.S., however, the national average achieved last year was just 2.7Mb/s.

"Download speeds are the next broadband battleground in developed countries," says Pfandler, "with network upgrades over the next four to five years providing a number of players with that much-needed edge in a commoditized market."

Cloud Services Enabling Mobile Applications

The iPhone, from Apple, increased the market awareness of value-added service (VAS) mobile applications. These applications and associated "app stores" are becoming the next mobile sector market development opportunity.

However, most new mobile applications require smartphone capabilities, limiting their potential market. Moreover, a new architecture that applies a cloud-based model could drastically change the way mobile applications are developed, acquired, and consumed.

According to the market study from ABI Research, mobile cloud-based services will be disruptive and could eclipse the current mobile application model by 2014, delivering revenue of nearly $20 billion annually.

"Mobile application developers today face the challenge of multiple mobile operating systems," says ABI senior analyst Mark Beccue. "Either they must write for just one OS, or create many versions of the same application."

More sophisticated apps require significant processing power and memory in the handset. Using Web development, applications can run on hosted servers, so handset requirements can be greatly reduced and developers can create just one version.

The cloud-based trend is in its infancy today, but ABI Research believes that eventually it will become the prevailing model for mobile applications.

This approach is not without challenges. A cloud-based application stops working if you lose your radio connection. But, new programming languages such as HTML 5 will enable data caching on the handset, allowing work to continue until the wireless connection is restored.

"Cloud computing will bring unprecedented sophistication to mobile applications," Beccue notes.

Business users will benefit from collaboration and data sharing apps. Consumers will gain from remote access apps -- allowing them to monitor home security systems, PCs or DVRs.

That said, one lingering question remains. How will over-the-top cloud-based apps further impact mobile network operator's hopes to increase revenue? If the mobile service provider isn't the catalyst for open innovation, then the evolving ecosystem may relegate them to a lower status in the mobile VAS value-chain.

Hybrid IPTV Set-top Box Creates Opportunity

The latest global market study by Multimedia Research Group (MRG) demonstrates how hybrid IPTV set-top boxes (STBs) are helping IPTV Operators accelerate early service deployment or extend the reach of their existing video IP Networks.

By merging existing digital video broadcast programming with IPTV services, Operators are finding they can significantly slash CapEx and lead-time costs from typical IPTV deployment costs.

In 2008, there were already 14.4 million installed hybrid STB units worldwide, with estimated growth to 22.3 million in 2012.

The MRG report explores how hybrid IPTV set-top boxes can receive broadcast digital channels from Satellite, Terrestrial or Cable—plus from a managed IPTV (on-demand) service.

By using existing broadcast sources in addition to on-demand IPTV service, IPTV Operators can significantly reduce the content acquisition and early network infrastructure requirements.

"Use of hybrids can solve some serious problems presented by technical restrictions or lack of content," says MRG Analyst, Huw Price-Stephens, MRG Analyst. "They can also create new and bigger problems unless acquired with an effective exit strategy, which does not require swapping out the STBs."

Matching a hybrid strategy with the local competitive profile may be the best way for an IPTV Operator to differentiate the service.

Moreover, the growing threat of compelling Over the Top (OTT) video offerings will motivate IPTV service providers to act sooner, rather than later.

New Approach to Digital Rights Management

Copy protection, watermarks, digital fingerprinting, and conditional access are all Digital Rights Management (DRM) technologies used with the intent to enforce copyright protection of video content. However, the problem is, typically they don't.

Apparently, efforts to stop the reported 12 billion peer-to-peer (P2P) downloads occurring annually in the U.S. have come up short, according to the latest market study by In-Stat.

In-Stat believes content owners and service providers need to shift from content protection to a two-pronged content monetization strategy consisting of digital rights information management and offering a better user experience than consumer P2P services.

"What is needed is a new approach to monetizing digital content including moving a relatively small group of consumer households that do the bulk of P2P downloading (power users), to legal services," says Keith Nissen, In-Stat analyst.

The question is whether the big media companies in the video industry wishes to control its own destiny, or get crushed by technological change, similar to what is occurring in the record labels within the music business.

In-Stat's market study found the following:

- U.S. broadband households download 14 billion videos copies each year; 85 percent are not licensed.

- In-Stat sees watermarking becoming a growing technology to track licensed usage rights.

- A migration of power user households from P2P to legal video services would potentially generate $1.4 billion in subscription revenue and $1.1 billion in advertising revenue.

Smartphone Content and Service Experience

The consumer demand for smartphones is growing rapidly and will push annual sales worldwide from 131 million units in 2008 to over 300 million by 2013, according to the latest market study by Parks Associates.

The assessment finds people are attracted to these converged devices because they combine applications into a mobile platform, which can then be expanded incrementally -- with new and unique add-ons and applications.

"Consumers have a personal connection to their mobile phones," said Harry Wang , Director, Health and Mobile Product Research, Parks Associates.

Applications like T-Mobile's Sherpa will learn from its user's preferences in order to make personalized, location-based recommendations on restaurants and shops. The latest iPhone release is also making a strong case for mobile video.

Smartphone users worldwide will top 1.1 billion in 2013, creating a lucrative market for mobile service providers and mobile phone application developers.

"The success of the iPhone, Pre, and Blackberry shows the strength of consumer demand for an intelligent, multi-functional device," Wang said.

The appeal of the smartphone will create significant new revenue streams for carriers and developers, who could create new service bundles that build off this mobile platform with converged video, voice, and data applications.

Apparently, they're launching a new consumer study to explore smartphone service and application usage patterns, handset feature and function requirements, and customer expectations for the mobile content and service experience.

Why Downturns Create Upsides for Creativity

According to the latest survey from Reardon Smith Whittaker (RSW), the economy has had a negative effect on the business of 87 percent of U.S. advertising and PR agencies -- and 91 percent of their clients.

Could this actually be a good thing for Digital Marketing professionals?

In the first half of 2009, 55 percent of clients had spending decreases of 6 percent or more. In addition, 35 percent expect to see marketing spending fall by 6 percent or more in the second half of the year.

Fifty percent of agency clients spent more on e-mail marketing than the previous year. Almost one-third of clients increased their commitment to search engine optimization (SEO), while 56 percent and 28 percent did the same for social media and online display, respectively.

"If you don't have a good grasp of new media, you had better get on it," recommended RSW analysts in their report of the apparent survey results.

Creative talent and business savvy is in demand, regardless of the current economy. The main reasons clients left agencies were lack of fresh ideas (73 percent) and the need to cut costs (44 percent).

I believe that the pressure to cut marketing budgets is always a wonderful thing -- because it creates opportunity for people truly skilled in doing more with less.

Big traditional advertising budgets, applied by inept executive leadership and habitually lazy marketing staff -- that are incapable of customer experience design experimentation -- are a proven recipe for a prolonged competitive disadvantage.

The minority of marketers that dare to move beyond their current comfort zone will do more than merely survive the downturn, they will thrive in the eventual upturn.

Latin America 3G Mobile Phone Data Service

Latin American mobile operators are promoting new data services in order to offset falling voice revenues and satisfy the growing demand for value-added products. That helped make 2008 the year of 3G in Latin America, where virtually every Latin American mobile operator launched 3G services.

There were more than 6.8 million active WCDMA connections across Latin America at end March 2009, up 50 percent in just one quarter. Possibly the most striking growth of all has been in Brazil, where there were 3.8 million WCDMA subscriptions at end-March 2009, up from 2.2 million three months earlier.

"We can expect that number to continue to accelerate, because America Movil has made it clear that its investment priority in the region for 2009 concerns its 3G network," said Eva Benguigui, Senior Research Analyst at Informa.

Informa expects investments in 3G networks will accelerate across Latin America. For instance, there will be more than 15 million WCDMA subscriptions in Latin America at end-2009 -- or less than 3 percent of the total 522 million mobile subscriptions in the region.

However, WCDMA subscriptions will grow to 320 million at end 2014, or 46 percent of the region's 689 million total mobile subscriptions at that time.

"As more high-speed mobile networks are deployed and customers gain access to a wider variety of compatible devices, value-added data services will become increasingly important to mobile operator bottom lines," said Tammy Parker, principal analyst at Informa Telecoms & Media.

While the region's operators are focused primarily on 3G today, mobile broadband technologies such as HSPA, HSPA+ and LTE will be on their technology migration paths as they continue to expand next-generation services in order to offset falling voice revenues with higher data revenues.

However, LTE deployments in Latin America are expected to be a challenge since spectrum is congested in many areas. In Latin America, spectrum caps on operators and an overall lack of suitable spectrum for wireless broadband threatens to hold back mobile broadband deployment in some markets.

Nonetheless, operators across the Americas are expected to continue aggressively rolling out mobile broadband networks over the coming years where they have adequate spectrum availability, graduating from today's 3G and 3.5G networks to faster offerings promised by LTE and, in some cases, WiMAX.

Upside and Downside for Broadband Growth

According to Point Topic's latest market assessment, by the end of Q1 2009 there were 429.2 million broadband subscribers worldwide. This represented a 4.02 percent increase on Q4 2008 when the total was 412.6 million.

The largest number of net additions was in Q1 2007 when 19.6 million new subscribers signed up for broadband services.

Despite the recent dips in Q2 2008 and Q4 2008, the lowest number of net additions in the period shown was in Q2 2006 at 14.5 million. This was almost 14 percent less than the net additions acquired in Q1 2009 which totaled 16.6 million.

Over the 12 months to end Q1 2009, 63.5 million new broadband subscribers were added worldwide, representing 14.8 percent of total subscribers by end-Q1 2009. Global broadband population penetration was 7.4 percent by the end of Q1 2009, up 17.4 percent on the same time a year ago from 6.3 percent and up 4.2 percent on the previous quarter from 7.1 percent.

Global household penetration was 27.3 percent, up 17.7 percent from 23.3 percent in Q1 2008 and up 4.2 percent from 26.2 percent in Q4 2008.

Western Europe and South and East Asia have the largest shares of the world broadband market at 25.18 percent and 23.07 percent respectively. These were followed by North America with a 21.79 per ent share and Asia Pacific with 15 percent of the market.

The three smallest shares of the broadband market are in Latin America (6.5 percent), Eastern Europe (5 percent) and Middle East and Africa (2.94 percent).

The regions with the most mature and advanced broadband markets had the lowest growth rates during Q1 2009. They were North America (3.87 percent), Western Europe (2.63 percent) and Asia Pacific (1.83 percent). Growth was relatively low in these regions due to little potential for new growth.

Demand for Lower Price Digital Photo Frames

The market for digital photo frames has gone mainstream, particularly since prices dropped to affordable levels in the first half of 2009, according to the latest market study by In-Stat.

However, most units shipped still lack advanced features such as wireless connectivity to the Internet. Nevertheless, Wi-Fi enabled photo frames are a key growth driver as they will grow at twice the rate of overall digital photo frames in 2010.

"Prices for connected frames will continue to decline, and as manufacturers educate consumers about these devices -- the mass market will become more comfortable using the Internet services connected frames support," says Stephanie Ethier, In-Stat analyst.

Applications such as sharing and downloading pictures over the Internet, as well as streaming Internet radio and video from online sites like YouTube, are also expected to be primary drivers.

In-Stat's market study found the following:

- Worldwide unit shipments of all digital photo frames are expected to reach 50 million by 2013.

- Nearly 60 percent of U.S. respondents to In-Stat's consumer survey identified integrated wireless connectivity as a desired feature on their next digital photo frame purchase.

- The total silicon opportunity for digital photo frame suppliers will exceed $550 million by 2013. Microcontrollers comprise the largest opportunity in non-wireless enabled devices.

- The bill of materials for a wireless 8-inch digital photo frame will fall below $36 by 2013; the LCD, the wireless module and the enclosure are the dominant cost items.