digital outlook report09 digital outlook
report 09

The following report contains statements
that are forwardlooking, including expectations and predictions regarding future industry trends and developments. Actual results may differ materially from our expectations or projections. This report also contains opinions, estimates, and forwardlooking statements by industry leaders. Such statements are the personal opinions of the individuals quoted and should not be attributed to any other entity or individual. Readers are cautioned not to place undue reliance upon forward-looking statements, which speak only as to the date of this document. Except as required by law, neither Razorfish, LLC nor any of its affiliated entities undertake any obligation to update any forwardlooking or other statements in this document, whether as a result of new information, future events or otherwise. © Razorfish, LLC. All rights reserved.

contents a new role for
agencies Social Object Theory: 56 The Secret Ingredient for Powering From Breaking Campaigns to 4 Social Influence Marketing™ Campaigns Building Client Businesses For Here or To Go? 62 outlook How Portable Media Is Like Fast Food Trends to Watch 10 Top 10 Mobile Applications to Watch 66 Shifting Their Focus: 16 Getting Smart With Mobile Marketing: 78 A Look at 2008 Digital Ad Spending How Mobile Marketing Is by Razorfish™ Clients Evolving in Europe and the U.S. Trends in Social Influence Marketing™ 26 topics on our minds Search Outlook 2009: 32 Pushing Search Forward Looking for the Pulse Online in 2009 84 in a Volatile Marketplace The Future of Retail: 88 Publishers of the Year 40 The Consumer’s New Shopping Journey Think Inside Someone Else’s Box: 96 what’s emerging Business Model Innovation in the Digital Age Digital Media Escapes From the PC: 44 Converged Connections: 100 Unlocking Opportunity for Consumers Moving Brands Across Multiple Experiences and Marketers Email Marketing: 104 Ad Exchanges: Revolutionizing 52 Increasing Marketing Connections the Buy-Sell Process in a Social World

consumer conversations TiVo on the
Future of Television: 158 A Call for Innovation Catching Up With the Connected Class 112 Xbox Live on the Future of Television: 160 Connecting with Digital Mom 118 A Window into the Next Generation through Emerging Technologies Comcast on the Future of Television: 162 New Opportunities for Enhanced Television the evolution of research and measurement Navic Networks on the Future of Television: 163 As TV and Its Audiences Fragment, Bringing Media Mix Models Into the Digital Era 124 How Will It Be Funded? Social Influence Research: 128 Google TV on the Future of Television: 165 The Confluence of Consumer Research An interview with Mike Steib and the Social Graph Social Media Measurement: What’s it Worth? 136 three things every executive Modeling and Creating Measureable should know in 2009 Outcomes of Social Media Engagement The Web Gets a Pulse 170 tv at a crossroads Fragmentation Moves Beyond Media 172 The Digitalization of Television: 146 When the Going Gets Tough... 174 Challenges and Opportunities as TV Turns a Corner Jack Myers on the Future of Television: 154 Realities and Opportunities for Media Companies and Marketers 3

A N E W R
O L E FO R AG EN C I ES From Breaking Campaigns to Building Client Businesses By Clark Kokich, Chief Executive Officer I spent the first 30 years of my advertising career focused on saying things. What do we need to say to persuade people to buy our product or service? How do we say it in a unique and memorable way? Where do we say it? How much will it cost to say it? How do we measure consumer reactions to the things we say to them?

Now, after 10 years in
the digital space, I find myself Agencies haven’t played this role very long. They spending my time talking to clients about building used to, but, with the rise of strong client marketing things. What do customers need to make smart deci- groups, agencies have focused squarely and sions? What applications do we need to build to exclusively on producing great advertising, on saying satisfy that need? Where are our customers when things. they make a decision? That limited perspective won’t cut it anymore. Clients How do we make sure the things we build can be are desperately dealing with a laundry list of chal- delivered wherever (and whenever) they need them? lenges: A sinking economy. A connected, in-control How do we build a link between the digital and the consumer. A drive for lower costs. The disruption physical world? How do we help consumers share of traditional media channels. An expansion of global the things we build? competition. The list is long and growing. This isn’t news to anyone; we’ve all seen it coming In this environment, clients need ideas that will trans- for awhile. At every industry conference you’ll hear form their business. In the past, when our only tool someone make a compelling case that the future was paid media, it was virtually impossible to develop of creating and sustaining brands is in building an idea that could change a client’s fundamental experiences, not just in producing great advertising. competitive position. Now, digital has the potential to re-imagine a consumer connection, or reinvent a What’s not so apparent is the impact this change business model. And we have a long list of consumer is having on the role that advertising agencies play touchpoints with which to work, starting with the within client organizations. It’s not just about the Web, then expanding to mobile applications, social, work that agencies do, but rather, it’s about the gaming, viral, digital-out-of-home, widgets, gadgets actual role they should be playing in setting business and more. Now, anything is possible. strategy, designing product and service offerings, delivering service after the sale, creating innovative With this expanded palette, we can build experiences distribution channels and developing new revenue that become an integral part of the brand. Experiences models. For a growing number of brands, the digital that have the ability to add value, create new cate- experience is becoming as important as the actual gories, surprise, delight, serve, simplify, entertain and physical product. tell a story in an entirely new, richer way than ever before possible. We are beginning to put examples of transformational business ideas into market for global brands such as Levi’s, which views the company and

the consumer experience in totality
across all departments — from product development to new collections to the digitally-enhanced fitting room. This is the role that agencies must fill now. Clients need us to bring them business ideas. They need us to expand beyond our traditional role of being great communicators. We need to be great thinkers and problem solvers as well. They need us to understand how their consumers and markets are changing, and then bring them strategies that fundamentally improve their competitive position. Finally, they need us to turn those ideas and strategies into reality — by building transformational experiences. We’ll still need to be good at saying things. Tradition- al, one-way advertising will continue to be a power- ful marketing force. But it won’t be enough. We need to make the things we say real by building experi- ences that truly deliver on the promise — experiences that establish a concrete and direct connection be- tween the consumer and the brand. It’s a new role. One that will challenge the status quo. One that will stretch all of us to expand our view of what it means to be a great agency. One that will require new skills. And one that will drive deep col- laboration between creative, technology, media, user experience and analytics. It’s a tremendous challenge. And it’s a huge opportunity for those marketers who embrace it fully. 7

outlook Trends to Watch 10
Shifting Their Focus: 16 A Look at 2008 Digital Ad Spending by Razorfish™ Clients Trends in Social Influence Marketing™ 26 Search Outlook 2009: 32 Pushing Search Forward in a Volatile Marketplace Publishers of the Year 40

• Conver ted to d
ig it a l c a b le O U T LO O K • Addicte d to i Pho n ea pps Trends to Watch • S k ip s th e com me rci als

1. Advertisers will turn to
“measurability” and “differentiation” in the recession As the economy softens, advertisers will be asking more from their budgets. Even those with healthy financials are likely to push for, and command better price terms and concessions from media companies, who are eager to fill the vast supply of ad space available. Agencies and advertisers will look to established pub- video and targeted media, or it could mean high qual- lishers with reliable models to focus their investments ity engagement opportunities with select partners as more scrutiny is placed on return on investment. who deliver unique brand engagement. The pressure Depending on an advertiser’s goal, this might include points will be on “measurability” and “differentiation.” proven performers like search, ad networks, online 11

2. Search will not be
immune to the Web site and across the Web. We can also impact of the economy expect new social advertising formats and new social research approaches to emerge that lever- Budget cuts will be a reality for search marketers age the complex relationships that occur within for the first time in recent memory, requiring them a social graph. As social behaviors go main- to do more with less in an increasingly volatile stream, Social Influence Marketing™ is going to landscape. Nevertheless, we expect the search be glue that binds every digital strategy together. landscape to continue to evolve and innovate, with an increased focus on measurement and 4. Online ad networks will contract; search engine optimization (SEO), and the rise of open ad exchanges will expand compelling opportunities in local and mobile search. In 2009, the online ad network world will see both contraction and expansion: 3. Social Influence Marketing™ • The traditional ad network world will contract will go mainstream as competition for declining ad dollars increases. 2009 is going to be the year that Social Influence There are simply too many broad networks Marketing truly goes mainstream. According to competing for the same inventory and not telling Forrester Research, 75% of the online population a new story. is now engaged in online social behaviors, and • At the same time, branded networks will expand. with social strategies getting more integrated and Large publishers (e.g. the Fox Audience Network accountable, marketers are going to depend on and Turner Entertainment) will continue to take their customers, more than ever, to do the mar- back control of their inventory and monetize keting for them. Marketers this year will learn how it themselves, or they will work with fewer ad to deploy Social Influence Marketing campaigns networks to ensure quality and maximize value. more successfully compared to 2008, which had its fair share of experimental failures. • Expansion will also come in the form of Ad Exchanges like Right Media, DoubleClick and As new tools gain adoption like Facebook Con- AdECN, which are newer open markets for on- nect, which has the power to make an individual line ad inventory that increase buying efficiency viewing experience social, and we begin to by delivering unprecedented transparency in deepen our understanding of consumer interac- the process. Development of this ecosystem will tions in social environments, we should see put further pressure on small and mid-tier ad the lines blurring between marketing efforts on a networks to survive. If Ad Exchanges are widely

adopted, it could revolutionize how
online media you want it. As GPS functionality and loca- is bought and sold. tion-based intelligence begin to improve content delivery and advertising through the mobile 5. This year, mobile will get smarter device, mobile will get smarter, and marketers who leverage it will, too. “The year of mobile” has come and gone with the advent of the iPhone. Mobile is still an area of 6. Research and measurement tremendous growth but the idea that it will have will enter the digital age a “break-out year” has passed. There is a risk that the recession will curtail R&D spending in the Due to increased complexity in marketing, estab- newer of new media and that mobile will take lished research and measurement conventions a hit, but smart marketers will take advantage of are more challenged than ever. For this reason, continued growth and opportunities — like 2009 will be a year for research reinvention. mobile rich media ads, applications, mobile search and location-based opportunities — to gain Current media mix models are falling down; they an advantage. Despite tremendous growth in the are based on older research models that assume mobile browsing population in 2008 (mobile media channels are by and large independent browsing grew from 13% to 20% of all U.S.-based of one another. As media consumption changes mobile users from Q1 2008 to Q1 2009 as per among consumers, and marketers include more comScore’s M:Metrics), advertiser interest as well digital and disparate channels in the mix, it is as the ad model infrastructure is still catching up. more important than ever to develop new media mix models that recognize the intricacies of The question brands need to ask themselves now channel interaction. Since online media is often as it relates to mobile is: how can they add val- linked closely with other media (TV can drive ue to their customers’ lives in this environment? search, search can drive magazine usage and so A good example is the iFood Assistant mobile forth) we need to adopt new ways of measuring application powered by Kraft, which offers recipe to account for the true complexity of media in the and dinner ideas, or Wikitude AR, an augment- digital age. ed reality application that, using a Webcam and GPS functionality, overlays information from Wikipedia onto your visual location. Both of these applications provide the convenience of relevant information at your fingertips when and where 13

7. “Portable” and “beyond-the-browser” ways
to search, discover, browse, organize and opportunities will create new touchpoints for “touch” rich content like video. This will change brands and content owners how we interact with the Web, our mobile devices and our televisions moving forward. Collectively, It was only a few short years ago that the bulk these changes are opening the doors to incredible of rich content was consumed via TV sets, home new ways for advertisers to connect with con- entertainment systems or desktop computers. sumers. The notion of portable media conjured up images of retro Game Boys and clunky laptops. But Ap- 8. Going digital will help TV modernize ple’s iPod changed all that, launching a portable media revolution that continues to churn today. As TV signals convert to digital in June 2009, we Advances in smartphones and entertainment will see an opening of opportunities in advanced devices have delivered endless on-the-go options television. Through their media platforms and for music, video, social networking, news and real time set-top box data, TiVo, Google TV and email. The Web environment has witnessed start-up Navic Networks, which, like Razorfish™, tremendous growth with embeddable content was recently acquired by Microsoft, have been through widgets and applications, creating a offering limited scale options for increased modular environment where people can share accountability and metrics in the TV space. This information and influence their networks online or coverage and opportunity will expand in 2009 remotely. Portable media has also come to mean with the digital conversion. that content unhinged itself from legacy devices; music is free from the turntable, primetime Advanced television providers, including the broadcast is no longer limited to the TV, and so cable companies, are also growing their audience on. The very things that define a media platform bases and their opportunities for marketers in have become rather blurry. And it’ll only get the form of branded VOD channels, featuring long more confusing — portability is phase 1. Further form content or t-commerce (purchasing through evolution is clearly visible on the horizon, with television), both of which are often reached content becoming more social and non-linear. by telescoping out from traditional 30-second TV spot overlays. It is expected that progress In addition, interface innovation ranging from by Project Canoe, the consortium of cable gesture and object recognition tools like the Wii companies working on standards for television to interactive, multi-touch storefront windows, in addressability, creative versioning and meas- to new browsers like Cooliris, is enabling new urement, will also push the industry forward.

As social media elements begin
to influence video (CNN’s social TV experience on the Web around the inauguration was well-regarded), and alternative television providers like Xbox provide social commu- nities in the living room around premium content, we may also see TV go social. The desire for more for your money as well as more interactivity, measurability and community will be especially apparent in the TV space as it struggles to modernize. 15

• Ad ver t is
e rs co n ti nu et o su pp or O U T LO O K ea ts rc h — Shifting Their Focus: de sp ite th e ec on om ic d A look at 2008 Digital Ad Spending own t urn by Razorfish Clients ™ By Sarah Baehr, Vice President, Media, New York and National Media Lead

The increased potency of social
networking is just one example of why 2008 was a year that empowered Razorfish’s ™ flexibility and command of a deeper, wider, more sophisticated digital channel. Just as President Obama discovered he could build engaging users. As you’ll see from the statistics on a movement and win an election through social our clients’ spending below, we saw several trends media channels, our clients also recognized the power which underscored that last year, our focus had that well-built digital strategies have on building mo- to become less about how much digital we do, and mentum for brands, reinventing business models and more about how well we manage broader demands. 17

Broad trends in Razorfish™ client
spending 2008 Media Distribution As in the past, the net ad spend of Razorfish’s™ clients was widely distributed. It spread across 1,024 Web sites last year, as opposed to 1,832 Web sites in 2007, 12% indicating a continued trend towards niche targeting and the diversification of media choices. We saw a 37% 16% decline in ad spend beginning late in the third quarter across the agency, and the typical fourth quarter overflow of budgets did not materialize. Growth from the third to fourth quarter was 7%, versus 17% in 2007, showing the first sign that the online market had 35% been impacted by an increasingly weak economy. Search A closer look at the distribution of ad spend by Verticals Razorfish™ clients reveals several trends, including: Portals • An increasing reliance on ROI and proven Ad Networks channels like search • A continued shift of budget away from portals • Renewed fragmentation in the ad network space

Share of search spending increases
In 2008, paid search allocation grew, with share of Advertisers continue to support search despite total ad spend among our clients increasing to 36% the downturn because it delivers a strong ROI, and from 31% in 2007. While there was no fourth quarter for the most part, it continues to outperform other spike as in previous years, there was very little tactics. While the marketing and media industries variance quarter over quarter, indicating our clients’ speculate on whether search is recession-proof, desire for consistent presence in search. we do anticipate that as budgets tighten, search will also be impacted by the economy this year. Among our clients, Google captured 72% of the total category. Yahoo! continued at a distant second at 22%, while Microsoft continued to be challenged with a 4% share. Spend Distribution 2004 — 2008 50% 47 42 39 40% 37 37 Verticals Search 28 28 35 30% Portals 31 31 19 Networks 20% 24 15 16 13 10% 12 12 11 11 12 0% 2004 2005 2006 2007 2008 19

Vertical placements move emphasis away
from portals Vertical placements saw a slight decrease year-on- In the U.S., unlike previous years, we have seen year, from a 39% share in 2007 to 35% in 2008. While the dominance of general ad networks wane and the still prominent and strategic partners for marketers, opportunity to buy similar inventory in premium portals continued to trend downward in 2008, garner- branded environments rise. The ability to buy and tar- ing a 16% share, versus 19% in 2007. Scale still get within the gated environments of premium sites matters, but the choices available that deliver depth is a boost to the vertical category and offer new, and breadth outside of the portals continue to more transparent choices as advertisers look for both rise. Outside the U.S., however, the portal category safe and efficient options to promote their brands received a large percentage — nearly 26% of share in this economy. of spend, indicating that the scale and quality of por- tals abroad still dominates. Vertical Spend Comparison 25% 23 20% 19 2006 18 17 17 16 2007 15 15% 13 2008 12 11 11 10 10 10 10 10 10 10% 9 8 8 8 7 7 6 6 5 5% 4 0% ity s ts ce t ch el lth ss en ew av or ne un n Te ea m re Sp N Tr si m H in fe Bu om rta Re te C En

2008 Vertical Spend In entertainment,
sites with strong video and audio capabilities drove the growth of this category. Stand- outs are Pandora, which saw a 142% increase, and 6% Hulu which went from zero in 2007 to a 3% share 7% of the category last year. These dramatic increases 24% 7% reflect the maturation of the video landscape in terms of the growing audience and the offerings it provides 10% advertisers. 15% 10% Lifestyle sites as a subset of entertainment grew at the expense of the health category, as pharmaceutical 10% 11% advertisers in particular showed they were com- fortable with advertising on sites outside of the health Entertainment category. Pharmaceutical advertisers had a much Community broader appetite for diversity of content and affinity- Reference based targeting, and a growing trust in digital as a Travel branding medium. Similar to the concentration of Health dollars we see in ad networks, the top five publishers Business in the health category amassed 68% of the ad spend; News WebMD remains the leader with a 36% share of the Sports category. Tech In a year in which we had a historic election and the Olympics, news as a category was down. In 2008, we saw newspapers and magazines continue to As we look at vertical spending in the U.S., two trends struggle and our data supports the notion that print emerge: a significant jump (18% to 24% year-on- dollars are not translating to online. Thirty-eight year) in money allotted to the entertainment category, percent of the spend in the news category was which includes video and lifestyle sites, and a decline spread out amongst 25 traditional print publishers, in spending within the health category (from 15% in pointing not only to the tremendous fragmentation of 2006 to 10% in 2008). online advertising but also suggesting that traditional ad powerhouses continue to struggle to establish a similar presence online. 21

Category Share vs. Site Growth
150% 142 100% 81 62 50% 27 0 0% -15 -50% t r ity a l t en ve so ke or un m a vi nd uc Tr Ad m in ob Pa ta om ip ot er Tr C Ph t En Unlike video, spending in the community vertical, which marketing cannot be achieved with banners; instead, is still one of our top two categories and includes they placed their attention on leveraging social as social media spending, seems to have flattened out a core part of their overall marketing strategy. In the from 2007 to 2008. Facebook and MySpace still short term, this trend indicates that there won’t garnered 24% of the ad spend in the category, while be an influx of spend in social media; however, it dem- About.com, Federated Media and Photobucket, which onstrates that our clients are approaching social saw a 63% growth year-on-year, rounded out the top media not as a tactic but as a foundation upon which five in this category. While industry standards around to build an effective communication strategy. ad models related to social media are still evolving , clients last year realized that effective social influence

Ad Network Consolidation 100% 80%
All Others Top 5 60% 40% 49 63 76 62 20% 0% 2005 2006 2007 2008 2008 was the first year that we saw mobile ad spend- ities to diversify their buys. As said above, advertiser ing pop; it represented 1% of the vertical category concerns about transparency and efficacy have re- and 3% of the entertainment category. While still a sulted in spending growth within broad premium envi- fledgling area, we saw a strong desire from marketers ronments or “branded networks” like CondéNet, NBC to test and subsequently expand their efforts in Universal and Fox Interactive Media (not including mobile. We believe that despite the poor economy, MySpace). Branded networks represented 15% of the marketers will continue to invest in mobile marketing, spend in this category. although growth may be limited to the single digits in the near term. Despite the drive towards increased efficiency because of the recession, ad networks as a category saw Consolidation and fragmentation only a slight increase in share year-over-year. One trend within ad networks reversal we saw was in the concentration of spend amongst the top five ad networks dropping to 62% The ad network category saw 62% of spending con- from 76% in 2007. A few things contributed to this centrated within the top five ad networks and 72% change in direction. The first is a rise in spend outside within the top ten. This continues to illustrate a move the U.S. and the development of branded networks towards consolidation but the trend is slightly down such as Forbes, Turner Entertainment and Fox Audi- year-on-year; buyers continue to look for opportun- 23

ence Network, and the move
of many premium adver- media — but it will also be an opportunity to explore tisers away from general networks. Additionally, the new buying methods, such as conducting business rise of specialty vertical networks like the community through ad exchanges, and learning how to employ sites BuzzLogic, Six Apart, Lotame and BlogHer social influence marketing strategies that have value has further fragmented this category and put a refo- for consumers and brands alike. cus on testing the emergent opportunities. Whatever happens, one thing is for certain: we’ll all Another trend we expect in 2009 is the increased learn how to do more with less. And be smarter for it. usage of ad exchanges (like those offered by Yahoo!’s Right Media and Google’s DoubleClick), and tools that allow agencies to directly buy within those environments. CPM pricing pressure and the buyer’s market mentality will only further muddy the 2009 landscape, but the battle to maintain pricing and manage inventory pools among publishers is sure to be front and center. The continued rumblings of anti-ad network sentiment by premium publishers is only going to increase pressure on the small- and mid-tier ad networks to differentiate, leading to a significantly-altered and, perhaps, consolidated network landscape going into 2010. 2009: A glass that is half-empty may be half-full The world, in the year to come, is one in which many of us in advertising will see as a glass half-empty. A flat year would be a good outcome for digital adver- tising in 2009, and while many major publishers will Footnote: see a YOY drop, there will still be winners. We are in Note that in previous Digital Outlook Reports, Razorfish™ the midst of a historic time when industries, that some has released total media billings for the previous year. In the 2008 report, we have included more detail on spending by would argue were the foundations of our economy, category and publisher than we have in past years. Because may be doomed — but there is also an opportunity many of our publisher contracts preclude us from publicly for new business models to take root and thrive. Yes, disclosing total spend with specific publishers, we have 2009 will be a tough year for all media, even digital opted not to release total billings for 2008.

25

O U T LO O
K Trends in Social Influence B ou ght a Marketing ™ new l aptop ba By Shiv Singh, Vice President and Global Social Media Lead s e d o n c o n s u m e r r ev i ew e• li n on s• ng pi op sh as tm ris Ch h er D o e s 87 % o f • og bl n s ig de ne w a o ut ab nd ri e il af ma to e in g Is go

A year ago, we developed
a hypothesis that the way people were influencing each other — online, in small groups, through peer pressure, reciprocity or flattery — was giving rise to a whole new form of marketing that we called Social Influence Marketing (SIM). ™ We defined it as marketing to the network of peers Today, SIM is not just a hypothesis. It is a driving that surround and influence the customer across force that affects everything we do as an agency and, social platforms and on brand Web sites. The rise of as we’re impressing upon our clients, it matters more SIM reflected the emerging thinking in our agency that than ever in this economic downturn as consumers the social Web and the mainstream Web were con- across the country are losing faith in large institutions verging, and that digital marketers needed to deliver and experts, and instead are turning to each other better value exchanges to consumers and allow for for advice. In fact, we believe it is as important a mar- influence more directly. keting dimension as the traditional pillars of brand marketing and direct response. It is even bigger than we thought it was. 27

Now, as SIM becomes more
mature, 2009 will be the more attention. An event like the Motrin episode, year in which differentiating between good and bad in which a group of social media-fluent mothers SIM will get easy — a year in which every campaign, managed to force Motrin to pull down an online every marketing effort and even every digital bus- video they found offensive, will not happen iness transformation activity (where digital is used to quite as much this year because marketers will transform core business processes) will need a social focus on SIM more. influence component. It will be a year in which com- panies realize that social influence must be harnessed 2. The focus will shift to influencers. Who are strategically if they want to transform their brands, these people that influence your customers their relationships with their customers — and their and how does their influence actually work? This businesses too. It will also be a year in which mar- will come into sharper focus, as reaching the keters discover which agencies truly grasp SIM and influencers gets easier via the social graph and which ones have only a tenuous hold on it. the plethora of technology vendors that make targeting easier. Different influencers will matter With those broad themes as a guide, what exactly at different stages of the marketing funnel, too. can you expect in 2009? Here are 10 specific trends For example, at the point-of-purchase, friends to look for: and family may matter the most in determining what a consumer buys, while at the awareness 1. Social media usage will result in more influ- stage, key influencers, like the bloggers at ence. As social media adoption climbs exponen- Edmunds.com, carry more weight. We’ll also find tially, so too will the influence conversations a way to put a valuation on each consumer’s in a social context have on brand affinity and pur- potential influence for specific product catego- chasing decisions. Participating in a conver- ries. Google and a few others are already taking sation online, sharing an opinion and influencing a crack at defining your influence rank. a purchasing decision explicitly or implicitly are becoming second nature for more and more consumers. The only thing that will prevent these 3. Top-down branding will continue to lose messages from spreading is that a lot of this effectiveness. Most brand managers are used influence happens in small groups within the to defining their brands in relative isolation of the walled gardens of the social networks and there- marketplace — or they do extensive customer fore goes unnoticed. That will change in 2009 research and see it as their jobs alone to define as social network analysis vendors help us peek the brand (or the manifestation of the brand) over the wall and, as a result, marketers pay in different forms. That’s going to change as

sumers define the brands by
the sheer volume 5. The portable social graph will fuel marketing of their opinions; they’ll be shaping the brands innovation. Arguably, the most successful more than the brands will be shaping them. manifestations of the social graph we’ve seen As a result, in order for them to be remembered, so far are in the news feeds and activity streams brands will be forced to deliver much stronger that reside on social platforms like Facebook value propositions to their customers. Cute adver- and Twitter. Expect to see new innovations that tising won’t be enough as the focus shifts to harness the social graph imaginatively, especially value exchanges. If you’re a brand manager, you at the awareness and consideration stages of can either fight this or treat it as an opportunity the marketing funnel. The early implementations to take your career in a different direction. of Facebook Connect, which extends users’ connections with their Facebook friends to other sites, barely scratch the surface of what’s pos- 4. Social advertising will grow up. We’re all tired sible. For example, imagine your personal profile of hearing about the failures of advertising being used for targeting content and advertising. on social platforms. Not surprisingly, IDC calls And imagine this happening across the Web, advertising on social networks “stillborn,” as it and not just on the social network where the pro- has been plagued by low click-through rates and file resides. confusing advertising formats. Although there are many formats, such as so-called app-vertis- ing, hypertargeting and engagement ads, we 6. Not just friends, but friendsters, will start to haven’t found what really works. That will change matter. There have been a lot of debates about in 2009 as ad units evolve to work more harmoni- whether a person’s “real” friends matter in a ously with user behavior on social platforms. social graph — call it the tension between friends Display advertising in the broader Web, too, will and friendsters. In 2009, we’re going to realize become more social, as linking display adver- that loose ties (like your friendsters on Facebook) tising to forms of social marketing — like blogger are as valuable as your strong ties (close friends) outreach, social credits, engagement programs because they’re the ones that bring new ideas and widgets that let you mix in your own content into your world and share your opinions with — become more important. However, there are people who are further removed from you. You’ll no guarantees that this will be completely figured be less conflicted about them and you’ll share out within the course of the year. more of your life with them. And the best way to understand this trend will be by paying more attention to academia and researchers like Mark 29

Granovetter, Barry Wellman and Duncan
J. porations to rethink how they are organized, Watts, all of whom have shaped theories govern- including agencies. Niche social media consulting ing influence across social networks. firms will find it harder to compete as SIM goes mainstream. 7. Social influence research will become more important than social measurement. Do 9. The intranet will join the Web. By virtue you want to know how? By focusing on meaning of buying media for our clients, building massive rather than measurement. To think in terms of Web sites and designing intranets too, we have social as a channel that should be measured like a unique perspective on all things digital. And TV, print, radio or digital is missing the point. something we’ve learned in the last few years is Instead, the greatest value in social for marketers that the boundaries between the corporate Web will be in the real-time insights it provides. We site and the intranet are blurring. Your employees call this Social Influence Research and it is going want to collaborate and share knowledge with to drive marketing campaigns, product devel- peers who work outside your organization too. opment and customer service programs. There Your intranet is going to need to encourage and will be an evolution from measuring sentiment allow for that kind of collaboration if you want to understanding opinion and synchronizing to be competitive in this economic environment it with the Net Promoter scores. Why? Because with fewer employees having to do more work. marketers care about opinion much more than The best ideas can come from anywhere and the they do about sentiment. best people will look for others like them to col- laborate with. They may be in your company — but they may not be. If they aren’t, you better give 8. Marketers will organize around Social Influ- your employees the tools to reach them. ence Marketing™. In today’s organization, SIM is everyone’s stepchild. It is part public relations, part direct response, part brand marketing, part 10. Your CEO will join Facebook. We believe it’s customer intelligence and part sales support, finally going to happen this year — your CEO just to name a few categories. That will change is going to succumb to the pressure from employ- in 2009 as marketing organizations discover the ees and join Facebook, or at the very least, benefits in approaching it holistically. Budgets LinkedIn. If he (or she) is smart, he’ll be on a blog- will be put behind SIM and it will be treated as the ging or micro-blogging service too, sharing his third dimension of marketing with its own team, perspective in an authentic fashion. Why does objectives and initiatives. This will also force cor- this matter? Because by doing this, he is going to

finally realize that social is
not a fad; it is fund- amentally changing how we relate and interact with each other and with brands online. He is going to want to get on board. It also means that, if you’re not already, you had better get on board yourself or you’ll be left behind. These are the 10 Social Influence Marketing™ trends we’re predicting for 2009. Like we did last year, we’ll evaluate these trends in July and then again at the end of the year. Now that SIM is so obviously real, we’ll see which brands are able to truly capitalize on it. Those that do will transform their business relation- ships with their customers, employees and partners. 31

•M ap sa nd di
r ec ti o ns co ns ti t ut e 69 of % m ob il e se ar ch es O U T LO O K Search Outlook: Pushing Search Forward in a Volatile Marketplace By Matt Greitzer, Vice President, Search, New York and National Search Lead and Josh Palau, Vice President, SEO, Global

It’s expected that 2009 will
likely be a challenging year for search marketing. While budget cutbacks won’t be as severe as in other channels, they are still a reality for search marketers — for the first time in memory. This requires them to do more with less in an increasingly volatile landscape. Nevertheless, we expect the landscape to continue mobile arenas. In this article, we identify the key evolving, with an increased focus on measurement factors that will shape the search market domain over and search engine optimization (SEO) and the rise the next year. of compelling opportunities in the local search and 33

Volatility in the paid search
landscape suspicious of last-click, search-driven attribution models, and also less willing to accept the validity of 2009 represents perhaps the first year in the brief portfolio optimization, wherein high-performing history of paid search advertising where same-client keywords subsidize low performers. This means the budgets are declining year-over-year. To that extent, standard optimization toolkit of search engine the Razorfish™ client base is representative of the marketers may need to be restocked with new tools search marketing industry overall; same-client bud- — and therein lies the opportunity. Now, more than gets in 2009 should be flat to down 10% versus the ever, marketers are intensely interested in revisiting previous year. These budget pullbacks will drastically their assumptions about ROI and how it is measured. shift the paid search competitive landscape in In this new period of open-mindedness, marketers unpredictable ways, as previously entrenched com- with multi-channel approaches are developing cus- petitors pull back on their paid search efforts, and tom attribution models that take into account search abandon certain categories entirely — a trend that marketing’s impact beyond immediate, click-based has already begun. These pullbacks will create pock- direct response — and working to understand value ets of opportunity within keyword categories, prev- outside whether or not those clicks lead to online iously unattainable due to cost constraints. To some purchases. By combining quantitative and qualitative extent, we expect search engines to mitigate CPC information, they are developing key purchase indi- (cost per click) pricing volatility through their built-in cators that help determine how search-driven traffic pricing controls (e.g. quality score). Nevertheless, corresponds with purchase intent off the site. pockets of “undervalued” inventory are emerging. Search marketers able to take advantage of these This approach is valuable for all search marketers opportunities will keep a keen eye on the competitive with sales channels beyond their Web site, and landscape, and look for shifts in competitive activity is transformational for non-transactional advertisers. that may signal an opening. Indeed, the proliferation of accepted methods for valuing search-driven traffic beyond direct response A focus on new metrics is perhaps the brightest spot in search marketing The more conservative spending environment will in 2009, as marketers in the consumer packaged- also result in increasing scrutiny of metrics. In 2009, goods and pharmaceutical categories embrace search advertisers will be reassessing long-held meaningful metrics to inform their search marketing beliefs about how they measure success through the investments. They will no longer have to guess the search marketing channel, presenting both a threat value of search clicks; these advertisers will increase and an opportunity to the search marketing industry. their search marketing investments with a solid That threat is easily defined: marketers today are grasp on what their investments are truly worth.

Focus on the site-side Two
forces are converging to hasten this develop- ment. First, after three years of intense focus on If the shift toward a new approach to measurement paid search, advertisers are more confident they are represents the inward focus of search marketing covering the relevant ground in that area. They can in 2009, so too does the increased focus on the mar- now shift their attention to how they appear in unpaid keter Web site — and its connection with the search listings, using SEO — a tactic many have neglected. marketing experience. With growing budget con- Second, pressure on marketing investments is caus- straints, search marketers will focus on getting more ing advertisers to get more from less. With average out of their investments through more effective site- SEO engagements in the low six figures, this tactic side experiences. No longer a secondary consider- provides a compelling opportunity. We expect this to ation, conversion path optimization and field analysis be expressed in the following ways: will take hold in 2009 as a standard tool in the search marketer’s toolkit. Additionally, 2009 may finally see The creation of search-centric content the end of the “point and shoot” philosophy in paid Content continues to be a dominant factor in strong search marketing — whereby advertisers simply point search engine performance. Now, more than ever, paid search clicks at the most relevant pre-existing Web site owners are using search query activity pages on their Web sites. Advertisers are making in- to drive how they develop content on their sites, creasing investments in search-centric landing pages linking user experience and content strategy with and mini-sites with the intent to align their content search engine marketing to create content that with searcher intent. The focus on the site in 2009 will aligns with searcher intent. CondéNet, for example, allow advertisers to get more from their search mar- used search query data to inform the launch keting dollars, and nowhere is that more true than in of its Portfolio.com Web site, building out specific the increasing focus on SEO. content pages for key business executives who garner large search query volume. Through their Focus on SEO effectiveness in organic search rankings, these If investments in paid search marketing are under pages are among the most trafficked section of the increasing pressure in 2009, the opposite is true of Portfolio Web site. investments in SEO. In fact, 2009 will likely be the year larger advertisers finally give it its rightful place in the marketing arsenal. 35

An emphasis on driving more
Marketers will have to make use of assets such search “shelf space” as press releases, videos, news feeds and product Content created in multiple formats allows market- reviews as ways to seek relevant links. As SEO ers to increase their search footprint and control implementation demands persist, link development the search experience. Marketers now have the continues to be a great way to succeed in search opportunity to optimize their product page, create engine results pages without straining resources. a video on product usage, post commercials featuring their spokesperson, create new product Local search: An ongoing shift from press releases and tag product images, creating print directories to online what we call additional “shelf space” for their own By Danny Huynh, Associate Search Director, Seattle content on the search results page. In addition, and National Local Search Lead and Rob Aronson, social media savvy marketers may develop blogs, Vice President, SEM Product Development, Philadelphia Twitter profiles or Facebook groups that engage active audiences. All these assets can be crawled 2008 saw local search engines surpass print and ranked by search engines, providing not only directories as the leading source of local information. the opportunity to increase marketers’ search With the digital landscape dominating local search shelf space but also to develop more links to their information in 2009, marketers with brick-and-mortar content. locations can no longer ignore the local search opportunity. And though Google is increasing The continuing importance of links its presence in local search, local is by no means a Without engaging in the paid link debate (which is one-player game. Consumer usage is distributed certainly spilling into 2009), there is no arguing that across search engines, Internet yellow pages, niche links are still important. The created — or optimized local directories and review sites. In fact, the primary — assets can be used in several ways. Some may challenge in local search marketing is no longer not pass link value but can still be used as link one of scale; it’s execution. The task of launching and bait. And significant link value can be attained if an maintaining a local search campaign can be daunt influential blogger or Web site links to your assets. ing, and advertisers of all sizes will increasingly turn There are many areas from which link strategies to automated feed management solutions to maintain may emerge, and big ideas must be implemented accurate local search listings across varied search swiftly before they become obsolete or overused. engines and directories.

Expect some consolidation in 2009
as the three critical role in helping users access and navigate biggest search engines, and yellow pages companies, the robust amount of content and offerings available. seek to solidify their position in local search. Either As users spend more time glued to the handset be- through acquisitions of niche sites such as Yelp cause of new user interfaces and applications, search or Angie’s List, or through the distribution of local is in a position to become its centerpiece. In short, search marketing platforms, this consolidation as the habits and needs of mobile users begin to mir- will mean the local search landscape will simplify in ror a PC user’s, so too does the way information is 2009 for marketers and consumers alike. accessed — search will become the go-to application. Mobile search: Coming closer to the cusp These advances in software and services have blurred the lines of mobile search. Previously, mobile By Justin Scarborough, Senior Search Manager, search was thought to consist of five experiences: New York on-deck (a mobile carrier’s branded portal), off-deck It seems as though mobile search has been on the (Google, Yahoo!, Live.com and other engines accessed cusp of broad adoption for over five years. While 2009 via the Web), applications, voice (operator-assisted may still not be “The Year of Mobile Search,” the future search) and SMS. is very rosy due to a few key areas of development. Today, however, we are starting to see a convergence, First and foremost is the increasing adoption of smart not only of these experiences, but also of the types phones, such as the iPhone, and cell phone plans of handsets that drive each type of search. Whereas that enable unlimited data access, which in turn sup- in the past, the type of search performed on the ports increased mobile browsing. This trend is ex- mobile phone was predicated on device functionality pected to become substantially more popular over the and data availability, we now find that where and how next five years. With that will come a corresponding users search depends on personal preference and rise in mobile search: it is expected to nearly double need. Applications now support multiple types of from 28.8 million U.S. users in 2008 to 56 million U.S. search (see Google’s iPhone application with voice) users by 2011. and search engines (mobile browsers with change- able default search bars) — and carriers are increas- The second major impact on the growth of mobile ingly teaming up with Web-based search engines search is the advancement of mobile technology and, to power on-deck search portals, which often come more specifically, software. As the mobile industry in the form of an application on a smart phone. One becomes more serious about software, services and needs only look at recent announcements by Verizon content, mobile search will play an increasingly and AT&T (set to partner with Microsoft and Yahoo!, 37

Respectively), for on-deck searches across
their real time and with GPS location functionality. This networks to see how carriers, who have traditionally is the latest example of convergence offered in mobile not shared on-deck search, have come to the con- search: enhancing a very PC-centric search task — clusion that mobile search is better controlled and product price comparison — by making it an in-store monetized by their Web counterparts. Lastly, the experience. Add on the ability to use GPS to get notion that SMS search is exclusive to non-data sub- the lower price, and you’ve got a pretty revolutionary scribers or non-smart phones is being challenged. customer experience. The monumental growth of Cha-Cha, which not only surpassed Yahoo! in October 2008, only 10 months With the change of consumer-usage patterns comes after its inception, to become the second largest the increased expectation that advertiser-con- SMS based search engine, also counts 20% of its sumer interactions will be highly-relevant and highly- users as smart phone owners. For instance, users of targeted, putting search at the center of the mobile T-Mobile’s G1, the first phone to run on Google’s advertising space. As with PC-based search, mobile Android platform, have the ability to search the Web search is poised to become the entry point to many or use an application, but still like to ask Cha-Cha a Web interactions and a key point of contact between question, and have the answer in one to two minutes. advertisers and consumers. How will brands begin to adapt to the new evolution of searcher interaction? The information users seek on a mobile device is also Will they be catalysts or passive engagers? Will poised to change. Currently, the leading content they interrupt or aid users? As it has been for paid categories searched by mobile users are maps/direc- search, SEO and local search, the first brands to tions (69%), weather (65%), local information (62%), get it right may be able to gain an early advantage in news (51%) and entertainment (43%). As the mobile the next search frontier. search experience begins to mirror that of the PC, so too do the expectations for types of content. This means users will increasingly begin to see the mobile device not only as a source of localized informa- tion on the go, but as an aid to many of their everyday tasks. Consider three shopping applications: G1’s Shop Savvy, the iPhone’s LikeThis and Amazon.com applications. All three offer the ability to either scan a bar code or take an actual picture of a product, and then send it to a database that identifies the product and provides price comparisons — often in

39

T he e pi t
om eo fs er v ic e ,c re at iv i ty an d re spo ns ive ne s s• O U T LO O K Publishers of the Year

It was overall service that,
in 2008, differentiated the top publishers from one another. Creativity may have helped mask the shortfall of an offering, responsiveness may have delivered an important meeting and strong ROI may have yielded a renewal, but it was the combination of these qualities that brought true partnerships to life. “In this quickly changing environment, where new technology and publisher solutions are constantly emerging, it’s easy to get distracted by the new shiny Publisher of the Year – EAST object. A huge differentiator is quality service. Pub- lishers that understand and nurture the relationship aspect of the business come out on top.” — Julie Weitzner, Media Director, Razorfish™, NY Publisher of the Year – CENTRAL The Razorfish™ media team anonymously voted on the publishers that epitomized service, creativity and responsiveness in 2008, all with an eye toward delivering meaningful solutions for our clients. The 2008 publishers of the year are ... Publisher of the Year – WEST 41

what’s emerging Digital Media Escapes
From the PC: 44 Unlocking Opportunity for Consumers and Marketers Ad Exchanges: 52 Revolutionizing the Buy-Sell Process Social Object Theory: 56 The Secret Ingredient for Powering Social Influence Marketing™ Campaigns For Here or To Go? How Portable Media Is Like Fast Food 62 Top 10 Mobile Applications to Watch 66 Getting Smart With Mobile Marketing: 78 How Mobile Marketing Is Evolving in Europe and the U.S.

ide r online viewing a
ons rep er sc lac em view en f tf o or 0% T 1. 5 V• Th C is EO is ab W H AT ’S EM ER G I N G ou t to jo in Face Digital Media b ook • Escapes From the PC: Unlocking Opportunity for Consumers and Marketers By Jeremy Lockhorn, Director, Emerging Media, Seattle

The last decade has been
a time of radical change and reinvention for the media ecosystem. 2008 was no different. Perhaps the most shocking change in the media and advertising industries was the pace at which digital and Web-based tech- nologies began to penetrate the mainstream and displace tradi- tional forms of advertising. Digital long ago escaped the browser via a proliferation perhaps the poster boy of this movement. But other of widgets and other applications rooted in Web-like platforms showed incredible growth in Web or systems — but in 2008, digital also escaped the con- Web-like systems: the mobile device, the television, fines of the PC. Digital signage grew rapidly and is in-store media and more. 45

At the same time, we
saw massive changes in the that the rise of DVRs and other digital recording de- way people interact with the digital world and how vices as well as “video snacking” online have forced the digital world interacts with them. The availability broadcasters to change their business models, yet of technologies like gesture and image recognition their “replacements...are not necessarily ready for helped this along, sparked by the Wii, which taught prime time.” Still, despite the drop in viewership and people how to work with devices via natural move- difficult economic conditions, U.S. ad spending on ment. Apple’s iPhone and Microsoft’s Surface, which TV stayed relatively steady through the end of the both allow interaction without a mouse or keyboard, year, a surprising trend that we do not expect to last. took this one step further with specific applications developed to take full advantage of the unique Many in the TV industry insist that online viewing capabilities like GPS, intuitive multi-touch and object is additive — that individual consumers watch shows recognition. both online and on TV, rather than replacing TV view- ership with online. However, a study from research These changes are opening the doors to incredible firm Integrated Media Measurement said May 2008 new ways for advertisers to connect with consumers. marked the first time that a significant portion of This section will examine some of these key emerging U.S.-based online viewers of primetime, episodic TV media trends and provide implications for marketers. shows didn’t watch part of those shows on TV. What’s more, 50% of viewers consider online viewing Online video threatens TV ad model, a replacement for TV, according to the firm. A Deloitte but neither channel has found a new one survey also found that nearly 6 in 10 U.S. consumers would like to easily integrate their televisions with The digital marketing and media site, eMarketer, found their computers to download or watch online content. that online video continued its rapid growth curve, reaching 154.2 million monthly viewers as of Novem- These trends have stoked the ongoing battle for digi- ber 2008. Sites like Hulu, a joint venture between tal media ownership in the living room. Key players NBC Universal and News Corporation, won industry continue to invest in solutions, perhaps best exempli- praise and have begun to amass significant audi- fied by Apple’s significant update to Apple TV, as ences. Meanwhile, TV viewership continues to fall in well as Microsoft’s complete overhaul of its Xbox user aggregate — at the end of 2008, The New York Times interface. The Xbox initiative was arguably aimed reported that cumulative viewership across the four at creating a more mainstream interface with broader broadcast networks was down 10% overall — roughly appeal and easier access to downloadable content, a million fewer viewers each night. At NATPE in Jan- including the “instant watch” library from Netflix. uary 2008, NBC Universal CEO Jeff Zucker, declared We are also closely watching companies like VUDU,