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The state of the digital economy, 2009: 'move forward'

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Digital media and economic forces converge to reshape the way companies engage with customers and markets

"Get out of here and move forward." -Don Draper

Don Draper never had it so good. Draper, the creative head of the fictional advertising firm Sterling Cooper, depicted in the AMC drama series Mad Men, created tantalizing campaigns at the snap of a finger, off the top of his head, in his 1962-era office. However, while members of his team adeptly delivered results for clients (despite the rampant boozing and sexism), they seemed somewhat perplexed by the emerging medium of television -- and resisted moving too much in that direction. Could Don and his team handle today's digital and social media opportunities?

Here's the story for 2009. Razorfish, an interactive marketing and technology company, has issued its 2009 Digital Outlook Report, which predicts continued shifts in the wired (and now increasingly wireless) economy, spurred in new directions by the larger, more turbulent economy. Razorfish's take, mainly on the marketing and advertising industry, provide are a bellwether into the forces that continue to shape the digital economy that touches every industry.

Leading trends identified by Razorfish include the following:

“Measurability” and “differentiation” are key watchwords in the current economy: Razorfish sees companies demanding more return from their advertising and marketing dollars (or pounds, euros or rupees). "Even those with healthy financials are likely to push for, and command better price terms and concessions from media companies, who are eager to fill the vast supply of ad space available." As a result, publishers or media sites that are more wired into the digital realm will see greater advertising and marketing revenue. Hot venues include search, ad networks, online video and targeted media, or "unique brand engagement."

Search also feels the economic chill: Search may be the hot new medium in town, but search marketers will also have to prove their worth to companies, Razorfish believes. However, there is no shortage of opportunities in this space: "We expect the search landscape to continue to evolve and innovate, with an increased focus on measurement and search engine optimization (SEO), and the rise of compelling opportunities in local and mobile search," Razorfish points out.

"Social Influence Marketing" will go mainstream: This is the big year for social networking as an intercative advertising and marketing channel, Razorfish concludes. "With social strategies getting more integrated and  accountable, marketers are going to depend on their customers, more than ever, to do the marketing for them." Interestingly, Razorfish says 2008 was marked by "its fair share of experimental failures." Apparently, companies have a lot more work to do before they can deepen their understanding of consumer interactions in social environments, but progress is being made. "We can also expect new social advertising formats and new social research approaches to emerge that leverage  the complex relationships that occur within a social graph."

Online ad networks will see  both contraction and expansion: The "traditional" ad network world will contract as competition for declining ad dollars increases, Razorfish says. "There are simply too many broad networks competing for the same inventory and not telling a new story." Look for growth, however, in "branded networks" (such as the Fox Audience Network and Turner Entertainment), as well as "ad exchanges such as Right Media, DoubleClick and AdECN, "which are newer open markets for online ad inventory that increase buying efficiency by delivering unprecedented transparency in the process."

“Portable” and “beyond-the-browser” are creating new opportunities: We're seeing a portable media revolution taking hold, extending to mobile devices of all kinds, including iPods and smartphones. "That means rich content is flowing to is enabling new ways to search, discover, browse, organize and 'touch' rich content like video. This will change how we interact with the Web, our mobile devices and our televisions moving forward. Collectively, these changes are opening the doors to incredible new ways for advertisers to connect with consumers."

If Don Draper and his team were brought forward to 2009, he probably would be having a tough time handling the new demands imposed by economic shifts and digital media.In fact, today's media companies are having their own difficult time with it.

As Razorfish CEO Clark Kokich puts it: "Clients are desperately dealing with a laundry list of challenges: A sinking economy. A connected, in-control consumer. A drive for lower costs. The disruption of traditional media channels. An expansion of global competition. The list is long and growing...."

Efforts to move to digital engagement with markets and customers is smart business because it addresses new ways to interact and learn. "Digital has the potential to re-imagine a consumer connection, or reinvent a business model," Kokich explains. "And we have a long list of consumer touchpoints with which to work, starting with the Web, then expanding to mobile applications, social, gaming, viral, digital-out-of-home, widgets, gadgets and more. Now, anything is possible..."

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Joe McKendrick

Contributing Editor

Joe McKendrick is an independent analyst who tracks the impact of information technology on management and markets. He is a co-author of the SOA Manifesto and has written for Forbes, ZDNet and Database Trends & Applications. He holds a degree from Temple University. He is based in Pennsylvania. Follow him on Twitter. Disclosure