The Hindu Business Line : Digital media grows up

Microsoft paid $6 billion for aQuantive. WPP paid $649 million for 24/7 Real Media. Yahoo! invested $680 million in acquiring Right Media and Google paid $3.1 billion for Double Click.

And that does not include the stratospheric valuations of YouTube and the marketing implications that are being attributed to this phenomenon.

Now factor in the news that last year, for the first time ever, spending on digital media in the UK exceeded that on print.

To that, add the Nielsen data for the first half of 2007 that points at advertising on the Internet from the US rising year on year by 23.2 per cent.

Something very big is obviously happening in the digital world and the India Chapter of the International Advertising Association (IAA) decided that a group of CEOs from India should see firsthand some of the leaders in the space who are leading this digital revolution.

The “study tour” was to include a day each at Microsoft in Seattle, Yahoo! in Sunnyvale, Google in Mountain View and Disney in Los Angeles.

Honestly, anything digital has to work harder to prove itself. The dotcom boom which saw everyone predicting fantastic things for this virtual industry and the devastating bust that followed has ensured that in India at least, brick-and-mortar staged a smart comeback. I personally remember attending lectures by people from the US who literally wrote off the print and electronic media and proclaimed the advent of a brave new digital world. This was as the world was awakening to a new millennium. And now in 2007, the new media, as it is called, seems to have not just had a new birth but appears to have galloped into a stage where scepticism has to be brushed aside in the face of an exciting new reality. This time around the pundits are not consigning the traditional media to the dustbin of history, but the changes that are actually happening on the West Coast of America will definitely have far reaching implications on the advertising and marketing industry in India.

Let’s take a snapshot look at what I observed on this tour.

Seattle is a lovely city in the Northwestern reaches of the US, famous for Boeing and Microsoft. The award-winning executive briefing centre at Microsoft’s headquarters was ready to receive its Indian guests. A busy agenda saw top executives of Microsoft including Steve Vamos, the Vice-President of Microsoft’s international Online Service Group take the Indian delegation through a variety of topics.

Basically, Microsoft appears to be a giant in a stage of transition from being just a software company to being an online services organisation. Huge investments are being made to achieve this smoothly yet quickly. Its primary objective in the online space is very clear — it wants to engage customers. Yes, “customer engagement” is a catch phrase we were to hear throughout our trip.

Microsoft also wants to make rapid strides in the area of search. Having conceded first-mover advantage to the dazzling speed of Google, it sees plenty of opportunities in the search domain and more so in mobile search.

It is generally felt that there will be two or three global, very large companies that will dominate the very profitable search business. It is evident that Microsoft would work hard to be one of them.

In fact, there seems to be general agreement that in the next couple of years massive revenues will emerge from three distinct areas — search, content and social networking sites. Even the company that made ‘google’ a generic word for search sees the advertising platform business overtaking its search business.

It is clear that Microsoft has realised that the milliseconds that Google took to provide search results were what the customer was dazzled by. The real point to note, however, is that though it takes milliseconds to get results, evidently it takes an average of fourteen minutes to get answers. And what customers really seek are answers. They can take heart from surveys that reveal that while customers seem satisfied with the search engine they are using (read Google), not only find it convenient but feel they really cannot live without one, an astonishing 69 per cent of those surveyed were willing to try a new search engine. The effort seems to be aimed at building a huge back-end of documents, making sure that page downloads are quicker and more important, making pages more relevant. With 3D mapping, the idea is to make the results more contextual. And speech search could soon be the flavour of the day.

Yahoo! is an iconic brand headquartered at Sunnyvale, California. With the legendary Jerry Yang back as CEO (we had a very pleasant meeting with him), people are expecting great things from the company. Yahoo! seems determined to grab leadership in the mobile space. The time seems right too. People have had great mobile experiences in the last year from products such as Blackberry, Google Maps, the iPhone, Y!Go and Y! One Search. Engineers at Yahoo! are gearing up to optimise applications for mobile exclusively instead of adapting PC applications for it.

The mood at Yahoo! too was distinctly aimed at transforming search from a merely algorithmic exercise to one that is completely contextual. They are working towards a situation where they could use their knowledge and insights about individual customers to provide intuitive answers that would create the “wow” factor in the area of search. Obviously, personalisation is the name of the game and the competitive advantage in the search business would be with the search provider who knows more about “you” the customer.

The search business in the US has witnessed a surge in advertising revenues simply because the customer acquisition cost which could be as high as $70 in direct marketing and $50 in the case of yellow pages is about $8.50 in the area of search.

Google is obviously the big daddy when it comes to search. The nine-year-old giant is committed to providing access to information easily and usefully.

At Google’s sprawling campus in Mountain View, various teams are working at transforming their vision of a developed world living in Version 3 of the Net with super high speeds into a commercial reality. Here too, the catch phrase is customer engagement. Google also wants to go beyond mere search by offering a suite of useful and innovative products.

One thing came out rather clearly during my tour. These companies that are living on the cutting edge of digital technology seem to feel that in a very short time advertising agencies will have to re-engineer themselves and re-position themselves. Media placement will increasingly be on digital platforms over which they do not have much control. The online services companies are creating strong marketing cells that will increasingly reach out directly to the client. That would leave the creative and strategic functions to advertising agencies. When it comes to digital platforms, creativity is still something that is being experimented with. So the sooner agencies go into the knowledge business and position themselves as the gurus there, the better it will be for them.

(Ramesh Narayan is a communications consultant.)

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