The Top Ten Burning Issues in Digital

By: Gian Fulgoni

Back on December 19, I had the privilege of moderating the annual Digital Collective meeting in
New York. The Collective is a regionally driven peer-to-peer exchange that facilitates best practices
and fuels new and meaningful relationships among digital marketers.

To kick off the meeting I reviewed what I consider to be the top ten burning issues in digital,
based on what we at comScore have observed while providing data and analytics to more than
2,000 companies around the world. I thought they would be of interest to readers of the comScore
blog. These issues will also form the basis of my comments at the New Media Expo on Tuesday
January 8.

Here are my top ten burning issues in digital:

Big Data
e-Commerce
Social Media
Shift of Ad Spending to Digital
Audience Targeting vs. Media Location
Measuring Digital Media Campaigns
Growth of Smartphones & Tablets
Multi-Platform Media Planning & Analysis
Real-Time Marketing Insights
Privacy
In this post, Ill examine these issues in detail and provide some perspective on the pros and cons
surrounding each in order to help marketers better understand the rapid changes being driven by
digital. This knowledge is so important in todays Brave New Digital World because the Internet
forces change without mercy. I like to say: The Internet giveth but it also taketh away.

1. Big Data

Big data is a moniker for the explosion in data that has occurred as a result of dramatic increases
in computing power coupled with sharp drops in the cost of both computing and data storage.
These trends have resulted in a literal torrent of data as consumers go about their daily lives using
and interacting with computers in a wide variety of ways.

Here are just a few astounding statistics regarding the growth of big data:

Todays smartphone would have been the most powerful computer in the world in 1985
120 million people in the U.S. now own smartphones, up 30 million in just the past year
For $600 you can buy a disk that can store all of the worlds music
30+ billion pieces of data are added to Facebook every month
72 hours of video are added to YouTube every minute
By the end of 2012, comScore was capturing 1.4 trillion digital interactions per month
92% of the worlds data was created in just the past two years
In a seminal white paper, the consulting firm, McKinsey, described big data as the next frontier for
innovation, competition and productivity. For example, McKinsey estimates that retailers could
realize a 60% increase in their operating margins through the smart use of big data.

Im convinced that big data can provide companies and governments with a basis for operating
much more efficiently and effectively. But, as always in life, theres a catch. Today, we dont have
anywhere near enough human talent to harness and exploit the promise of big data. McKinsey
points out that in the U.S. alone we need somewhere north of 140,000 people to fill deep
analytical talent positions and 1.5 million more data-savvy managers and analysts to analyze big
data and make decisions based on their findings.

2. e-Commerce

Driven by lower prices, convenience and the broadest selection of products, online consumer
spending is soaring. comScore data show that in the last twelve months $304 billion was spent via
e-commerce in the U.S., with Travel accounting for $110 billion and Non-Travel (aka Retail eCommerce) pulling in $194 billion. Retail e-Commerce now accounts for one in every ten
discretionary dollars spent by U.S. consumers and in Q4 grew 15% versus the prior year, a rate
about five times faster than for all consumer spending at retail.

Pure play online retailers such as Amazon and eBay have built massive businesses on the basis of
e-commerce. Amazon for example, now attracts in excess of 110 million unique visitors in a month
and reported North America sales of $7.9 billion in Q3, up 33% over the prior year. But the
emergence of e-commerce also means that the physical store is under attack, which in turn means
that those retailers who cannot maintain their in-store market share as their category shifts online
face increasingly difficult times. Different product categories are shifting online at differing rates,
creating particular challenges for multi-category retailers such as big store mass merchandisers.
For example, the consumer electronics product category now sees about 30% of sales completed
online while consumer packaged goods lags with no more than 1% of sales occurring via ecommerce. This means its particularly important for multi-channel retailers to monitor trends in
their market share by channel and also by product category so as to clearly understand the nature
of competitive online threats.

The channel shift to online has also put downward pressure on prices, because the Internet allows
consumers to easily root out the lowest price for a product. This creates myriad challenges for
retailers and manufacturers since pricing power is now in the hands of the consumer.

3. Social Media

comScore data show that social media has just eclipsed portals in share of time spent on the
Internet. In November Facebook attracted 150 million unique visitors in the U.S. alone while
accounting for 10% of total minutes spent online. But its not just Facebook that comprises social:
In the same month in the U.S., LinkedIn attracted 41 million monthly unique visitors, Twitter saw
40 million, Google+ attracted 29 million, while Pinterest and Instagram each received more than
25 million visitors.

With the explosion in consumers use of social networks, marketers are wrestling with the
challenge of how to best utilize these channels to communicate with consumers. In many cases,
social holds the promise of word of mouth persuasion achieved at scale. But many questions
abound. For example: whats the value of a fan? whats the role of paid versus earned media?
How to best measure the ROI from social? Its clear that much research and experimentation is
being conducted to help answer these types of questions.

comScore has introduced a service called Social Essentials to help quantify the impact of social
marketing efforts according to the demographic and behavioral composition of a brands social
media audience, while also providing the reach and frequency of social brand impressions. These

metrics allow marketers to tie social media exposure to desired consumer behaviors, including
brand engagement and buying, and to measure actual campaign performance.

Beyond the use of social networks as an advertising platform, market researchers are pondering
their use as a source of consumer insights, with some suggesting that this will replace the use of
consumer surveys within the next five years. Count me as one of the skeptics when it comes to the
ability of listening to fully replace question and answer. While I certainly appreciate the ability
of social to provide timely and valuable information regarding consumer preferences, it seems to
me that the need to obtain consumers answers to specific questions that might not be present in
social media conversations means that surveys will always have an important role to play in
consumer research.

4. Shift of Ad Spending to Digital

Advertising spending has been shifting to the Internet at a rapid rate, with the IAB reporting that
online advertising in Q3 increased by 18% over last year. For the first three quarters of 2012, the
increase was 15% -- far greater than the increase of 3.8% in spending for all measured media
during the same time period.

Here are the most recent IAB data by ad format for Q2, 2012:

Online Ad Spending
The IAB report reveals strong growth in a variety of formats, especially mobile (+92%), video
(+18%), search (+17%) and banners (+12%). The notable exception is rich media, which posted a
large decline of -34%. It has been hypothesized that the high production cost of rich media ads is
causing a shift to other formats, especially video where a 30-second TV commercial can be easily
repurposed into a 15-second online ad at a minimal cost. At the same time, concern is growing
among advertisers and their agencies regarding the limited amount of video inventory available,
with many reporting that video CPMs often exceed those of TV. However, its also clear that the
more precise targeting that can be achieved with online ads along with a higher consumer
engagement with video ads is also helping drive video ad prices above those of TV.

5. Audience Targeting vs. Media Location

The rise in computerized cookie-based audience buying has been aided by the availability of
demand side platforms and real time exchanges. Its now estimated that about 20% of all display

ad impressions are bought via real time bidding and that this level is growing rapidly. The benefits
of programmatic audience buying have been well documented. For example, in this video, Bob
Arnold, Associate Director of Global Digital Strategy at Kelloggs discusses the lower, lower and
lower effective CPMs that Kelloggs has been able to achieve through programmatic buying of
display ads.

On the negative side, publishers are understandably concerned about the downward pressure on
ad prices that has occurred despite their efforts to hold back premium content from the
exchanges. This has, in turn, led to the creation of private sell-side platforms, which allow the
programmatic buying of audiences on specific internet properties. The hope is that this will
protect publishers premium pricing, while simultaneously providing advertisers with some of the
efficiencies of programmatic buying and the higher impact of having their ads running alongside
premium content.

6. Measuring Delivery and Effectiveness of Digital Media Plans

Just over a year ago, the 3MS (Making Measurement Make Sense) initiative was launched by
three key trade groups: the IAB, which represents online publishers; the ANA, which represents
advertisers; and the 4As, the agency body. One of the key tenets of 3MS was moving digital
measurement from a served ad impression to a viewable standard.

Here at comScore, weve conducted numerous studies around the globe measuring the degree to
which digital ad impressions are viewable and the results clearly show that there is much room for
improvement. In studies involving billions of impressions from dozens of leading advertisers such
as General Mills, P&G, Ford and Allstate, we have found that on average about 30% of display ads
are never visible to the end user, generally because the user doesnt scroll down the page far
enough or leaves the page before the ad is fully rendered. Obviously, a non-viewable has no
possibility of affecting behavior. As a result, some publishers are now beginning to guarantee the
viewability of their inventory, much to the delight of their advertiser clients. This undoubtedly
helps make digital advertising more directly comparable to TV advertising and should help in the
formulation of more powerful multi-platform advertising campaigns. It will be most interesting to
see the rate at which guaranteed viewable impressions become an industry standard.

An important issue that needs to be mentioned at this point is the relative accuracy of cookiebased targeting. comScores research has shown that while its generally superior to what can be
achieved using traditional media, it often fails to match the hype. Because of cookie deletion and
the fact that a cookie is a unique browser identifier (but not a person identifier), a cookie can
often fail to accurately reflect the demographic and behavioral characteristics of the person using
the computer at any given point in time. Heres what comScore has found:

Targeting accuracy using cookies (% of impressions delivered accurately):

70% for 1 demo (e.g. women)
48% for 2 demos (e.g. women age 18-34)
11% for 3 demos (e.g. women age 18-34 with kids)
36% for behavioral targeting
On a related topic, digital media is seeing a growing use of online GRPs to plan and measure the
delivery of digital campaigns. When coupled with a viewability measure and a targeting accuracy
metric, this can provide a huge step forward in ensuring that an advertisers media plan is being
delivered as intended. An indication of the growing use of these metrics is that comScores
Campaign Essentials product suite has now been used in more than 5,000 studies by 160
advertisers / agencies across 32 countries, and its use is accelerating rapidly. The value is also
clear, with Kelloggs reporting a 5X to 6X increase in financial ROI from their digital campaigns
since they began using comScores service.

Turning to the measurement of the impact of digital campaigns, there are now a variety of ways in
which the attitudinal or behavioral impact of online campaigns can be measured including the
ability to do this while the campaign is still running (which allows for in-flight adjustments). Given
the availability of these measurement options, it is especially frustrating to see click-through rates
(CTR) still being utilized as an effectiveness metric, even though CTRs average no more than 0.1%
(yes, thats 1 in 1000 ads in a campaign being clicked) and despite the fact that research has
shown no relationship between CTR and campaign effectiveness. A recent comScore survey found
that fully one third of advertisers, agencies and publishers routinely use CTR as a performance
metric. The reasons are simple: CTR is fast, inexpensive and easy to compute but unfortunately
its also a fundamentally misleading measure of digital advertising effectiveness.

7. Growth of Smartphones and Tablets

The rate of growth in the use of smartphones and tablets has been astounding. More than 120
million people in the U.S. now own a smartphone, accounting for more than 50% of all mobile
phone users and representing an increase of 30 million over the past year. More than 48 million
people own a tablet, representing a staggering growth of 300% from last year. The tablet is, in
fact, the fastest growing electronic device ever created.

The emergence of smartphones and tablets represents a fundamental dislocation in how

consumers access the Internet, with these devices now accounting for 13% of all Internet page
views and growing at an accelerating rate. To help provide the advertising industry with relevant

information measuring how consumers are accessing the Internet using various platforms,
comScore recently announced the beta availability of Media Metrix Multi-Platform, providing a
unified view of web, smartphone and tablet audiences.

Mobile and portable technologies are radically altering the manner in which consumers make
buying decisions and how they complete transactions. This presents opportunities but also
challenges. On the opportunity side, marketers can push information to consumers with
relevant geographically-targeted messages (e.g. delivering a brand promotion when a consumer is
in a local store). Or they can deliver ads when the consumer accesses a mobile web site, although
this does require building mobile-enabled web sites, something that many marketers have yet to
do. Apps represent yet another way of reaching the consumer with mobile advertising or
promotion messages, and here comScore data show that pure play online retailers are far ahead
of their multi-channel competitors in the degree to which consumers are using the retailers
specific app as they shop and buy.

According to the IAB, mobile push marketing now accounts for about 8% of all digital
advertising, while growing at a rapid 92% rate. This growth is occurring despite low CPMs / CPCs
and some consumer resistance to the intrusion of mobile ads.

As with all technological dislocations, there are challenges for manufacturers and retailers that
accompany consumers adoption of mobile technology. For retailers the downside is
showrooming, the phenomenon of consumers visiting a physical store to research (e.g. to touch
and feel) products but then using their smartphone or tablet in-store to price comparison shop -often resulting in them buying the product online. comScore data show that consumers have
increased their use of smartphones to access retail-related information by 50% in the past year
alone. Retailers are using a variety of tactics to try to combat showrooming, including selling
unique products that cant be found elsewhere or offering to match the lowest price that the
consumer finds online. Whatever retailers response might be, its apparent that the practice of
showrooming is creating more downward pressure on prices.

comScore data show that about 13% of all e-commerce transactions over the holiday shopping
season were completed using a mobile or portable device, with tablets accounting for about 70%
of that total. Overall, M-commerce is now growing at a rate of about 30% per year. Thats good
news for the consumer while presenting both challenges and opportunities for manufacturers and
retailers.

8. Multi-Platform Media Planning and Analysis

Consumer consumption of media content is fragmenting across digital platforms at an accelerating

rate. For example, originally-scripted TV content can now be viewed on the Internet using a PC or
Mac -- and increasingly via mobile and portable devices; TV ads are being delivered online; and
sports programming is being viewed live on smartphones. While this multi-platform behavior
allows advertisers more opportunities to reach consumers with their advertising messages at a
place and time that the consumer prefers, it also creates a pressing need for media planners to
accurately measure how content is being consumed across platforms.

To help understand this multi-platform behavior, comScore recently conducted a seminal study for
NBC that measured how consumers viewed programming from the 2012 London Olympics.
Dubbed the Billion Dollar Research Lab, the study involved measuring how 700 consumers used
TV, the fixed Internet, smartphones and tablets to view the Olympics. In a compressed 17-day
period, a massive amount of Olympic sports content is consumed across platforms. Since sports is
the content category most viewed across platforms it was believed that by measuring this
behavior we would be able to open a window to see into the future of multiplatform consumption
and better understand how it might evolve across all types of content.

Some of the key insights from the study are shown below:

From my perspective, one of the most intriguing findings was that alternative screens are additive.
In other words, there was no evidence that incremental screens cannibalize the use of other
screens. Media consumption is apparently not a zero sum game. Consumption increases across all
screens as more screens are used. This is illustrated vividly below:

More Screens = More Time Spent on Every Device

The study also confirmed the importance of the concurrent use of other digital screens while
watching TV. Specifically, 25% of the time spent watching the Olympics on TV was accompanied by
the use of another screen. Interestingly, there was no evidence that these simultaneous viewers
skewed younger, since 55% of them were 55 years of age or older.

Given the current and growing importance of multi-platform consumption, its critical that new
systems be developed that can provide media planners and analysts with the ability to measure
duplicated and unduplicated audiences across platforms at the most granular level, e.g. at the
level of an individual show. comScore is currently building such a system for ESPN in partnership
with Arbitron. In addition, comScores Andrew Lipsman did an excellent job of covering the
measurement challenges and solutions for digital media fragmentation in a recent white paper:
Brave New Digital World.

9. Real-Time Marketing Insights

Increasingly today, speed of decision-making is a competitive advantage -- and this is certainly true
in the case of digital advertising. Gone are the days when an advertiser could wait until a campaign
had run its course to understand if the media plan was delivered as intended or to measure the
effectiveness and ROI of the campaign. Todays digital realities demand and allow real-time
insights so that course corrections can be implemented quickly as needed, thereby significantly
reducing waste and increasing campaign effectiveness. Smart advertisers and their agencies are
already receiving near real-time comScore data summarizing the delivery of their digital media
plans and their impact -- on a publisher-by-publisher basis. This allows for in-flight adjustments as
necessary. Its encouraging to see this foster the development of strong but flexible partnerships
between publishers and advertisers that are tightly focused on the advertisers advertising
objectives in terms of reach, frequency and targeting. The Kellogg Company has graciously allowed
us to cite some powerful examples of their use of near real-time feedback data in a case study that
can be downloaded here.

While there are many benefits from the use of real-time insights to gauge advertising
effectiveness, its also important to point out one potential downside thats especially relevant to
brand marketing. This relates to the specific content in the advertising message. The use of price
and promotion incentives will undoubtedly generate a more immediate consumer response than
will a branding message. As a result, its possible that real time measurement could tend to favor
price as a preferred driver of consumer choice, with the unintended consequence of creating a
long term decline in brand loyalty. Marketers will be well advised to carefully consider the creative
that they employ in their advertising campaigns when using real-time measurements.

10. Privacy Considerations

The advent of digital marketing has been accompanied by a far higher level of scrutiny of privacy
issues than was ever the case with traditional media. Some of that is to be expected. Data are,
after all, at the center of the digital world and its critical that consumers personally-identifiable
(PI) data be protected. Much of the privacy concern that digital marketing has encountered relates
to the observation of consumer behavior and the targeting of ads based on this behavior.
Ironically, the myriad new digital ad targeting approaches that dramatically increase the relevance
and effectiveness of the advertising being delivered -- all while simultaneously reducing waste -require no PI data about the consumer. Anonymous cookies are the basis of this matching up of
advertising with behavior.

The industry as a whole has the opportunity to help legislative bodies here in the U.S., and
especially in Europe, understand how both first and third party cookies, when used anonymously,
present no risk to privacy.The IAB has been particularly active in this regard, both through their
lobbying efforts and by publishing reports that quantify the economic value to the U.S. Gross
Domestic Product (GDP) of the ad-supported Internet ecosystem. The IABs latest report,
published in September 2012, estimated that the contribution of the Internet ecosystem to the
$14.5 trillion U.S. GDP was $741 billion in 2011. The report further concludes that the value of the
Internet ecosystem sector grew by 56% from 2007 to 2011, while U.S. GDP, partly as a
consequence of the 2008/9 recession, grew by only 5%. Clearly, online marketing has become a
major contributor to the U.S. economy and it is to be hoped that legislators will see the need to
keep this engine of growth running without undue interruption.

So, there you have my assessment of the top ten burning issues in digital marketing. As you can
see, ours is a dynamic industry, driven by dramatic increases in computing power that allow for
continuous and rapid innovation. But, as history has shown, in every technology-driven dislocation
there are losers as well as winners. For any business today, its clear that ignoring or resisting the
changes wrought by digital technology will surely lead to disaster because as Rishad Tobaccowala,
Chief Strategy Officer at Vivaki, put it: Digital is like hydrochloric acid, it burns through
everything. Successful marketers in contrast will ensure that they adapt to the new digital
realities and improve their businesses by leveraging the many innovations that technology has
provided.