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ADMEDIA project report

The Future of Media and Advertising

Executive Summary

November 1995


Table of Contents


The ADMEDIA project - investigating the future of media and advertising

Here is a brief Executive Summary of the so-called ADMEDIA study report. The project was sponsored by the European Commission - DG XIII/E. The project team was asked to investigate the future of advertising and the new media.

This document contains a summary of the conclusions and recommendations drawn from the investigation. The conclusions are preceded by a methodology overview and an abstract about the ADMEDIA project. The list of contents of the full report is appended, as
it indicates the scope of this extensive study.

The Executive Summary (free of charge) and the ADMEDIA report (at a price of ECU 200) can be ordered from your local National Awareness Partner (NAP). A list with addresses of NAPs is attached to the Executive Summary.

Copyright: European Commission, 1995

Abstract

  • The study on the future of media and advertising was given the acronym ADMEDIA (advertising and the new media).

    The ADMEDIA study was undertaken for the European Commission by the International Electronic Publishing Research Centre (IEPRC), the European Association of Advertising Agencies (EAAA), the Federation of European Direct Marketing (FEDIM), and the European Publishers' Council (EPC) between November 1994 and October 1995. The purpose of the study was to provide a strategic framework for the EC (DG XIII/E) and for those using or providing advertising in the context of changes in the marketplace brought about by the introduction of new media as a potential channel for advertising.

    The study indicates that advertising trends in the dominant media - newspapers, magazines and commercial television - do not suggest a short-term significant shift in advertising revenue streams caused by new media. However it argues against complacency for all in the advertising chain. It concludes, there is a period of up to five years for experimentation and restructuring of businesses to take advantage of changes in the media and advertising likely to occur over the next decade.

    The study finds that one of the major drivers of change in the media and in advertising will be the need for new media services to gain a share of the advertising spend. It further suggests that disintermediation will have more impact on retailing than the advertising industry. This in turn will bring about major changes in the total marketing mix and the use of advertising in different media.

    The study argues strongly the case for de-regulation and the positive contribution of advertising as a driver of competitiveness. It points out that in the past the sectors which make up the industry have been discrete areas for policy and regulation. Because of technology convergence, the study concludes it is now essential that legislators consider them together.

    Finally the report makes fourteen recommendations for action to the private and public sectors, the European Commission and the governments of the member states of the European Union.

Methodology

  • This study was undertaken between November 1994 and October 1995 for the European Commission by the International Electronic Publishing Research Centre (IEPRC), the European Association of Advertising Agencies (EAAA), the Federation of European Direct Marketing (FEDIM), and the European Publishers Council (EPC). The purpose of the study was to provide a strategic framework for the EC and for those using or providing advertising in the context of changes in the marketplace brought about by the introduction of new media as a potential channel for advertising.
  • The consortium of four project contractors, listed above, worked closely with nine Associated Partners who represented the major trade associations of Europe concerned with advertising. The Associated Partners are named at the end of this summary. In addition the project team and the EC were guided by a Steering Committee drawn from all parties interested in advertising, including consumer groups. A list of members of the Steering Committee is appended.
  • The EC in consultation with the Steering Committee set specific objectives for the study which were to:
    • Describe the existing patterns of activity and income streams of advertising in the media.
    • Study world-wide developments in information delivery with particular reference to their implications for advertising.
    • Assess the implications of new patterns in marketing by the distributive/retail trade and quantify their impact on traditional advertising.
    • Compare media and advertising developments in Europe, North America and Japan.
    • Assess how these issues and developments relate to specific interests in media/advertising interdependence over the next five years.
    • Consider regulatory structures in so far as they influence new media opportunities from an advertising and marketing viewpoint.
  • The study is based in part on the results of past research of similar subjects as described in the literature but the main investigation was conducted by field research including interviews via discussion groups with more than one hundred experts in the main European countries. In addition the project supported participation in specific events concerned with developments in the media and their relationship to trends in advertising. Key players in advertising, the new media and the traditional media which carry advertising were involved, either in individual interviews or in workshops. The project team, and its sub-contractors, thus drew conclusions from a world-wide perspective and developed a strategic framework to take account of the key industries involved in advertising and the changes likely to be brought about by the introduction of new media.
  • Interim results and hypotheses were made available to the EC and to the Steering Committee as well as the Associated Partners in order to receive feedback and further direction for the study as it progressed.
  • Focus groups were assembled to gather the views of experts in the media and advertising fields from around Europe.
  • Scenarios were developed which were based on focus groups discussions as well as other work undertaken during the project programme. The aim was to produce scenarios which are believable and probable for the next five to ten years. The scenarios contain a high level of judgmental material but do represent views expressed by leading industry representatives. Their usefulness lies in that they point to what might happen.
  • The strategies developed from the scenarios set out what steps companies and organisations can take now to face these changes if, and when, they occur.
  • This report represents the summary of the findings, conclusions and recommendations as well as a view of expected developments. It is important to note that due to the enormous changes taking place in communications and the media and the breadth of impact which these changes may have, the project contractors have had to come to their own conclusions, some of which may not be completely shared by all industry participants.

The views expressed in this report are those of the authors and do not engage the European Commission in any way. The authors of the study are:

  • IEPRC (International Electronic Publishing Research Centre)
  • Pira House, Randalls Road, Leatherhead, Surrey KT22 7RU, UK
  • EAAA (European Association of Advertising Agencies) 3 rue St. Quentin, B-1040 Brussels, Belgium
  • EPC (European Publishers Council) 49 Park Town, Oxford, OX2 6SL, UK
  • FEDIM (Federation of European Direct Marketing) 20 place Chasseurs Ardennais, B-1040 Brussels, Belgium

Summary of Conclusions drawn from the ADMEDIA study

This summary contains no source references. In the full report such references can be found in the main body of the text and the appended bibliography. In addition, the ADMEDIA project team can substantiate claims and propositions made as a result of their investigations.

While the project partners and their sub-contractors have made every effort to ensure accuracy in this work, they can not be held responsible for any actions or consequences resulting from the use of the material. Timescale and advertising spend in new media

  • The present advertising trends in the dominant media newspapers, magazines and commercial television do not suggest a short term (five years) significant shift in advertising revenue streams caused by new media. In the short term, an overall expansion of the advertising space is indicated.
  • The findings that there will not be a major shift in advertising revenue distribution between the media over the next five years should not be interpreted by anyone in the advertising chain as grounds for complacency. Quite the opposite should be the conclusion. It means, there is a period of up to five years for experimentation and, where appropriate, the restructuring of businesses to take advantage of changes in the media and advertising likely to occur over the next decade.
  • There is a clearly defined trend in many European countries towards direct response advertising in the mass media. This could be taken as an indication that, once the new media are firmly established in a sufficiently large percentage of households, the new media will be able to benefit from the upsurge in direct response mechanisms by virtue of their interactiveness.
  • Interactive TV, it seems, is regarded as no longer relevant in the USA by the direct marketing industry. The whole of the US Direct Marketing Congress in October 1995 concentrated on on-line systems via Internet or the World Wide Web.
  • The key question on advertising spend in new media is: how essential is it for new media product and service providers to capture a share of the advertising market? 50% of Fortune 100 companies have their own Web site now. 7% of US households have an on-line connection. The Time Warner Orlando experiment incorporates already advertising and recognizes its critical contribution to economic viability. A similar characteristic is manifest in the development of the Microsoft Network (MSN). Web advertising rates on the Internet range now from US$10,000 to US$30,000 per month or US$15,000 to US$18,000 per one million 'hits'. Already we see the emergence of business models which suggests that new media players are beginning to recognize the importance of advertising revenue streams to their business. This is likely to be the single most powerful market driver which will change the balance of advertising revenue streams between the media.
  • The evidence provided from the introduction of commercial television and radio in relation to printed advertising suggests, that a new medium tends to increase the overall advertising spend. Therefore, the introduction of additional opportunities for advertising, eg interactive television, CD-ROM/CD-I and on-line publishing and services, is likely to contribute to expansion of the total advertising space and revenue.
  • Advertising has always been a component of the total marketing mix. Advances in technology and an increase in available media further complicate the already complex management structure in the marketing industry.

Changes in presentation of advertising

  • Study of new media technology highlights recognition of three modes of advertising:
  1. one-to-one messaging between the product supplier and the purchaser
  2. interactive messaging, servicing many customers but requiring the stimulation of

    individual response

  3. mass messaging creating awareness or shaping brand image.
  • Developments in new media make it impossible to sustain these modes of advertising as separate and independent entities. Managing the use of these individual modes and their potential for reinforcement when used together, requires a new and holistic vision by all persons involved in the advertising chain; this includes the provision of information and customer care.
  • Experimentation in the USA with new media advertising and new electronic trading modes is markedly greater than in the European Union. This suggests the need to encourage, at national and at multinational level, greater experimentation in the EU with new media advertising and electronic trading. However, there is no intrinsic virtue in using any one medium for any particular purpose, other than cost and effectiveness in advertising. Thus, while it is desirable for governments to stimulate innovative experimentation, such stimulation should follow private sector initiatives and must not favour one medium over another. The ultimate test will remain the market place and thus the consumer for the determination of any shift in advertising revenue between the media. New media reinforce the trend towards interactive marketing

The recent trend towards database or 'dialogue' marketing has been noted in the focus groups and in various studies prepared over the last few years by the advertising industry, for example, the UK Henley Centre research on 'Teleculture' published in early 1995.

The advent of the new on-line services will accelerate this process. However, as a survey in the Financial Times of October 1995 shows, at least for business-to-business, the electronic systems will not do away with the established paper-based media. The 'paperless office' is at present a myth, and it is highly unlikely that the 'paperless household' relying only on electronic systems will be any more than a myth in the next decades.

  • Database marketing does pose a challenge to the established processes of advertising insofar as it changes the emphasis of advertising and channels it into a series of very precise procedures. The process of advertising on any media using a direct response mechanism should trigger off a series of activities from the handling of responses and fulfilment of the order, to the creation of databases of customers, the evaluation of responses, and in most cases the provision of follow-up steps (customer care).

In a survey carried out by FEDIM among its members for this study, a common complaint was that much direct response goes to waste. Orders are processed, but the next steps - creating databases, evaluating responses and providing customer care to ensure that the client returns to buy again - are being ignored by many advertisers.

Slowly but surely the trend is to pay greater attention to the full process of direct response among the major advertisers. The process is being encouraged by training and conferences on database marketing and database management.

The process will be slow because it requires a marriage between information management and creativity, represented by direct marketing on the one hand and creative departments in advertising agencies on the other. A new breed of advertising/direct marketing concept designers needs to be created.

  • The consumer will play a new role. She or he is not only a receiver of commercial messages but has to become active her- or himself to receive more information, to place orders etc. Therefore interactivity, creating a dialogue with the customer, will be the most important aspect - with on-line media consumers having to take the initiative themselves to look at commercials. This means that commercial messages have to raise interest or be entertaining, or incentives have to attract the consumer's attention.
  • The main encouragement for on-line and interactive marketing has come from telecommunications. The reduction in the cost of telecommunications, due to the gradual liberalisation of telecom monopolies in Europe and to economies of scale, is one important element. The Postal Operators, for example, have been studying the effects of competition between paper-based mail and electronic mail, such as e-mail, faxes etc. Their conclusions have been that the cost differentials have disappeared and that soon telecommunications will become cheaper even than local mail. This realisation explains the moves into electronic mail (sometimes termed 'non-physical mail') by the postal operators.
  • The second development in telecommunications, closely interrelated with the first, is that of digitalisation, allowing for faster and less 'bulky' exchanges of voice and data messages. The advances in voice systems on Internet and the World Wide Web announced in the summer of 1995 offer the greatest challenge yet to both telecommunications and postal operators.

Due to digitalisation, services can be performed all over the world, depending on the place of their best value. Images, sound and text can easily be transferred via, for example, computers from one place to another. This means that also in the advertising sector globalisation will take place.

Digitalisation also means a speeding up of the present marketing process. With the help of new technology everything from the production of the commercial, to the response handling and the fulfilment including the delivery, may now be easier and must be faster. If a customer reacts and wants information or a product she wants it as quickly as possible.

  • Interactive marketing, or creating a dialogue with the customer, with the help of databases that save all information received from the client, provides a more focused and precise target, at the same time leading to more satisfied and loyal customers. This also leads to a more interested customer who takes the initiative. The challenge is to create that possibility and then to benefit from it. Advertising assists in market making - appropriate regulation is needed for effective EU trading
  • As the countries of the European Union move towards implementation of the Single European Market, the positive contribution of advertising as a driver of competitiveness must be recognized by the private and public sectors throughout the EU. Advertising and the media must operate throughout Europe within a common regulatory framework, the purpose of which is to protect the individual citizen from undue influence. The form of regulation should not impede the competitiveness of the industry but should encourage competitiveness among advertisers, advertising agencies, direct marketers, sponsors, sales promoters and media selling companies and media carriers throughout the European Union.
  • Guiding de-regulation and enhancing present regulation in the European Union are a unique task for the EC in setting the vision for the European Union to create an environment which enhances the quality of life, stimulates free market enterprise among large companies and nurtures creative small and medium enterprises (SMEs). In this context the EC becomes a unique influencing body. It must be a persuader, for positive purpose, of national governments in the EU to see the benefits of common aims in an increasingly competitive global trading environment. Advertising, and its application as an income stream for new media, is an essential part of a strategy to encourage EU competitiveness.
  • With the implementation of the European Single Market, advertisers and their agencies will seek a unified market for advertising throughout the European Union. Private sector companies, national governments and the EC must actively facilitate an open trading environment to respond to this aspiration. Increasingly display and classified advertising, sponsorship, mail order shopping, direct marketing and tele-shopping etc will become inter-related. The trading environment of the EU should represent 'neutral space' for these different commercial operations. It must allow the market and ultimately the consumer to determine the market pattern by free choice.
  • In the past the sectors which make up the information industry have been discrete areas for policy and regulation. Because of technology convergence, it is now essential that legislators consider them together. Legislators must assess the impact they have on each other before and during elaboration of any new legislation affecting media companies. The time has come for a thorough review of existing and pending legislation; otherwise, media companies will be operating within a regulatory framework that is no longer appropriate to the information market and which will constrain economic growth.
  • As the players and technologies in the integrated information industry combine and converge, it may no longer be efficient to elaborate regulations for each sector. A simplified framework is required more akin to the principles of competition policy. Existing legislation, for example that which limits cross-media ownership, is interfering with media companies' investment decisions and militates against strategic alliances and economic growth. It is counterproductive to the creation of a competitive Single European Market.
  • The imperatives which led to the existing regulatory media framework, at national and EU level, were multifarious and have been highlighted in this project. They were designed for an era of individual national markets and shortages of broadcast media outlets. An additional characteristic has been governments' wish to regulate the content of media, to circumscribe its influence by establishing limitations on ownership and cross-investment between different sectors of the media. Justification has been based largely on scarcity of media outlets. This is no longer applicable due to opportunities offered by new technologies which will lead to a proliferation of media sources and offer wide diversity of opinion and choice.
  • The project has demonstrated that existing national legislation and regulations are detailed in the extreme. Current levels of consumer protection from commercial messages are astoundingly interventionist. This level of detailed regulation is not only disproportionate but contrary to the freedom of expression as provided in Article 10 of the European Convention on Human Rights.
  • Unless large-scale de-regulation of legislation (and in some cases self-regulatory codes) affecting content, amount and timing of advertising is given urgent consideration by the EC, the advertising budget will not be able to grow sufficiently to meet the revenue demands of the market place and the existing and new media companies.
  • The current Intellectual Property Rights (IPR) regime is detailed and complex, having evolved over time. This has led to the establishment of a hierarchy of rights. In the Green Paper on 'Copyright and Related Rights in the Information Society'; although the role of publishers is acknowledged, they are seen as 'third division' players in the rights league. Authors play in the first division, reflecting the droit d'auteur regimes. The second division consists of the holders of related rights, eg performers, producers of phonograms and producers of films. Publishers are considered only as 'managers' of rights. This does not reflect the levels of creativity or investment made by publishers, particularly those of new multimedia products. The creative input and investment of the publisher deserves legal recognition in terms of a right in addition to individual authors' rights.
  • The same must be said of advertising agencies, whose work consists not just of holding and clearing authors' rights (whether they be employees or outside suppliers), but whose primary function in the creation of advertisements is to generate the creative idea that is at the core of the 'collective work' as expressed in the advertising campaign.
  • The concept of 'collective work' is contained in the Berne Convention; but new electronic media present a particular challenge to the practical application of the concept of collective work.
  • Advertising is increasingly global, as is the whole concept of the information super-highway. For this reason, there needs to be a good balance between the work of the EC in this field and the work that is currently being undertaken by the World Intellectual Property Organisation (WIPO) in Geneva. In particular, there needs to be greater clarification of the term 'collective work' and its application in practice in relation to new technology. This is because creative works are particularly important for the new information super-highway and the whole growth area of interactive advertising.
  • It seems, there is a case for statutory presumption in favour of employers in relation to IPR. It relates to the ownership and clearance of authors' rights; specifically, the right of publishers and advertising agencies to exploit works such as articles and photographs produced by employees in the course of their employment, where national law does not contain a presumption in favour of the employer. There is need to consider an EU-wide statutory presumption in favour of employers. However, this should not impede agreements where the purchaser is granted exploitation rights to the creative copy.
  • Sales promotion schemes that are long-term and co-extensive with a brand's advertising (eg Air Miles) or planned for multimarket use (eg on-pack promotions) should enjoy the same freedom of expression, and thus the same freedom from restrictions, as the brand's advertising campaign. By way of comparison, individual State laws in the USA may not obstruct inter-State commerce by preventing an advertiser from mounting a nation-wide campaign. This model should be the target for emulation in the EU.
  • The cost of telecommunications in other relevant parts of the world is far lower than in the EU (eg telecommunications costs in the USA are one-eighth of the cost in the EU). High telecommunications costs in Europe inhibit the practice of telemarketing and the development of the information society. Telemarketing can be a particularly useful, controllable and affordable medium for SMEs and for new entrants to a market. It can be expanded by new technology to the benefit of the consumer and SMEs. The EC should aim at a reduction of telecommunications costs by encouraging vigorous competition. Unless this is done, the EU will suffer a self-imposed restriction on the growth of new media, including new media advertising. This will have a knock-on effect on all EU information technology (IT) use and manufacturing to the detriment of the EU's global competitiveness.
  • EU regulation, or rather de-regulation, are the mechanisms which if properly used will create 'neutral trading space' for all media, and thus all industry and commerce, throughout the EU. This willingness to collaborate and change the patterns of trading throughout Europe is a critical issue for advertising but more importantly for the economic future of the European Union.

    Stimulation of new media technology and skills application in the EU

  • The trend continues for players from outside Europe to enter the EU media service space. The entry of such players enhances competitiveness in the EU but the question remains for companies, for national governments and for the EC to respond to this challenge and produce new media advertising products which gain increased EU market share and a greater share of global markets. A start has been made by the impetus given by the recent G7 initiatives related to the Information Society. Greater vision is still required to stimulate interest in new media technology in the EU. This relates to education policies in the broadest sense from the use of new media technology in schools to the use of new media in presenting the benefits of European citizenship. Companies, national governments and the EC must increase their recognition of common purpose if the EU is to take its proper share of the benefits of these developments in the information society of the future. Advertising, direct marketing and the information content industries should recognize common purpose in this sphere.
  • The citizens of one European country alone produce 40% of Sega software. However this positive trend is not supported by alliances to value-add to new creative advertising products in the EU. There is lack of holistic perspective. Media companies in concert with the EC should build on the Bangemann Initiative to encourage programmes in innovative advertising and electronic trading which will develop EU supply chains that embrace content, software, hardware and facilities providers. Innovative new media advertising should be at the centre of this common thrust to create new markets, new jobs and more efficient trading.
  • New interactive media technologies raise questions of restrictive access and the role of network gatekeepers. It is important to prevent price or access mechanisms being raised against content owners (advertisers, advertising agencies, direct marketers, media buyers, publishers, TV channel operators etc) who need to utilize new interactive distribution networks. Private sector companies and the EC must pursue a policy which encourages the growth of new delivery systems, especially from the private sector, and which also guarantees fair commercial access. This should be the subject of a specific monitoring brief by DGXIII in conjunction with the representative bodies of the content industries.
  • The EC, and governments throughout the EU, recognize the importance of SMEs to job creation and economic growth. SMEs are sometimes disadvantaged in the opportunity they have to utilize advertising throughout the EU. The EC should explore the need of manufacturing and service SMEs in the EU for cost-effective advertising exploiting the advantages of new media technology. The objective should be to increase the marketing and advertising scope of SMEs within the EU market by utilizing new media technology to reduce costs and facilitate the use of services by Europe's SMEs. The EC should also study the non-retail outlet trade in greater depth to ascertain its potential needs vis-à-vis the new on-line media.
  • Evidence has been gathered of concern among direct marketing practitioners, advertising agencies and other relevant service providers in the EU to gain a wider perspective on new media through knowledge sharing and better training. Because of the traditions of this industry, and their highly competitive nature, creative skill sharing has not been practised. It would be appropriate now for the EC to provide a programme aimed at stimulating experimentation with new media and knowledge transfer programmes throughout the EU.
  • All governments of the EU subscribe to the concept of the Single European Market. Part of that Market is the market for advertising in new media. Thus it is logical to argue for a common regulatory environment, but it is also logical to argue for national information technology programmes to be designed to achieve synergy with each other and EC programmes. Without this sense of common purpose the EU will not gain the critical mass necessary for new media advertising to compete in the global market place.

    Action envisaged by industry players related to new media and advertising

  • Measuring advertising effectiveness has never been easy. Similarly, developing business models for the present providers of advertising, eg newspapers, magazines, commercial television etc, which combine free circulation, advertising revenue, cover price, subscription or entry charge, are in need of constant updating. New business models are needed to develop more sophisticated assessment of the critical items which identify the targets and revenue roles for new media advertising. Any new player entering this market place should place high priority on developing and testing such business models. This is a subject which should be explored by collaborative research.
  • Telecommunications, cable operators and other future carriers will need to develop facilities to deal with the specific requirements of advertising. New media are technology-led, the partnership role of hard- and software manufacturers is essential if the full potential of advertising on new communications systems is to be realized. The specialist services which will create new advertising possibilities include software programmers, database operators, on-line service providers, new media publishers and producers, eg CD-ROM/CD-I publishers, interactive television producers and other television production companies.
  • Providers of the surrounding services will become increasingly important and will include the operators of inbound and outbound on-line marketing, such as call centres and tele-marketing bureaux, fulfilment and delivery facilitators including postal operators. There is likely to be growth and increasing competition for the provision of these fulfilment and delivery organisations.
  • Postal operators (POs) are competing fiercely for international mail. Large investments are being made in more efficient postal sorting systems. Parcel post is open to competition in Europe. (In July 1995 the EC issued a proposal which will inter alia reserve mail of 350 grams and under to the public postal operators). A number of EU countries have already more open services, eg Finland, Germany, Holland, Spain, Sweden. Postal operators as well as media companies will try to provide a 'full service' by offering the full range of operations for distance selling from the carrying of the direct response mechanism through to fulfilment, processing of payment and delivery, just as most teleshopping broadcasters and mail order companies at present deal with their own products from the offer to the fulfilment, payment processing, delivery and provision of any necessary after-sales service.
  • Over the next decade advertising should be an active and profitable provider of services on both on- and off-line new media. The challenge is to get a sufficiently large percentage of the population to use these services. Penetration of home-PCs is rapid but overall Europe is still behind the USA; cable passes 25% of European households but is not high-capacity and cannot be used for video-on-demand (VOD) or for fast electronic data interchange (EDI) links.
  • Branded goods manufacturers will continue to concentrate on display advertising via mass media to achieve mass audiences. However, the increase in the media carriers available are already eroding circulation or audience levels in some countries. The mass media will continue to fragment. Fragmentation may reduce the cost-effectiveness of the media for advertisers who need to reach a mass market, but more efficient micro-targeting will be possible.
  • Branded goods advertisers are facing greater pressure from retailers and have had to respond by using a greater array of marketing techniques to combat this challenge to their predominance in the consumer goods market. Two-thirds of all new products introduced to the market place fail in the first couple of years. This can be due to insufficient media exposure, and the new forms of communication may offer a greater opportunity for products to establish themselves. Systems such as homeshopping also shift the balance of power between retailers and the brands.
  • There is a trend towards greater use of 'below-the-line' advertising techniques (direct marketing, sales promotion, sponsorship). Although Europe may lag behind the USA in some of these techniques, the relative newcomers to serious advertising investment, for instance financial services, have concentrated their expenditure on techniques such as direct mail, telemarketing and sponsorship. The concept of integrated marketing strategies has made the division between 'above' and 'below-the-line' redundant for advertisers. Marketing budgets will become more integrated to achieve the most effective use of the advertising and new media possibilities available.
  • New players (eg media companies, carriers and manufacturers) are entering the direct marketing sector through investments, joint ventures and strategic alliances. If advertisers' business activities take place on-line, it is likely that they will have to allow their agencies more involvement in their business operations. For an agency to look after a company's on-line interests in the same way it looks after its traditional media activities, it will have to form relationships well beyond the marketing department.
  • Business-to-business advertisers already use on- and off-line media extensively. At present, this tends to be in combination with traditional business-to-business media (eg in a Royal Mail survey of direct mail nearly 50% of business-to-business advertisers offered their client the option of ordering via fax ) and the trend is to increase on-line use.

    Consumer acceptance of new media advertising

  • Some advertising techniques, for example constant interruption of broadcast programmes, telephoning homes at inconvenient times, fax advertising, are considered intrusive. Some consumers also have specific aversions to some forms of advertising - issues such as nudity, the waste of paper (unaddressed mail) or audiotext (a study by the Kelsey Group in the USA showed 78% of respondents disliked audiotext advertising).
  • Consumers are likely to become more ruthless about good and bad advertising. The two can co-exist in most media at the moment because of the essentially passive nature of their consumption. The consumers' option to avoid a reactive advertisement on-line will make it even more important to get the message right and to deliver innovative high quality advertising messages.
  • A major concern of advertisers in the future will be to find a solution to the demassification of the mass media on the one hand, and to the potential creation of media-rich/media-poor communities on the other. The media-poor will be disproportionately represented in the audiences of free media; this may mean a disproportionate amount of the poor, the technologically averse or incompetent, or of those living outside the reach of the new media, such as rural populations. New media will be of little use to brands whose customer base is made up of the media-poor. The existence of media-poor (based on income and education) need not mean a stable core audience for traditional media. It could simply be that the media-poor make do with less or cheaper new media rather than remaining with traditional media.

    Opportunities for advertisers utilizing new media

  • Advertisers will try to reduce the competitive advantage retailers have due to their close ties to the customer. New media should help advertisers close this gap by having the possibility to relate directly with their customers. It is to be expected that customer care systems will become a major competitive issue between advertisers, and between advertisers and retailers. The identification and therefore ability to target customers precisely provides the marketer with unique opportunities; marketing staff must be properly trained in the use of data bases and precision/dialogue marketing techniques.
  • Customer care lines will be offered by the full media-mix, that is advertised in the press or broadcasts; demonstrated on CD-ROM/CD-I; operated on-line, via any of the new media on-line sites; interactive TV; audiotext etc; and via the provision of free-phone customer care services, ie in-bound telemarketing. The telephone is likely to remain the most popular medium for the customer.
  • Advertisers wishing to experiment in the short term with on-line services should consider whether as a first step they use the techniques presently available in telemarketing. These provide an introduction to the concepts of on-line and will show if direct response, information/customer care services, sales promotion and database management suit the company's products and customer base.
  • Advertisers should take care to ensure that they have selected the best position for their product in on-line services, particularly Internet and the World Wide Web. The great challenge will be to provide either sufficiently entertaining advertising or services which satisfy the users' need for information.

    Challenges for advertising agencies using multimedia

  • The future impact of new media on advertising is a vital concern to advertising agencies. The trends identified in this study and the evidence of practical experience indicate that five main areas of change and development must be addressed by advertising agencies, as they prepare for their future in the Single European Market. These are:
    • globalization
    • media fragmentation
    • new media
    • regulatory problems de-regulatory opportunities
    • client/agency relationships
  • The trend to globalization has many different aspects. For example, advertising expression for a single brand may need to differ between national or regional markets. New media do not change this fundamental characteristic, but new media will offer even greater opportunities for tailoring, to meet the needs of ever more targeted audiences.
  • Agencies and their clients regard the diversification and concentration of media ownership as a normal development in a free and competitive market economy. However, when media concentrations create dominant positions in the market, consumer choices are limited and advertising costs increase. For example, the television duopoly in Italy, which controls over 95% of commercial time, fixes the prices it wants, so that there is no real market but instead there are high access costs, a barrier to market entry by new advertisers, particularly SMEs.
  • In advertising management the consumer has long been paramount. With the advent of new media he/she is in even greater control of the button. Interactivity means greater viewer involvement. Individual users will access services according to their taste and timetable. They will search and choose what they want and when they want it.
  • Video-on-demand is some way from becoming feasible for large numbers of people. The slow and costly downloading of film is still inhibiting development of VOD and thus the development of corresponding advertising-on-demand, even if viewers were to want such a facility rather than resorting to standard zapping.
  • In the new media, agency remuneration will probably not be based on media commission but on connection time or even on sales commission. There will be new money and incremental money invested in on-line systems that allow fast moving consumer goods (FMCG) manufacturers to bypass the bottleneck of traditional retailers. Agencies must develop expertise to assist their clients in the optimum use of new on-line opportunities. The strategic imperative for advertising agencies is to develop the skills, the expertise and the experience necessary to insure their clients receive the same level of professional service in the use of new media as they have in traditional media advertising.
  • Advertising agencies across the EU should enter into dialogue with the EC to explore the creation of support programmes for training to enhance the skills of their staff in the field of new media.
  • Agencies should carefully investigate the possibility of carrying out relevant copy tests, relevant 'clinical trials' on interactive media that are useful for the development of communication in general advertising media. Agencies need to experiment continuously with new media and related user metrics.
  • The freedom to provide services throughout the EU is a cornerstone of the internal market, guaranteed by Article 59 of The Treaty of Rome. Advertising is such a service and has the same right to cross borders as the goods and services it promotes. Agencies must ensure, by dialogue with the EC, that such free flow is stimulated particularly in the context of increasingly complex media space provided by new technology.
  • Advertising agencies must continue to play a key role in ensuring that advertising in the EU is legal, decent, honest and truthful. The EC have recognized that self-regulation can be the best instrument for policing advertisements. Self-regulation is efficient, effective, fast and virtually free to the consumer.

    Response by publishers to new media advertising

  • In responding to the opportunities of new media, all publishers should be considering the following:
  • developing in-house new media knowledge and skills, whether through training experimentation or acquisition,
  • exploiting content and brand image through new media,
  • enhancing existing printed products with better colour, better finishing technology and more illustration etc,
  • understanding who the customers are, and developing the customer/advertiser interface.
  • Publishers (newspapers, magazines, directories) must venture into new media, whether to innovate in presenting their content in new ways or just to maintain a place in the market. This can be achieved in a variety of ways, from setting up a completely new in-house department to forming strategic alliances with existing new media software developers, broadcasters or service providers.
  • The strength of consumer and special interest magazines is the power of their brand image in the market place. In the short term (five years) little impact is likely on these products from new media advertising. The strategy for these products should be to explore the use of the brand in either the extension of publishing activity into new media, or the use of the brand image to generate an associated product, eg the printed magazine Wired and the on-line magazine HotWired. In either case the relationship between the publisher, the product, new media and advertising is the sustaining of a defined readership which is associated with a particular brand quality and coverage.
  • There will remain three critical issues for consumer and general interest magazines when exploring new media and shifts in advertising revenue. These three issues of strategy are: the size of the audience captured by present circulation; the characteristics and specification of the audience; the efficiency of the message transfer, both editorial and advertising.
  • Extending the depth of a magazine by linkage to another medium, such as cable television or CD-ROM/CD-I, can extend the 'readership space' for many topics. This has been demonstrated by the EC-sponsored IEPRC-managed FAMPUB project. The FAMPUB project provides evidence of the benefits of collaborative experimentation.
  • Publishers can exploit fragmentation to attract advertisers looking to promote products to target audiences. The publisher of a consumer or general interest magazine can exploit this opportunity by formatting content material in a way which allows transfer to an on-line service for selective searching to meet the needs of fragmented groups. This management of fragmented communities provides opportunity for targeted and selective advertising.
  • New media offer to the consumer and general interest magazine publisher opportunities for enhanced editorial dialogue with readers and thus enhanced mechanisms to understand reader preferences. This interactive dialogue exceeds anything previously achieved through 'letters to the editor'. Thus editorial understanding of readers' interests may be enhanced and can be used for better targeting or sales of topic-related advertising.
  • Consumer and general interest magazines will respond to new media by enhancing the quality of their product by increased use of high resolution colour. Future strategies will involve expanding the range of services provided by the magazine, such as customized advertising or sales promotion coupons etc. In a sense the consumer magazine is thus moving into direct marketing. The publishers will use whatever medium is available to achieve this objective, and in so doing will increase their products' attractiveness to advertisers and the advertising agency community alike.
  • Consumer and general interest magazines need to consider the systems and technology for transferring advertising copy from paper-based systems to new media systems. The strategy for the magazine publisher must be to ensure proper understanding of these constraints and the standards and encoding formats required to deliver a quality service to the advertiser and agency community.
  • All magazines and newspapers, but particularly specialist publications, have ownership of information which has archival value. There is growing awareness of the need for asset management on the part of all publishers. These assets will provide new income streams for publishers and may on some occasions lend themselves to an additional advertising income stream.
  • Business magazines are dependent on advertising revenue and consequently have to be able to attract as much quality advertising as possible. A recent Internet survey (O'Reilly Associates) suggest that 43% of Internet users work in corporations of a thousand employees or more. This supports the evidence that there is a strong, and growing, demand for on-line business information such as financial and commercial data. Because of their timely content and use in the business environment, business magazines will be able to charge a premium for the on-line versions, many of which (eg Time, Forbes, Business Week) are available on commercial on-line services, already expanding them as media for wider advertising reach.
  • Business magazines are in a prime position to utilize new media to provide services based on their content. There are three generic ways in which the business magazine may utilize new media. These are:
    • to provide content material to other providers of information services, eg Dow Jones, Reuters etc,
    • to present their product on an on-line host, eg Europe On-line, CompuServe etc,
    • to create a different new media product based on the re-use of their editorial and advertising content.
  • The business magazine publisher needs to deal constantly with the issue of timeliness of content and provide a steady update of the information available. The frequency of the business magazine is unlikely to be greater than weekly. Exploitation of audiotext and videotext systems will give immediate currency to the content of the business magazine. Such alliances are already developed. In this context there are opportunities for the use of advertising in audiotext and videotext systems, but they tend to experience resistance due to the functionality of the service.
  • The costing structure of business magazine new media services requires careful design. The fundamental issue is to decide how much of the income stream is to be derived from subscription and how much from advertising. There must always be enough content in quantity and quality to attract users and thus achieve both income streams. The strategy by business magazine publishers to optimize this mix can be gained only through experimentation and sampling user response.
  • Newspaper circulations fell globally by as much as 12% between 1989 and 1993 (The Global Newspaper, Goldman and Sachs, June 1995) which can be partly attributed to alternative media delivery systems such as cable television eroding the two main strengths of newspapers, namely national and regional news delivery and display and classified advertising. A number of newspapers have ventured on-line, such as the national Daily Electronic Telegraph in the UK and the San Jose Mercury News in the USA. Many others are experimenting. At present few on-line newspapers are making significant profits. The strategy employed has been, first to seek to create a new market, even if initially at a loss, in order to meet the challenge of competitors and gain understanding of the medium and the marketplace.
  • Diversification for newspapers will involve major changes in skill, marketing and management structures. Convergence will need to be managed. Convergence involves the acquisition of companies outside the newspaper sector, also the management of created synergies among communities of companies. Technology transfer management in a diversified newspaper company will thus be paramount in maximizing resources in the market place, including share of advertising revenue.
  • The quality electronic newspaper available globally can be enhanced to offer additional information services related to issues such as travel, currency values and weather conditions. By so doing, the quality newspaper will pursue its fundamental objective to create a readership audience. In extending this audience it creates opportunity for further advertising messages. The electronic newspaper thus becomes a continuous news and information service.
  • The popular newspaper is the ultimate expression of a paper-based mass medium. Editorially it tends to focus on a more sensational approach to news reporting coupled with leisure interest and sport. Thus it is in competition often for audience capture with the so-called TV 'soap' series or dedicated channels related to particular leisure subjects, notably sport. Because of the wide audience covered by the popular press and its orientations towards leisure it is a natural medium in which to advertise leisure electronic publishing products. The use of popular press brand names can benefit the promotion of new electronic publishing products like games. The popular press may represent sponsoring organisations for electronic products in the market place, thus becoming sponsors of their own promotional and advertising needs.
  • A feature of the popular press is its skill and interest in competitions and related interactive games. This could make the popular press a content player in the development of effective interactive television programming. Once a significant audience has been built by such mechanisms, it will offer opportunity for advertising messages which will not be regarded as unreasonably intrusive. By this means, the popular press will achieve a cost reduction in programme access by distribution of income streams into advertising through either sponsorship or inserted messages.
  • Provincial (regional) newspapers are hardest hit by the loss of revenue from classified and retail advertising, their circulations are being undercut by the introduction of free sheets, local radio, television channels and on-line services. However, provincial newspapers provide an essential local information and distribution service. As such they will continue to develop local advertising and the facility for insert distribution to local areas.
  • Provincial newspapers should capitalize on their skills as local information providers and the knowledge about their region which they possess, both for traditional copy and electronic services. When considering electronic services, provincial newspaper publishers should think in terms of providing a local community information centre and how the printed newspaper will support the electronic versions and vice versa. This could lead to the concept of the local newspaper becoming a local information electronic network. Initially that might be to discrete private points in a region but might also include the managing of public information through kiosks. Under these circumstances it is easy to visualize the transfer of advertising messages through such a new network.
  • The dominant strategic issue for provincial newspapers is their ability and willingness to make the investment necessary to develop local network services and generate market demand for them. Other new players, eg telecoms companies, may see this opportunity for adding value to their services and have a greater potential for sustained investment. The alternative is partnership between such players, whereby one provides technology capability and investment and the other exercises the contribution of content and service skills. Whichever evolves as the model, it is likely that there will emerge in the provincial press parallel streams for advertising, some of which will continue to be based on paper as a medium and others which will develop as a complementary electronic alternative. The issue for the newspaper at this time is to begin to enter the learning curve of how to manage the new medium and to maximize income, whether by subscription or through advertising.
  • To attract and maintain classified advertising (cars, houses and jobs), provincial newspaper publishers should develop innovative new ways of presenting information; eg house advertisements present opportunities for the use of 3D images (virtual reality) and data selection by a variety of criteria (eg area, price, house size etc).
  • Catalogues and directories are already migrating from printed to electronic format. This migration is dictated by fitness-for-purpose with respect to the target audience. Where a catalogue is for reference purposes, such as car spare parts, the printed version may be completely replaced by a CD-ROM for reasons of convenience and cost effectiveness.
  • The mail order catalogue is itself a promotional device. The cost of printed mail order catalogues and their distribution is tending to increase. Also, the mail order catalogue cannot provide moving sequences which can be an invaluable attribute to certain products, notably fashion related items. Already there is experimentation with CD-ROM or CD-I for such catalogues. This trend is likely to grow. One advantage offered by the electronic mail order catalogue is the use of the equivalent of hypertext links which enable the promotion of one product to support demand for another product, eg the selection of a dress or suit whereby accessories are promoted as adjuncts to the initial sale.
  • Although not all catalogues may be suitable as electronic products, the strategy required by mail organisations and their suppliers is to structure their content material in a way which permits transfer to electronic format. The use of digitization in reducing production costs for the printed version is already a part of the evolution of the printed catalogue. Introducing appropriate encoding structures for this content material keeps open the option for mail order companies to exercise the decision to transfer to electronic format when considered appropriate by market opportunity.
  • The overriding strategy for catalogue and directory producers is to reach audiences with optimum convenience and best means to respond to fulfilment. For the foreseeable future, paper-based catalogues and directories will continue to be widely used. However the trend for substitution will grow, initially through off-line electronic formats such as CD-ROM/CD-I. In time these formats are likely to be superseded to a large extent by on-line systems eventually incorporated with downloading. The growth facilities in direct marketing are substantial. The question how messaging is transmitted to target audiences is at present not clear. The paper-based catalogue, the electronic catalogue, the downloading from on-line information, and the use of homeshopping requires further study. The issue for the mail order company is to ensure that options are kept open by the management of information through databases and appropriately encoded structures.

    The effect of new media on the printers' business

  • Printers are not directly affected by new media advertising developments. However, they currently provide publishers with a range of services, and if the publisher's business changes significantly, so will that of the printer. Printers should extend their in-house software capability for data preparation for new media (eg databases, graphical user interfaces, software languages used for multimedia development etc), so that the publisher can be offered a 'one-stop-shop' output capability for both printed and new media products. As advertisers seek more direct consumer relationships, the volume of data processing and analysis increases. Printers can provide an additional integrated service to publishers and advertisers that facilitates targeting, personalization, distribution and response monitoring. New media activities, especially when on-line, encourage interaction with readers and hence generate more consumer data which can be used by a publishers to demonstrate to advertisers the characteristics of their audience and the response they achieve. These developments offer opportunities to publishers or extension and diversification of their business. Printers of catalogues and directories must develop asset management expertise and other skills required for the production of electronic catalogues and directories. This may include the provision of on-line ordering facilities coupled with fulfilment services.

    Restructuring of the television sector and its relationship to new media advertising

  • Of the traditional media, television seems the most certain to undergo significant change in the next five to ten years. Expansion in channel numbers and the growth of pay services are changing already the nature of the industry and will continue to do so. The central characteristic of television in most countries - limited supply - is likely to diminish, opening up new opportunities and causing concern to existing broadcasters as well as competing media.
  • Television advertising in the EU has grown significantly over the last decade, spurred on by de-regulation and an expanding number of channels. Over the next five to ten years both these factors are likely to fuel further growth. This will be tempered by a maturing of the television market, so that such high levels of advertising revenue growth will not continue without equivalent growth in total advertising spend and, by implication, gross domestic product (GDP).
  • Television will experience more competitive market behaviour: there will be many new and potential entrants; new channels will fail; existing channels will close; channels will be increasingly in competition for the same revenues. Many channels will have to look beyond advertising for their revenues.
  • Europe is about to see a huge expansion in channel capacity. Digital television - cable, satellite or terrestrial - will be widely available within ten years, implying hundreds of channels in some countries. However, the audiences these channels reach are likely to vary greatly between the EU countries.
  • A greater variety of business models will develop: programming costs, hours, advertising rates, content, audience sizes, subscription rate, the role of sponsorship and so forth will become more and more diverse between channels. More channels bidding for the best programmes (eg new films, sports events, etc) will push up prices, however the average cost of programming will have to fall significantly . The secondary market for programmes will expand, though more in terms of hours to be filled than in expenditure.
  • New players will enter the market place from other media and non-media sectors. Independent producers, national, regional and local newspaper companies, sporting organisations and clubs, specialist and general interest magazine publishers, advertisers, games companies and others will find profitable ways to use the additional bandwidth.
  • Owners of content software (eg film studios, sports organisations) may be encouraged to broadcast directly in order to realize the full value of their assets, denying other broadcasters access to the most attractive programming. Television bandwidth will be used in new ways: near-video-on-demand; sophisticated information services; games; computer services; multi-track audio in several languages etc. Television-based homeshopping may be transformed by access to many more channels or broadcast hours.
  • Some advertisers will find that for the first time they are able to use television profitably. Where local channels develop, most obviously in the cabled areas, it will bring in new advertisers at a local level. People have confidence in the advertisers they see on television. As television becomes more fragmented, there is a danger that this 'trustworthy image' will be lost.
  • New channels are likely to be pay services and some existing free services will be forced to move to subscription or pay-per-view (PPV) as their advertising revenues are squeezed. In many countries payment by the viewer will be the driver of growth in the television market. Where pay services are also advertising-supported, if their penetration rises to a high level, they will develop financial advantages over free services. This could unravel the virtuous circle of traditional mass commercial broadcasters whereby revenues fall and the ability to buy or produce good programming diminishes.
  • Despite the high growth rates forecast for multimedia PCs and software, multimedia products will not undermine television advertising revenues in the short term (up to five years). Looking further ahead, if consumer interest and attention begins to ebb away from television, it would be surprising if advertising revenue did not also begin to shift. If the success of gains among young people extends to adults in some leisure form (edutainment, Internet communication etc) television usage may be reduced significantly. New media, eg PC-based networks, will increasingly be available to the most attractive part of the television audience and will have effect on their television viewing. New media developments over the next five years will indicate the long-term prospects of the television industry.
  • If interactivity is to challenge traditional broadcast services, it will come from the PC. On-line services are developing quickly; high-speed cable modems, much cheaper processing and data storage and improvements in compression will allow some households access to a new source of video in the home. On-line will complement television services, offering programme and channel information; a means of interacting with the viewer; a direct response mechanism for advertising; or a retail outlet for spin-off products.
  • The prospects for interactive television are unclear. A number of different systems are in development. The results of trials as yet offer no clear picture. It is likely that some of these systems will prove successful, particularly those which can be set up cheaply and easily. For example, a system that sends a message from the television controller down the telephone line to order a product or to register a vote could be set up cheaply and allow profitable new services to develop.
  • Existing broadcasters should maintain a quality differential between their services and on-line or interactive television. If these develop into a significant challenge, broadcasters should support the introduction of widescreen TV and high definition TV (HDTV) as a way of re-establishing the differential.
  • Television companies must join trials to investigate the revenues that might accrue from video-on-demand, interactive programs, interactive advertising and other services where their skills can be used in the future (eg interactive shopping services). Two key provisos are: first, they must guard against technical over-ambitiousness; second, they need to factor in, at some considerable cost, the economies of scale which would come with a full market roll-out. Channels should ensure their brand is strong. As publishers and packagers of good content, they can maintain their role in an on-demand environment.
  • Producers should open discussions with those who provide homeshopping, financial and public services on interactive networks; they will all need the type of on-screen expertise which production companies have in abundance.
  • Television companies should gain experience in the area of content re-use, search their libraries for relevant material and, where possible, produce programmes with multimedia spin-offs. Use of appropriate standards and asset management will increase as a relevant revenue stream.
  • Joint ventures and acquisitions should be considered for new television services. A magazine publisher, radio broadcaster or non-media company may have a better idea how to target a specialist audience and may own a brand which is already well established with that audience. With the production expertise of a television company this can produce a high quality, well focused and viable service something which neither could manage alone and which will provide an attractive source for advertising revenue.
  • Highly profitable opportunities remain for broadcasters who can maintain a large audience share in the face of general fragmentation. Whereas in the past premiums were paid for access to limited delivery capacity, the focus will increasingly be on content quality. This will require maintaining a virtuous circle of high advertising revenues from high rating, high production value programmes which can then be fed back into quality programme making or buying. Broadcasters should form strong relationships with advertisers to explore ways of maintaining access to the best content software through sponsorship and development of production deals. If broadcasters are not cost-efficient, advertisers will look elsewhere for such partnerships.
  • Broadcasters must use the underlying desire for common experiences and culture (in the widest sense) to maintain audience share. This means concentrating on programmes which are news in themselves and the awareness of which reflects status. Mass channels should maintain a clear image differential compared with smaller channels; otherwise, the trust which viewers have in mass television advertising may be reduced by less scrupulous service providers.
  • Smaller channels must use all possible techniques to reach profitability sponsorship, barter and particularly subscription, as well as keeping production costs lower than is common at present. Small channels must be clearly defined in image terms, well packaged and branded. Local channels should consider ways to promote their services to local advertisers not accustomed to using television as a medium.
  • Pay broadcasters who own their own encryption and subscriber management services should be prepared to offer access to competitive services to avoid regulation of their systems. There is also good commercial reason to do so, as they will attract more subscribers to their systems.
  • Public service broadcasters (PSBs) must provide reasons for the continuation of licence fees, as their audiences are likely to shrink while programming costs rise. PSBs should consider new channels, on-line services and video-on-demand as ways to fulfil their public service obligation better and more cheaply. PSBs should revisit their obligations in the light of new services which may cater to some of the minority audiences for which they are asked to provide.
  • There should be greater concentration on the creation of re-usable formats. Cultural and linguistic barriers prevent a large market in 'European' programming developing in the medium term, but companies such as Endemol and Grundy have shown how lucrative transferable formats can be. Producers should gain experience in electronic publishing. Multimedia offer opportunities for re-use of television material and there seems little reason why the television industry should cede the electronic publishing industry to traditional print publishers or new entrants.

    Commercial radio and the scope for advertising

  • Although commercial radio has existed in Europe for many years, it has been seen as something of a niche medium for advertising, commanding just over 4% of total spending despite large audiences. The radio advertising market, however, is currently far from static. First, in many countries commercial radio is a new medium, the potential of which is as yet unclear. Second, in other countries, where commercial radio is better established, it is gradually taking audience share from public service broadcasters.
  • Predicting advertising growth in radio is complicated by the fact that different trends are at work across different countries. Where commercial radio is relatively new (eg Sweden, Denmark, Belgium, Switzerland) there has been significant growth in recent years. Where radio is a fairly mature advertising medium, it has often been squeezed by the growth of other media, particularly television (eg Spain, Italy) but also magazines (eg Portugal). Advertisers have a less clear view of radio potential than that of other mass media and this may explain the varied advertising performance of radio across Europe.
  • There is a general trend towards more spectrum being made available for radio broadcast. Digital Audio Broadcasting (DAB) is likely to speed up this process over the next ten years, allowing many more stations to occupy the same bandwidth. The majority of these stations will be commercial. These new services will rely almost exclusively on advertising for their funding as the market for pay-radio services looks very limited.
  • Where regulations allow it, radio stations should try to form national sales federations, either through mergers and acquisitions or as part of a consortium of separate companies. Industry organisations must market radio to advertisers to convert the large audience of radio and its particularly intimate relationship with listeners into higher advertising revenues.
  • New radio stations must aim at a clearly defined target audience. It is recommended in many cases that a previously established brand, for example that of a magazine, be considered for the station as a way to signal the new service's attractiveness to advertisers.
  • Larger radio companies and industry organisations should investigate the different ways to transmit and charge for radio programmes over the Internet, as a potentially profitable service in itself as well as a preview of how radio might profit from more advanced interactive systems.

    The impact of new media advertising on the retail sector

  • The major developments in retailing of relevance to advertising are: the introduction of own-products ('white products', 'no-brand products'); the trend towards disintermediation (removing the middle-man/distributor from the marketing chain); customer loyalty programmes; improvement in direct marketing techniques; and fulfilment. These have strengthened the retailers' control over the products they sell and weakened their dependence on the branded product manufacturers.
  • The cross-over between mail order and retailing is increasing. A growing number of large stores and supermarkets now have their own mail order catalogues or offer home delivery, taking orders via the telephone or via on-line services (eg, most Parisians can order groceries via Minitel to be delivered to the door at the most convenient time). Some hybrid retail outlets/distance selling stores have started, in which the customer can view products offered in the catalogues but delivery is to the home.
  • Major retailers use advertising to promote their brand image as well as to promote specific products on offer (mainly in collaboration with the producer). The major techniques used are sales promotion, local media advertising and direct marketing, although the use of a mix of all techniques is on the increase.
  • Contract publishing is popular among larger retailers and is becoming sophisticated. In addition to free sheets, many retailers are offering magazines with editorial as well as special offers and other advertising material. Sales promotion (SP) is becoming a strategic (ie long-term) as well as tactical (ie short-term) technique for retailers. The rise in sales promotion is due to less leisure time for shopping and more impulse purchasing together with greater attention given to the point of sale.
  • The major medium for retail outlets remains point-of-sale. In general, the shops of retailers are their main sales medium and their use of it is growing in sophistication and variety. More consumers enter a supermarket on any day than watch a local TV station, listen to a local radio, or read a local newspaper or publication. Thus the supermarket potentially becomes a focus for the use of new media in support of point-of-sale. Retailers have a vastly improved set of techniques to reduce storage problems and to increase their knowledge of their customers' preferences and buying habits. These technological benefits are enhancing the power of the retailer outlets vis-à-vis their suppliers.
  • Databased customer loyalty schemes provide the retailer with immediate and invaluable data on its customers' preferences and buying habits. Sophisticated sales promotion schemes can be devised to link in with partners from entirely different trades (free airmiles for example). These customer loyalty schemes will be linked to direct marketing and provide a natural progression to on-line customer care services. Other new technological dynamics have been identified for example, the use of CD-ROM or CD-I demonstrations replacing video displays of products in do-it-yourself (DIY) shops, on-line services, interactive cable TV, and interactive kiosks in shopping malls.
  • Consumers have enthusiastically embraced the growth of retail power in the market place. The result has been convenience, greater choice and cheaper products, reducing the time spent in purchasing staple household products and leaving more time and money for leisure pursuits. Modern society, with a greater proportion of retired people, more couples who both work, more single-parent families, have an enormous choice of entertainment and leisure pursuits. Supermarkets and shopping malls are appreciated for reducing shopping time. It is likely that the retail sector will continue to enhance its image and service facilitation by use of new media both out-of-store and in-store.
  • Retailers express the same concerns as other advertisers over advertising regulation in Europe. In particular, retailers are hampered by differences in contract laws, by sales promotion, direct marketing and credit/payment regulations. Sales promotion regulations vary widely throughout the EU where they create difficulties particularly for mail order (the Yves Rocher European Court of Justice case is an example). Data protection regulation should be solved by the recent Directive, but how this is to apply to cross-frontier on-line media, and which national laws will apply, will be unclear until the Directive is implemented by Member States.
  • Retail outlets will continue to use their point-of-sale as a means to increase the time shoppers spend in their store. The outlet itself is a major medium which needs to be exploited to the fullest and in such a way that shoppers are not irritated by wasting time. Off-line systems, eg touch-screen CD-ROM/CD-I, will develop as an alternative to video displays. Interactive in-store systems will be used to guide customers and attract them to specific offers. In-store space will be reduced by creative use of audio-visual demonstrations, interactive systems and intelligent check-out or shopping trolley systems.
  • Customer care services will become a central competitive issue. They are key to retaining customers' loyalty to the retailer. Both on-line systems and telemarketing are ideally suited to achieve improved customer care. Retailers of all sizes should consider customer care services (including after-sales) as a testbed for on-line experimentation.
  • Retailers going on-line on the World Wide Web (WWW) or using established Internet servers will need to ensure that their customer care is as good, or better, than their national or local competitors if they expect to build up a global client following. Off-line systems offer more limited opportunity for customer care, but CD-ROM/CD-I will be used to demonstrate complex products and promote add-on products. The telephone will remain the major medium for customer care, and the new developments in telephony such as audiotext will be exploited. Retailers will continue to develop smart-card systems as a means to improve customer care and to create tailor-made sales promotion programmes for customers.
  • Retail outlets should move into home delivery and mail order to prevent loss of customers to the on-line homeshopping systems. The synergy between direct response, home deliveries and outlets should be exploited, and marketing strategies devised to encourage consumers to buy both at distance and in the retail outlet. The response mechanisms for distance selling are likely increasingly to be 'on-line' (telephone, fax, e-mail, as well as via the Internet). This will create a desire by the consumer for faster delivery and raises questions of contract law. Centralizing fulfilment logistics (despite economies of scale) creates delivery delay. Unless private delivery services at reasonable cost can be developed, several fulfilment centres will be required for European or global distance selling. Retailers should press governments for more flexibility of delivery services (ie outside postal monopolies) or work with postal operators to share fulfilment logistics. Governments should also be made aware of the problems that variations in contract law pose for cross-border distance selling. The use of electronic trading and electronic commerce in retailing is inextricably related to new media developments and the extension of advertising into new media for the future.

Recommendations to private sector companies, public institutions, the European Commission and Member States

1. Stimulate experimentation in the use of new media in advertising by implementation of specific support and funding programmes at the national level and at the EC level through programmes such as Info2000.

The EC should seek to persuade Member States of the benefits in co-ordinating experimentation in the use of new media in advertising with EU wide additional programmes.

The EC should issue a call for project proposals relating explicitly to experimentation with new media advertising.

Member States should include within their information society programmes explicit encouragement of experimentation of new media advertising.

Public institutions should seek to co-operate with Member State Governments and EC programmes in the use of new media advertising within public institutions communications programmes.

Private sector companies - advertisers, advertising agencies, publishers - should increase their commitment to experimentation and collaboration in experimentation with new media advertising.

2 In consultation with consumer representative organisations, the EC should facilitate study throughout the EU of consumer attitudes and aspirations of companies using new media advertising.

The European Union - and the single market in particular provides benefit to the European Union citizen. These consumers are the ultimate judges of new media advertising. The EC together with advertisers and advertising agencies should investigate consumer attitudes towards new media advertising so that they may be taken into account in policy development and infrastructure creation; such investigation should be initiated by the EC utilizing the many independent academic centres of excellence in the EU for such study.

Creating awareness among the EU citizens of the benefits of the European Union and the Single Market should in itself be a campaign which is used to experiment with new media advertising. All Directorates General of the EC should be encouraged to participate in such a programme of information provision and experimentation.

3. As the countries of the European Union move towards implementation of the Single European Market, the positive contribution of advertising as a driver of competitiveness must be recognized by the private and public sectors throughout the EU. More concerted action on de-regulation is required.

The EC should guide de-regulation and enhance present regulation in the European Union as it relates to the media industries; this should be done by creating a vision of the European Union which enhances the quality of life, stimulates free market enterprise among large companies and nurtures creative small and medium enterprises (SMEs).

In the past, the sectors which make up the information industry have been discrete areas for policy and regulation. Because of technology convergence, it is now essential that legislators consider them together.

Legislators must assess the impact they have on each other before and during elaboration of any new legislation affecting media companies. The time has come for a thorough review of existing and pending legislation; otherwise, media companies will be operating within a regulatory framework that is no longer appropriate to the information market and which will constrain economic growth.

A simplified regulatory framework is required more akin to the principles of competition policy; existing legislation, for example which limits cross-media ownership, is interfering with media companies' investment decisions and militates against strategic alliances and economic growth. The EC together with Member States must act to create a regulatory framework within the EU which stimulates competitiveness in the single European market and allows the media industries to develop according to market need in a global trading environment.

The current intellectual property rights (IPR) regime is detailed and complex, having evolved over time. Publishers are considered only as 'managers' of rights. This does not reflect the levels of creativity and investment made by publishers, particularly those of new multimedia products. The creative input and investment of the publishers deserves legal recognition in terms of a right in addition to individual author's rights. Action is urgently needed by Member States and the EC in this regulatory area.

The same must be said of advertising agencies, whose work consists not just of holding and clearing authors' rights (whether they be employees or outside suppliers), but whose primary function in the creation of advertisements is to generate the creative idea that is at the core of the 'collective work' as expressed in the advertising campaign.

There is a case for statutory presumption in favour of employers in relation to IPR. The EC should consider introducing an EU-wide statutory presumption in favour of employers. It should follow the lines of the provision in the UK Copyright Designs and Patent Act 1988.

Sales promotion schemes that are long-term and co-extensive with a brand's advertising (eg Air Miles) or planned for multimarket use (eg on-pack promotions) should enjoy the same freedom of expression, and thus the same freedom from restrictions, as the brand's advertising campaign. By way of comparison, individual State laws in the USA may not obstruct inter-State commerce by preventing an advertiser from mounting a nation-wide campaign. This model should be the target for emulation in the EU.

The concept of 'quotas' in television in member states and attempts to classify new media and information services under the heading of 'broadcasting' should be questioned and, where appropriate, resisted. These concepts become redundant in a fully interactive environment with multiple distribution of media. Exploitation of the quota concept and the broadcasting classification argument by some member states of the EU will distort competition. These should be issues of critical concern to the EC in stimulating the development of the internal market combined with a comprehensive understanding of competition policy.

4. The cost of telecommunications in other relevant parts of the world is far lower than in the EU. High telecommunications costs in Europe inhibit the practice of telemarketing and the development of the information society. Urgent action is required by the Member States and the EC to enhance competitiveness in the EU telecommunications to bring about price reduction.

High telecommunications costs in Europe inhibit the practice of telemarketing and the development of the information society; telemarketing can be particularly useful, controllable and affordable as a medium for SMEs and for entrants to a market. The EC should initiate investigation of the impediment for economic growth being caused by high telecommunications tariffing in the EU.

Member States and the EC must act in concert to encourage competitiveness in telecommunications in the EU and to monitor this price competitiveness by comparison to telecommunications costs in other developed economies.

5. Stimulation of new media skills in the EU is needed.

Greater vision is still required to stimulate interest in new media technology in the EU. This relates to education policies - in the broadest meaning - from the use of new media in schools to the use of new media in presenting the benefits of European citizenship.

Companies, national governments and the EC must increase acts of common purpose if the EU is to take its proper share of the benefits of these developments in the information society. A focal point for this concerted action in the EU is needed. It must be provided by one or more of the EC Directorates.

6. New interactive media technologies raise questions of restrictive access and the role of network gatekeepers. It is important to prevent price or access mechanisms being employed against content owners (advertisers, advertising agencies, media buyers, publishers, TV channel operators etc).

Private sector companies working with the EC must pursue a policy which encourages the growth of new delivery systems, especially from the private sector, and which also guarantees full commercial access.

The EC - probably through DGXIII - should set up specific monitoring in conjunction with representative bodies of the content industries, to ensure fair and effective competition in the development of information networks.

7. The EC and governments throughout the EU recognize the importance of SMEs to job creation and economic growth. SMEs are sometimes disadvantaged in the opportunity they have to utilize advertising throughout the EU.

The EC should explore the need of manufacturing and service SMEs in the EU for cost-effective advertising exploiting the advantages of new media technology.

The objective should be to increase the marketing and advertising scope of SMEs within the EU market by utilizing new media technology to reduce costs and facilitate the use of services by Europe's SMEs throughout the EU.

8. Evidence has been gathered of concern among advertising agencies in the EU to gain a wider perspective on new media through knowledge sharing and better training.

The EC should provide a programme aimed at stimulating inter-agency experimentation with new media and knowledge transfer programmes throughout the EU.

The EC should consider building on existing organisations (the European Association of Advertising Agencies and Research and Technology Organisations (RTOs)) - to stimulate the increase in creative skills applied to new media advertising throughout the EU.

9. Auditing new media and other norms and standards. Measuring advertising effectiveness has never been easy. The Information Market Observatory (IMO) should open dialogue with those throughout Europe seeking to develop effective advertising management tools. Also, the EC should stimulate further action on norms and standards which facilitate the free flow of advertising material between the existing and new media.

The methodology and technology for audience measurement in terms of listenership, readership and viewership of classic media are well developed and widely practised. Definitions and standards are clear and generally accepted. However, there are no such disciplines as yet for auditing the Internet and other information highways. The number of people reached effectively, and their socio-demographic and life-style characteristics, are largely unknown. There are no national definitions or standards already in place in the EU to obstruct the creation of European standards. The European Association of Advertising Agencies (EAAA) is taking the lead in setting European standards for audience measurement and self-regulation in the practice of marketing communications on the Internet. The EC - through the Information Market Observatory - should open dialogue immediately with those concerned with this work on measuring advertising effectiveness. Consideration should be given to providing assistance to this work. Such measures become an essential part in dialogue between consumers and the advertising industries; also such information is essential to legislators.

In addition to the standards and methodologies needed for measuring advertising effectiveness, there is need also to stimulate norms and standards which facilitate the free flow of advertisement content between the media. Encouragement should be given to the creation of expert groups, spanning all media, capable of formulating and recommending norms and standards for the free and flow and transfer of advertising information.

The EC should investigate the needs for EU standards - compatible with global developments - which embrace all aspects of advertising measurement and advertising content transfer.

10. Regional newspapers can play an important role in local communities.

The local newspaper has suffered more than any other medium from changes in new media technology and reading habits; nevertheless the local newspaper is an important part of democracy and service facilitation. Stimulating the reprocess engineering of the local newspaper industry in the EU should have priority in infrastructure development.

The local newspaper will continue for the foreseeable future but can develop into a cost effective local information facility serving consumers and public institutions; the EC should consider a call for proposals aimed at exemplar products of the redevelopment of local newspapers for emulation throughout the EU utilizing new media technology for information systems and local advertising.

11. Of the traditional media, television seems the most certain to undergo significant change over the next five to ten years. The central characteristic of television in most countries - limited supply - is likely to diminish, opening up new opportunities and causing concern to existing broadcasters as well as competing media.

The EC, in conjunction with the Member States, should consider a study dedicated to investigation of the future of television in the EU.

Television will remain a powerful medium for advertising and it has a unique relationship to the development of new media. The relationship between television, the audio-visual industry and the development of new media - and the migration of skills between these sectors - will influence significantly the quality of new media advertising in the EU. Thus it will justify specific study when seeking to identify drivers of change in new media advertising in the EU for the future.

12 .The impact of new media advertising in the retail sector is likely to be of significance over the next decade.

Rapid convergence is occurring in relation to direct marketing, retailing, home-shopping and new media in advertising. This should become a focus for study by the EC in conjunction with Member States. It is a significant area of employment and an important part of the trading infrastructure of the Single Market.

This disintermediation (removing the middle-man/distributor from the marketing chain) will have impact on the retailing infrastructure of the EU. The EC should issue a call for projects to investigate the impact and the opportunities arising from disintermediation on the retail sector.

Direct marketing and the mail order business will be subject to change brought about by new media advertising and new communications technology; the EC should consider calls for proposals for projects to study change in this growing sector.

Database marketing is growing rapidly. It is an area which can be used to stimulate the development of retailing throughout Europe as well as creating demand for new IT manufacturing opportunity in the EU. However, database marketing raises also issues of privacy. Thus it is recommended that the subject of database marketing be considered by the EC as a further subject area for a call for proposals for a relevant study.

13. The development of electronic trading and electronic commerce in the EU should be encouraged.

New media use in advertising is at times inextricably related to the development of electronic trading and electronic commerce. To some degree both are inter-dependent and create opportunity for synergy. Electronic commerce involves both the use of new technology and the need for change in the regulatory environment.

The EC, in consultation with Member States and leading industry interest concerned with electronic trading, should consider the creation of a forum to bring together the interested parties so that a holistic view may be garnered to guide policy in the EU for the stimulation of electronic trade and electronic commerce.

More resources should be provided to the Legal Advisory Board (LAB) of the EC and that organisation should be encouraged to develop links with other policy forming organisations such as the International Communications Round Table (ICRT) to ensure the optimization of legislative framework in the EU for media trading.

14. Implications of the ADMEDIA study for the information society

The Bangemann report commented on the development of the information society and made certain recommendations. The ADMEDIA study has further elaborated in more detail the complexity of many issues related to the development of the information society. The project has demonstrated clearly the inter-dependence between many activities as they relate to new media development and the need for holistic vision.

It is recommended that the Commissioner responsible for DGXIII re-examine the present structure for consultation on the information society to take full account of the issues raised in the ADMEDIA project, both as they relate to representation and to actioning by specific programmes initiated through the EC. In particular the ADMEDIA project demonstrates the challenge presented by the issues studied and thus the importance of articulating consumer views, the views of the content industries and the views of advertisers and their agencies. This community is an essential driver both to competitiveness and to the creation of the information society. The influence of this community through the expression of its views on needs and preferences should be enhanced in the political debate on the future development of the Single Market in the European Union.

The EC and the project management team wish to acknowledge with thanks the following persons and organisations who participated in the project Steering Committee, contributed data and took part in Focus Group discussions (the full list of contributors is given in the main report).

ADMEDIA Steering Committee Members

Ms Louisa Pogliana,
Director Market Research
Arnoldo Mondadori Editore Italy
Mr Andreas Jud, Director Interactive Media
Axel Springer Verlag AG
Germany
Ms Christine Kerstiens, Legal Adviser
BEUC
Belgium
Dr Theo Wolsing, Expert
BEUC
Germany
Mr Anders Knutsen, President
Bang & Olufsen
Denmark
Mr Lars-Erik Holmertz, Vice President
Bonnier Group
Sweden
Mr John Cowen, Media Market Manager
British Telecom
UK
Mr Paul Munchen, Commercial Manager
Compagnie Luxembourgeoise Télédiffusion,
Luxembourg
Prof Jean-Claude Burgelman, Professor
CBNMIT-VUB Belgium
Mr André Lange, Expert
EAO
France
Mr Michel Grégoire, Marketing Advisor
EBU-EGTA
Belgium
Mr Joaquim Sans, Director
Ediciones Primera Plana-Grupo
Zeta Spain
Mr Aad Weening, Secretary General
EMOTA
Belgium
Mrs I van Gaal, Public Affairs Coordinator
ENPA
Belgium
Mr Michel Vander Straeten, Director
ENPA
Belgium
Mr M Deurinck, Secretary General
European Advertising Tripartite
Belgium
Mr Guy Chauvel, Executive Vice President
Euro-RSCG Worldwide
France
Mr Henri Neuville, Secretary General
Europage
France
Mr Barry Mahon, Executive Director
EUSIDIC
Luxembourg
Dr Volker Hauff , President
FAEP
Germany
Mr John Shannon, President
Grey International
UK
Mr Denis Noel, Development Director
Groupe Liaisons
France
Mrs E Nigen, Manager Electronic Publishing
Groupe Liaisons
France
Dr Graham Barnes, Chairman
ICIA
UK
Professor Patrick Purcell, Department of Electrical Engineering
Imperial College
UK
Mr Thierry Tachany, Group Marketing Director
IP Group
France
Mr John Stubbs, Chief Executive
Marketing Council
UK
Dr Hermann Flotzinger, External Affairs Manager
Master Foods Austria GmbH
Austria
Dr Michel Bera, Managing Director
MATRA Hachette
France
Mr David Harfst, Legal Counsel
Microsoft Europe
France
Mr Willem Bulthuis, Manager New Publishing Business Development
Philips Media
Netherlands
Mr J Clarke, Market Development Manager
Printech International Group
Ireland
Mr Fernando Santos, Commercial Director
Radio Televisso Comercial
Portugal
Dr J C van Ek, President
Ten Klei Group
Netherlands
Dr Erik Hupkens van der Elst, Vice President
Business Development & Analysis VNU
Netherlands
Dr Rolf Kat, Director,
Business Development VNU
Netherlands

Note: Where two representatives of one organisation are named, only one took part in any one Steering Committee meeting as a rule.

Associated Partners

Mr Patrick Vittet-Philippe, Executive Director,
The Association of Commercial Television in Europe (ACT)
Mr Pascal Rogard, Secretary General,
Committee of Cinematography Industries in the European Communities (CCIEC)
Dr Oliver Gray, Director General,
European Advertising Standards Alliance (EASA)
Mr Roger Bennett, General Secretary,
European Leisure Software Publishers Association (ELSPA)
Mr Bryan Bates, Director General,
European Society for Opinion and Marketing Research (ESOMAR)
Mr Julius Waller, Director,
Federation des Associations d'Editeurs de Periodiques de la CE (FAEP)
Mr Jean-Pierre Bouillot, Secretary General,
Intergraf
Mr Lex Lefebvre, Secretary,
Scientific Technical and Medical Publishing (STM)
Mr Paul de Win, Director General,
World Federation of Advertisers (WFA)

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