Socializing off-'net

One morning in January, hundreds of commuters at the Liverpool Street Station in London started dancing. The feat was aired during a break in the reality television show Celebrity Big Brother as an advertising stunt for wireless telephone network T-Mobile.

The ad was shown only once on television, but word of it spread via email message, blogs and social networks, until it was watched more than 15 million times on YouTube. 

The ad — part of T-Mobile's "Life's for Sharing" campaign — is an illustration of how traditional advertising via TV commercials, newspaper ads and the like is slowly giving way to novel approaches — most of which are found on the internet — forcing advertisers to spend more of their budgets on online ads. The good news is that popular social networks and other Web 2.0 phenomena are helping them use consumers to spread the word for them, allowing them to cut down on paid advertising.

This kind of free advertising can take many forms: having a journalist or blogger write a review for a new mobile phone, placing a catchy video on YouTube, spreading the word via bloggers, and starting a Facebook group dedicated to a brand or product. Over the course of the economic downturn, much paid advertising would be lost for good, separating this downturn from previous ones, when ad spend recovered relatively quickly, says Marcel Fenez, head of the media practice at PricewaterhouseCoopers, adding that after a 12% plunge this year, global ad spend will not climb back to 2007 levels for another five years.

Forecasts are gloomiest for newspapers and television, with ad spend declines of 16% and 11% this year. Even internet advertising will fall by 2% and is expected to recover slowly, the company said. Well known 'net businesses like MySpace recently announced plans to cut 30% of its staff, while others like YouTube are anxious to figure out a way to make money from vast traffic. Ad agency companies have been relatively spared compared to many media owners because they get paid regardless of whether advertisers choose to spend their money on newspapers, television, magazines, radio, billboards or the Internet, but here too, things are changing, and they have been cutting jobs and costs.

Agencies used to be paid on commission, as a percentage of advertising sales, but their compensation is increasingly being fixed at hourly rates. Digital marketing campaigns require higher fees because they are more labor-intensive to develop than ads in traditional media.

Those advertisers that can still afford to spend money on ads can find some solace in the fact that the price of advertising in many paid media has fallen, and hope that consumers will help spread the word.

A recent survey shows that 67% of global marketing executives claim to be running digital cross-channel ad campaigns, but only 12% are integrating their cross-channel performance data - across TV, outdoor, mobile, print, and online - when they plan, execute, and measure the campaigns.