Foreword

As an industry, we have only just begun to scratch the surface of social media.

There’s a revolution in the air, and a pseudo-science to describe it that leaves

many of us searching for a better understanding. The tech-savvy creatives
among us are leaping to experiment; strategy people are living in the
‘planosphere’; new ways of thinking and talking are emerging.

There’s a lot of hype, but less understanding of the reality.

This publication aims to bridge the digital divide between the old and new
worlds. It seeks to make sense of social media with reference to both old and
new communication models and, in so doing, provide common ground for
debate and collaboration.

As media convergence really begins to take hold, and brand owners seek to
integrate social media into their overall communications strategy and plans, it
is incumbent on agencies to help them navigate this new reality.

In so doing, we will also arrive at a clearer understanding of social media’s

likely impact on marketing and agency budgets, structures and services, and
find it easier to take effective action.

We can also identify new business opportunities for agencies beyond brand
communications, where insight, planning and marketing database skills can
be applied to reputation management, listening and monitoring, new product
development and e-commerce.

We are delighted to be partnering with the Future Foundation for a second

time, on this most constructive research and consultation programme.

Moray MacLennan
IPA President and Chief Executive, M&C Saatchi Worldwide


Contents

Introduction and rationale 4

Scope of work 4

Methodology 5

Management summary 6

1 | Demystifying social media 8

1.1 | What are social media? 9

1.2 | An anatomy of social networks 10

1.3 | Key characteristics of social media 12

1.4 | Who uses social media? 12

1.5 | How networks are changing society 13

1.6 | Why networking is challenging brand communications 15

2 | Social media and

brand communications 16
2.1 | New models for brand communications 16

2.2 | New advertising formats for brand communications 16

2.3 | New business opportunities beyond brand communications 17

2.4 | Applying social media ‘netiquette’ to brand communications 18

2.5 | Applying industry Codes of Practice to social media 19

2.6 | Social media and intellectual property 21

2.7 | Case examples of current practice 22

2.8 | Integrating social media 26

2.9 | Brand conversations online 27


3 | Learning from academia 28
3.1 | Five academic theories of social networks 28

3.2 | Relating academic theories to practice 34

3.3 | Planning guidelines for social media 36

4 | Agencies and social

media – the Delphi research 37
4.1 | Predicting the future of brand messaging
over social media 37

4.2 | Painting a picture of the future of social media:

the next 10 years 39

4.3 | Agency readiness for the social networked future 43

5 | Assessing the top-line business impact 45

5.1 | Opportunities for business growth in social media 47

5.2 | Broader opportunities for revenue generation 49

5.3 | Sizing the opportunity 50

5.4 | Broader market opportunities 50

5.5 | Comparing the consumer-led scenario of 2008

with that of 2007 51

Post-script: The future impact of technology 52

Bibliography 54

Contributors 56


 Introduction and rationale
In January 2007 the IPA and the Future Foundation published The Future of
Advertising and Agencies: a 10-year perspective. This thought-provoking study
put forward three scenarios, of many possible, for the future of commercial
advertising as we know it: a central scenario, which was deemed to be the most
likely, and two alternative scenarios, one media-led, one consumer-led, which
pushed to the extreme the impact of changes in the media and consumer landscape.

The central scenario painted a picture of a healthy industry growing at an

average 4.5% per annum to £52bn (at 2005 constant prices), with a shift
towards more named, screen-based and two-way communications activity. It
assumed that there would be no major shifts in power between agencies, clients,
media and consumers, despite a more interactive digital media environment.

The media-led scenario described a world in which brands would have to ally
themselves to media owners to get their messages through to consumers in
order to overcome stringent restrictions on paid-for advertising in a growing
number of categories.

The consumer-led scenario, on the other hand, described a future in which the
consumer, empowered by social networks and ‘blocking’ software, increasingly
mediated messages between brands, themselves and other consumers, and
radically diminished the power and influence of the paid-for advertising industry.
figure 1
Not surprisingly, on this basis, the consumer-led scenario
Total commercial advertising in 2016
was predicted to be the most negative to the industry in
Probability Frequency
Central scenario terms of future growth. Indeed, the Future Foundation’s
0.05 500
Consumer-led Media-led
scenario scenario model of total commercial advertising in 2016 indicated
0.04 400
a £16bn revenue gap between the best-case scenario
0.03 300
(central) and the worst-case scenario (consumer-led); with
0.02 200 total commercial advertising expenditure figures of only
0.01 100
£36bn and average annual growth rates of 1.2%.

0 0 The report suggested that some, though not all, of the

30,000 36,000 42,000 48,000 54,000 60,000 66,000
£bn at constant 2005 prices revenue lost to commercial advertising would transfer
Source: The Future of Advertising and Agencies, IPA/Future Foundation to the wider communications industry, and be taken
up by new forms of advertising and new channels of
figure 2
communication.
The consumer-led scenario
£bn at constant 2005 prices
60 Scope of work
Consumer-led scenario
50
Central scenario The broad purpose then, of this further exercise, was to
40
explore in greater depth the consumer-led networked
30
scenario; test the accuracy of the assumptions made about
20
its likely impact on the future of advertising and agencies;
10
provide a series of recommendations and principles for
0
1996 2001 2001 2011 2016 agencies to consider in order to maximise the potential
Source: Future Foundation
of the growth of social media for their businesses; and


identify a range of new revenue generating activities which figure 3

social media would create for the industry. New forms of advertising: the consumer-led scenario
Commercial
This report is a summary of the research, development and
consultation undertaken and has, as its core objectives, to:
£35.8bn
1. Demystify social media ‘Advertising’ Editorial
2. Make sense of social media in a brand communications
and broader business context, and provide case examples ~£16bn
of current practice
3. Use academic theory to create guidelines for planning Consumer
Source: The Future of Advertising and Agencies, IPA/Future Foundation
the use of social media for brand communications
4. Explain agency perceptions of social media and its likely
impact on the future evolution of commercial advertising
5. Assess the top-line business impact of social media on agencies, and the
implications for the future evolution of agencies.

Methodology
Many of the lessons from last year’s exercise came from observing how ‘think-
tank’ teams, drawn from the IPA membership itself, were able to respond
to alternative scenarios and invent new organisational forms in the face of
radically different circumstances. This second-stage project has been no
different, and has involved the same process of consultation and research
among the IPA membership. This has been amplified, at different stages, by
desk research into social network theory, a literature review of relevant reports
and articles, and by case material provided by IPA member agencies. The
statistical model has also been recalibrated by the Future Foundation.

In total, the project has taken 18 months and involved over 100 participants
from the IPA membership. The full schedule of activity is outlined below.

Schedule of activity
2007
May. . . . . . . . . . . . . . . . . . . . . . . . . Scope of work
June. . . . . . . . . . . . . . . . . . . . . . . . Exploratory workshops
July - September. . Desk research into social network theory
October. . . . . . . . . . . . . . . . . . ‘Visioning’ workshops
2008
March. . . . . . . . . . . . . . . . . . . . . Delphi Stage 1 – online research
June. . . . . . . . . . . . . . . . . . . . . . . . Delphi Stage 2 – online research
July. . . . . . . . . . . . . . . . . . . . . . . . . Modelling – future forecasts of market size
September. . . . . . . . . . . . . Draft 1 – peer group review
October. . . . . . . . . . . . . . . . . . Desk research - trade press Oct 2007 – 2008
November. . . . . . . . . . . . . . Draft 2 – peer group review
2009
January. . . . . . . . . . . . . . . . . . Publication