Why 2006 was a watershed for digital

It's been a year when digital moved into the media mainstream. Julia Martin takes a look at some examples of how digital has made its mark and considers whether it can keep up the momentum in 2007.

Few would deny that 2006 has been the "year of digital". As the landscape shifted from the traditional to the new, the media world saw agencies restructure, media owners rebrand and entirely new players explode into the market. In the past 12 months, online established itself as a key part of any self-respecting campaign, and mobile grew from far more than just a texting and talking tool into a means to target the consumer wherever, whenever the brand desires.

As Wayne Arnold, co-founder of Profero and chairman of IPA Digital, neatly sums up: "In 2005, as a marketer you could happily ignore this digital thing and not get sacked. This year if you decided to ignore it as a fad, you are probably looking through the classifieds as we speak."

Indeed, as media owners scrambled to overhaul their portfolios to include new-media platforms, agencies also sprung into action, launching specialist divisions and competing to recruit the rare bright young things who understand this brave new world.

One agency to really nail its colours to the mast in terms of throwing its weight behind the digital revolution is Carat, which instigated a massive restructure in the summer, replacing its old divisions with six multidisciplinary client teams.

Explaining the rationale behind the move, managing director Neil Jones says: "This was the year online became mass in terms of penetration and reach. Clients really began to take it seriously."

He believes one catalyst for digital's explosion was the inaugural IAB conference at the end of 2005, which saw heavyweights such as Sir Martin Sorrell and Bill Gates expounding its virtues. When such major players throw their cap in the ring, others are bound to follow.

Carat's bold move was vindicated in October, when a survey by Willott Kingston Smith showed a 13.5% rise in operating profits at the top 30 media agencies, with the biggest growth in those agencies that had invested most heavily in digital.

Meanwhile, the extent of the internet's power was thrown into sharp relief last month, when shares in Google broke the $500 barrier, climbing by almost 13%. When Google floated in August 2004, a single share was worth a mere $85.

Paul Frampton, head of digital at Media Contacts, says: "The exponential growth in online ad spend has clearly helped, but it is the more potent recipe of this, alongside a radical shift in consumer behaviour, that has been the tipping point.

"The internet has brought with it a new level of expectation among consumers that we would do well not to ignore. This year has seen all media become more accountable as a result of the web; next year will see this accelerate and all media become more dynamic."

But it wasn't just in online that digital made its mark. Traditional media realised this year it could no longer afford to ignore the technological tidal wave and, from newspapers to outdoor, media owners started to reflect the digital habits of their consumers.

Newspaper groups rebranded to highlight their increasingly cross-platform offerings, while the Manchester Evening News, The Daily Telegraph and Financial Times all launched multimedia newsrooms. Associated Newspapers employed "conduits" to act as go-betweens combining online and print sales, while both The Guardian and Telegraph unveiled downloadable newspapers.

Magazine publishers followed suit. Dennis moved swiftly to launch a website version of Maxim, then took the strategy a stage further by unveiling an exclusively online magazine, called Monkey.

Meanwhile, NatMags bought Handbag.com, recruiting its managing director Nancy Cruickshank and crowning her managing director of the newly created Hearst Digital Network. Emap and IPC were far from idle too, with both investing heavily in digital expertise and solutions.

In TV, broadband penetration ushered in a new era of television viewing, including video-on-demand and broadband TV. Andy Duncan, chief executive at Channel 4, which was the first broadcaster to simulcast its entire schedule on broadband, credits 2006 as "the year when multi-platform, on-demand viewing became a reality".

With the launch of BT Vision last week, he predicts: "This is not just a trend. Viewers increasingly expect to be able to watch great TV content whenever, wherever and on whatever device they want - and the winners will be broadcasters who adapt quickly and lead the way in the on-demand world."

In the world of outdoor, Viacom's win of the Transport for London contract saw out-of-home move into hi-tech mode, with plans for a whole digital network of over 2,000 screens being rolled out across the London Underground. The outdoor giant also took digital above ground, by introducing GPS-tracked, LED screens on its fleet of buses, allowing advertisers to place location-specific messages.

Meanwhile, JCDecaux Airport unveiled large-scale deployments of digital technology at Heathrow Terminal 5.

And in radio, amid the whirl of podcasts and websites, Channel 4 showed its faith in the medium's digital future by launching 4Radio, while the end of the year saw a flurry of applications for the eagerly anticipated second digital multiplex. C4 immediately confirmed its intention to bid, with partners including Universal Music, IPC, CanWest, UBC Media, UTV Radio and possibly Sky.

With a decision not due until spring next year, it's a long wait for those involved, but one thing is for sure - the future of digital radio exists far beyond the DAB set and is likely to find its own once it is widely available on mobiles.

2007: the shift continues

The rise of digital doesn't look like slowing down in 2007. Media Contacts' Frampton predicts it will be "an interesting year".

"It will be a year of even greater convergence," he says. "Next year's battleground will be video. On the one hand you have the traditional giants in Sky, ITV and Channel 4, and on the other you have MSN, Google and YouTube. Both are fighting to own the next generation of broadcast, with the former allied to TV departments and the latter to the bread and butter of digital divisions."

Blake Chandlee, media sales director at Yahoo!, agrees: "It will likely attract advertisers that have historically spent very little budget online, for example those in the FMCG sector. They will be attracted by the value that video can deliver - providing complete coverage of the entire consumer marketing funnel - from brand awareness right through to purchase intent."

Chandlee also backs the widely held belief that mobile will be the "next big thing", predicting: "Without a doubt, mobile advertising will flourish as the sheer number of mobile devices - an estimated two billion worldwide, compared to 900 million PCs - means the next big area of online advertising will be targeted at users who have never connected to the internet via a computer and perhaps never will."

Media Contacts' Frampton is more cautious: "Mobile will not take off until consumers have the equivalent of broadband through 3G."

Also tipped to continue its invasion into every corner of our waking lives is user-generated content.

It will continue to grow in importance throughout 2007, predicts Chandlee. "Our challenge will be to educate more media buyers and advertisers as to how this exciting new phenomenon can be used as an effective branding and promotional tool," he says.

Carat clearly believes this inexorable growth is set to continue, with its restructure designed to allow it to offer "integrated solutions" to clients. Managing director Jones believes it will "explode" next year and vows: "Digital will be a part of every plan going out of the agency. It is a mainstream media; you couldn't say that to the same extent last year."

He believes 2007 will also see, at last, the FMCG giants finally climbing aboard the digital juggernaut.

Mike Mathieson, chief executive of Cake Group, sums it up: "Brands will have to increase their attention and budgets to engaging consumers in their language, on their terms and right across the Web 2.0 spectrum. Frankly, I can't wait."

It seems fitting to give the last word to Guy Phillipson, chief executive of the IAB. He believes the key catalysts for further growth will be social media, video, IPTV and mobile, which are "still in their infancy, but incredibly exciting prospects for advertisers".

"I have a feeling we could be celebrating the 'year of digital' for many years to come," he says.

As things stand at the end of 2006, few would disagree.

AND THE REST: THE WORLD OFF-LINE

Of course, not everything that happened in 2006 was about digital. There were significant developments in some of the more old-school sectors.

One of the biggest headlines was last month's announcement from Ofcom on food advertising to children. The final decision is not due until next month, but the impact is already being felt.

And of course Michael Grade's defection from the BBC to take over as executive chairman at ITV caused shockwaves throughout the TV world, which will be watching with keen interest to see how the saga unfolds over the coming year.

Just one of the many other major, non-digital developments included Emap's launch in February of an 80-strong creative sales division, Emap2, bringing together its creative solutions and cross-media sales teams, to offer clients what is claimed to be the largest creative force at any UK media owner.

But Emap was far from the only media owner to make exciting and significant moves in the offline sphere.

ITV battled falling revenue with a major restructure, magazine and newspaper publishers launched new products despite rumours of the "demise of print" and, in outdoor, the sale of Maiden to Titan marked a new major player in the market.

It's worth remembering that while new technology is what seems to be causing the biggest excitement, many of the older media have continued, quietly, to hold their own, as David McEvoy, group marketing director at JCDecaux, points out.

"While digital outdoor is set to grow, traditional formats will continue to dominate the sector," he says. "Poster campaigns already enable clients to reach audiences in the right place and at the right time. What digital adds is flexibility and day-part selling, particularly in locations with long dwell-times."

And James Wildman, executive sales director at Flextech sales house IDS, believes passionately, as do most of his broadcast colleagues, that TV is still the number one medium when it comes to big brand-building messages and mass reach.

"Think of all the ways TV is changing for the better and it's a very compelling proposition," he insists.

"There's so much nonsense in this industry about the demise of television. With so many people competing, the schedule has never been stronger. Overlay that with technological advancements and TV is fabulous."

So while 2007 looks set to be yet another 12 months of devotion to all things digital, it's important not to forget the tried and tested media that are still reaching out to consumers.

Will people really give up their morning rag on the tube in favour of a downloaded document on their laptop, or watch a full Premier League football match on their mobile instead of the wide-screen TV down the pub? We don't think so either.

As Deloitte's 2007 predictions forecast for the industry points out: "Internet advertising should continue on its way to becoming a $20 billion industry.

"But 439 million people may still buy a paper every day."

SOME OF THE YEAR'S MAJOR DIGITAL MILESTONES

January

- Mark Howe, ex-managing director of Flextech, makes the digital leap to become UK managing director of Google

February

- Carat wins £8m Abbey digital brief from MindShare

- Guardian Unlimited test-launches a downloadable news service for mobiles

- ITV begins interactive ad service on Freeview

- IPA's Digital Marketing Group restructures as IPA Digital with more focus on media agencies

March

- IASH, a rival trade body of online sales houses, merges with the Internet Advertising Bureau

- Aegis digital umbrella Diffiniti scoops £26m Aviva digital account

- Walker moves to staff up Walker-i after winning the Barclays account worth £70m

April

- Wrigley's first ever foray into the world of digital advertising with its Extra Venue campaign on Yahoo! Music

- Cube.tv, a new broadband TV platform, launches

May

- Microsoft launches Microsoft AdCenter

- Creation of Associated Northcliffe Digital through merger of Associated New Media, Associated New Ventures and Northcliffe Electronic Publishing

June

- OMD Digital launches, followed by OPera Digital

July

- FilmFour goes free-to-air after moving to Freeview

August

- Sky Media buys Aura Sports (sales house for football club websites)

September

- Yahoo! Answers secures its first commercial deal anywhere in the world, with Sainsbury's as sponsor for its Food & Drink section

October

- Google acquires YouTube

- NatMags buys Handbag.com and creates Heart Digital Network

- The Guardian and The Telegraph groups rebrand to reflect new multi-platform offerings

- EMI Records teams up with Yahoo! Maps to create an exclusive competition supporting the launch of Badly Drawn Boy's new album

November

- A Group M report predicts £160m online growth for 2007

December

- Future invests £6.7m in its web strategy for next year - more than half of its planned new product development spend

- ZenithOptimedia predicts global internet ad spend will grow by 28.2% next year and overtake radio's share of spend by 2009

- The much-anticipated broadband TV service from BT, BT Vision, launches

- Applications accepted for a second national digital radio multiplex licence

A FEW OF THE YEAR'S BIG OFF-LINE STORIES

January

- Clear Channel chief executive Steve Spring leaves, re-emerging in June as chief executive of Future

February

- Managing director Gary Digby leads a major restructure of ITV Sales

- Emap's iconic teen mag Smash Hits! closes

- News International's magazine division, News Magazines, unveils first launch, Love It!

- Emap launches Emap2

March

- The Telegraph Group launches three supplements, including women's fashion special Stella

- Titan reveals the new structure for newly acquired Maiden Outdoor

- Aegis axes 11 jobs in a global restructure

- The IPA's TouchPoint survey launches

- TV marketing body Thinkbox unveils Tess Alps as its first chief executive

April

- Universal McCann overhauls its management structure

May

- JCDecaux Airport is awarded the 10-year BAA contract worth an estimated EUR730m (£500m)

- Times Newspapers creates a cross-platform ad unit across its three brands

- The Manchester Evening News replaces its Lite edition with free copies in the city centre

June

- IPC plans digital push for women's weeklies

- NatMags creates digital publishing managing director position

July

- Consumer magazine sales are up by one million in the UK, according to WARC report

- The RadioCentre, the radio body formed from the merger of the Radio Advertising Bureau and the Commercial Radio Companies Association, opens for business

August

- Bauer launches In The Know

- ITV's chief executive Charles Allen announces he will leave the broadcaster in October

- London Lite launches

September

- Thelondonpaper launches, a week after its Associated Newspapers rival appears on the streets

- Ex-IPC stalwart Mike Soutar sets up Crash Test Media

- Nick Manning, group OMD UK chief executive, leaves, to be succeeded by OMD UK managing director Steve Williams

October

- Carat scoops agency of the year at the Media Week Awards, while Channel Four walks away with the honour of sales team of the year

November

- David Pattison, PHD co-founder and worldwide chief executive, resigns

- Ofcom announces a ban on all junk-food advertising to children, extending to all programming with a large audience of under-16s.

December

- C4 incurs its first advertising trading deficit.

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