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Future Audiences for Advertising: Enraged or Engaged? May 2004

About This Report

As audiences increasingly adopt interactive technology, will they use that power to turn away from advertising? Or will audiences use interactivity to intensify their relationship with advertisers? Of course, not everyone will respond the same way. But on balance, will interactive audiences be enraged or engaged by advertisers?

Suppliers of interactive technology often hope to find new business models for collecting revenue, and some of those models involve revenue from advertising. For Yahoo and Google, advertising is generating billions of dollars of annual revenue. Users engage with "Ads by Google" because these ads are relevant. At the same time, e-mail spam has become a daily annoyance for hundreds of millions of users. No matter what measures network administrators take, the spam continues. Users are enraged by spammers, who persist in intruding on daily life.

The enraged-versus-engaged theme applies across a range of technologies: television, electronic games, cell phones, and more. Notably, digital-video recorders let people skip TV commercials. If interactive audiences can control the content they experience, they may filter out advertising messages. But audiences also take advantage of interactive technology to engage with commercial messages—as in the case of the popular BMW Films Web site.

In reality, both practices will continue: Audiences will evade intrusive advertising and welcome interaction with friendly suppliers of goods and services. But uncertainties remain about what attitudes toward advertising will prevail among future audiences and what steps businesses must take to engage audiences.

When businesses must make high-impact decisions in the face of uncertainty, SRI Consulting Business Intelligence's (SRIC-BI's) Digital Futures Program advises exploring multiple possible future business environments. We use the term scenarios to refer to stories that describe these different environments. Organizations can test a course of action against scenarios. Often, an organization develops scenarios for internal purposes—frequently with help from SRIC-BI. But sometimes multiple organizations facing similar decisions can use a common set of scenarios. We expect that many industries are exploring how the future of advertising will affect business models, partner relationships, and new developments. Thus we are pleased to present four scenarios for the future of advertising in this report.

Table of Contents

Advertising Crisis or Opportunity? 1
Enraged versus Engaged 1
Push versus Pull: Which Will Prevail? 2
Decisions and Uncertainty about Advertising 4
Axes of Uncertainty 5
Four Scenarios for the Future of Advertising 9
Captive Audience 10
Sponsored Production 10
Ad Industry Contraction 11
Advertising on Demand 11
How We Arrived at the Scenarios 12
Diverging Perspectives on the Future of Advertising 12
The Interactive Threat to Advertising 12
A Chance for a Renaissance for Advertising 13
More Nuanced Views 13
Scenarios as a Tool for Managing Uncertainty 14
Uncertainties about the Future of Advertising 15
Uncertainties about Technological Development 16
Uncertainties about Audience Response 17
Uncertainties about Social Trends 17
Uncertainties about Advertising-Industry Responses 18
Uncertainties about Government and Regulatory Responses 19
Uncertainties about Global Events 19
How Uncertainties Lead to Scenarios 20
Rapid Scenario Development and the Future of Advertising 21
The Enraged-versus-Engaged Axis 22
Enraged 22
Engaged 24
The Degree of Interactivity 25
A Link between Interactivity, Macroeconomics, and Technology Progress 25
A Framework for Characterizing Trends in Interactivity 26
The Push Prevails–versus–Pull Prevails Axis 27
Push Prevails 28
Pull Prevails 29
Detailed Description of the Scenarios 30
Captive Audiences 30
Sponsored Production 33
Ad Industry Contraction 36
Advertising on Demand 38
Enraged versus Engaged 6
Push versus Pull 7
Summary of Uncertainties about the Future of Advertising 16
Axes of Uncertainty about the Future of Advertising 5
Capsule Descriptions of the Four Scenarios 9
Captive Audiences Scenario 31
Sponsored Production Scenario 34
Ad Industry Contraction Scenario 37
Advertising on Demand Scenario 39