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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 MacLennanIPA President and Chief Executive, M&C Saatchi Worldwide

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Contents

Introduction and rationale 4

Scope of work 4

Methodology 5

Management summary 6

1 | Demystifying social media 81.1 | 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 162.1 | 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

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3 | Learning from academia 283.1 | 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 374.1 | 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 455.1 | 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

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Probability FrequencyCentral scenario

Media-ledscenario

Consumer-ledscenario

0.05

0.04

0.03

0.02

0.01

030,000 36,000 42,000 48,000 54,000 60,000 66,000

500

400

300

200

100

0

Total commercial advertising in 2016figure 1

Source: The Future of Advertising and Agencies, IPA/Future Foundation

01996 2001 2001 2011 2016

10

20

30

40

50

60Consumer-led scenario

Central scenario

The consumer-led scenario£bn at constant �005 prices

figure 2

Source: Future Foundation

£bn at constant �005 prices

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.

Not surprisingly, on this basis, the consumer-led scenario

was predicted to be the most negative to the industry in

terms of future growth. Indeed, the Future Foundation’s

model of total commercial advertising in 2016 indicated

a £16bn revenue gap between the best-case scenario

(central) and the worst-case scenario (consumer-led); with

total commercial advertising expenditure figures of only

£36bn and average annual growth rates of 1.2%.

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

revenue lost to commercial advertising would transfer

to the wider communications industry, and be taken

up by new forms of advertising and new channels of

communication.

Scope of work

The broad purpose then, of this further exercise, was to

explore in greater depth the consumer-led networked

scenario; test the accuracy of the assumptions made about

its likely impact on the future of advertising and agencies;

provide a series of recommendations and principles for

agencies to consider in order to maximise the potential

of the growth of social media for their businesses; and

5

Editorial‘Advertising’

Commercial

Consumer

£35.8bn

~£16bn

New forms of advertising: the consumer-led scenariofigure 3

Source: The Future of Advertising and Agencies, IPA/Future Foundation

identify a range of new revenue generating activities which

social media would create for the industry.

This report is a summary of the research, development and

consultation undertaken and has, as its core objectives, to:

1.Demystify social media

2.Make sense of social media in a brand communications

and broader business context, and provide case examples

of current practice

3. Use academic theory to create guidelines for planning

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 activity2007May . . . . . . . . . . . . . . . . . . . . . . . . Scope of work

June . . . . . . . . . . . . . . . . . . . . . . . Exploratory workshops

July - September . Desk research into social network theory

October . . . . . . . . . . . . . . . . . ‘Visioning’ workshops

2008March . . . . . . . . . . . . . . . . . . . . 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

2009January . . . . . . . . . . . . . . . . . Publication