Saturday, 11 July 2009
CLOUD COMPUTING AND THE IMPACT ON THE ADVERTISING BUSINESS
If you remember the Sun Microsystems slogan "The Network is the Computer" then you'll know that there have been many attempts to move computing power away from the desktop and onto networks. This time it could work. People unhesitatingly now save photos on Flickr and Facebook, use email on gmail, and hotmail, and use word processing and spreadsheet tools from Google via a browser. All of this is free. The key difference between past efforts to make the network the computer and cloud computing, is that cloud computing is driven by an advertising-based business model. Google's announcement this week to launch Chrome OS, an operating system designed for the cloud to compete with Windows is well timed, and smart.
We already have more advertising inventory than can be sold, so the glut of new cloud computing ventures and their associated advertising inventory promises to destabilise the digital business. More inventory will drive down prices. More inventory will also drive down production costs, but increase demand for better optimisation and reporting across advertising campaigns.
Analytics will be key as new formats and new approaches emerge, die, and in some cases flourish. I also expect those who are overburdened by this inventory to start to look at new ways to raise margin by helping produce the advertising. So expect more cloud computing providers to start up creative units to help their clients produce ads.
Existing creative agencies can face this challenge by investing in teams focused on making cloud-based advertising work. That means more analysts focused on the maths and the optimization. That means more performance based pay that aligns with pay-per-click models. Notions of creativity have to change. Creativity shouldn't just mean arty and edgy, but should also broaden to mean useful and functional.
Equally creative agencies shouldn't just do communication strategy but should also do marketing strategy. Most importantly, it means recognising that the next wave of competitors are not the people you see at advertising awards shows, but are instead the geeks that live in neat streets in Silicon Valley. The music and newspaper industries were looking in the wrong direction when the revolution happened. Advertising needs to look West at California rather than towards Madison Avenue for the next challenge. This is only the beginning.