Advertising may not be dead, but it is certainly in a crisis.
A Forrester Research study shows that trust in advertising is falling dramatically — from 12 percent in 2002 to 7 percent in 2004, to even lower this year. And if people don't trust advertising, it can't be worth much. So at a recent industry conference of media moguls here, CNBC asked CEOs in the multi-billion dollar communications industry what they’re doing about the trend.
The shift to the Internet seriously challenges traditional ads like TV commercials and the businesses built on them: advertising companies and TV networks.
“People know more; they have better access to information, they don't want to be spun anymore,” said Forrester's CEO George Colony. “They tend to believe what's on the Internet because it's coming from individuals."
Like a recent wildly popular video clip starring an explosive concoction of Mentos and Diet Coke. The clip didn’t come from the companies, but this hit on the Web is getting Mentos millions of dollars worth of free publicity.
That has some proponents of public relations arguing that advertising as we know it, is worthless.
“You cannot buy consumer attitude,” said Richard Edelman, CEO of Edelman Public Relations. “You have to, over time, engage with them, listen to them, actually ask them for their views and absorb that into your promotional campaign.”
The latest example is NBC Universal, which is asking YouTube users to make their own promos for the wildly popular show "The Office." (MSNBC is a Microsoft - NBC joint venture.)
The second largest communications company in the world, WPP Group, has launched grassroots campaigns and blogs to create 'authentic' information. So how effective is the traditional 30-second TV spot?
“If you want to move a brand quickly and effectively,” said WPP CEO Sir Martin Sorrel, “there is nothing more effective than these traditional media.”
But Sorrel, along with the TV networks whose livelihood is selling ad time, still acknowledge traditional ads can now only be one piece of the puzzle. In just six weeks, for example, Philips Electronics has already sold 6,000 body shavers with an Internet ad that’s become a hit on the Web.
“A lot of the research so far has shown that Internet advertising and new media advertising adds incrementally to the value of network television advertising,” said David Poltrack, longtime head of research for CBS.
But no one is suggesting that it will replace network television advertising.
Now companies are desperate to keep up by doing a bit of everything. But new media has had one major impact: companies buying ads are now demanding a lot more accountability — and quantifiable results. That’s easier with Internet ads then with other media.