Marketing channels, such as Word of Mouth Marketing and Online Marketing, are expected to grow to an astounding 27% of overall marketing expenditures by 2012, up from 7% in 2002, according to a new research study recently released by IBM Institute for Business Value titled “Beyond Advertising: Choosing a Strategic Path to the Digital Consumer”.

The findings prove the changed landscape of the advertising marketplace and the necessity for companies to adapt in order to compete. The report reveals that companies are shifting spending away from traditional advertising in favor of more interactive and measurable ways of reaching consumers.

The study cites the four major trends that are emerging:

• Influence of the Digital Savvy Consumer – Today’s consumer is more more digitally savvy and wants to be engaged online. This year, 76 percent indicated they had already watched video on their computers (up 27 percent). Thirty-two percent indicated they had viewed video on a portable device or mobile phone (up 45 percent). And interest in mobile video content has more than doubled in a year, to 55 percent.
• A shift in advertiser spending – Advertisers are responding to this new breed of digital savvy consumer. Results show that Sixty-three percent of global CMO’s expect to increase online/interactive marketing spends while 65 percent expect to decrease traditional advertising.
• Digital migration of platforms – The emergence of digital forums such as social media and online video are blurring the lines between advertising and marketing in a move to what the study calls “brands-actional” advertising.
• Emergence of new capabilities –“Moves, by both new entrants and existing players, are driving new types of industry innovation, and accelerating the pace of change.”

“To succeed – especially in the current economic environment – media companies will need to develop a new set of capabilities to support the industry’s evolving demands, which include micro targeting, real-time ROI measurement and cross-platform integration,” says Saul Berman, IBM Global Leader for Strategy and Change Consulting Services and co-author of the study.

I definitely don’t underestimate the older demographics. I’m getting used to commenting on my cousin’s status on Facebook, then seeing my uncle’s comment under mine a few hours later. I’m getting used to seeing my best friend and her mom’s conversation on my homepage. I’m getting to the shrug-off point.

I know and I certainly see the older demographics not only adopting and adjusting, but integrating all this technology and weaving it into their daily lives… so what does surprise me is a recently released study conducted by The Barna Group that explored how technology is shaping different experiences and expectations among generations. Although the study does point out that “many of the bloggers, music downloaders and users of social networking websites are from the Boomer and Buster cohorts” because “Boomers and Busters represent about two-thirds of the adult population”, the study seems to undermine their technical savvy. AdAge.com also recently pointed out this generation’s dominance on the big two, “As of January, more than 50% of Facebook users and 44% of MySpace users in the U.S. were over 35 years old, according to ComScore estimates.”

The study breaks users down into four generations – Mosaics (18 – 24), Busters (25 – 43), Boomers (44 – 62) and Elders (63+) then categorizes each generation’s use of technology into Mainstream (technologies used by at least one out of every two computers users (50%+)), Emerging (Those used by at least one out of five but less than hald computer users (20%-49%)) and Limited (Technologies used by fewer than one-fifth of computer users (19% or less)).
So, what sticks out from this chart that doesn’t fit right with my personal observations as well as other recently released research surveys? These are the points that I question:

• Busters, Boomers and Elders fall into the “Limited” category for both having “posted a comment on another blog” and “maintain personal blog”.
• Busters are only in the “Emerging” category for “watched a video online”.

These are surprising to me because Forrester Research just released a report that show more than 60% of those in the Baby Boomers generational group actively consume socially created content like blogs, videos, podcasts and forums. It’s true that they might not be heavily involved with content creation but as far as commenting and watching videos go, Baby Boomers are there and on the rise, “In 2007, the percentage of Boomers consuming social media was 46% for younger Boomers (ages 43 to 52) and 39% for older Boomers (ages 53 to 63). By 2008, those number increased to 67% and 62%, respectively.”
In short, there is no doubt that the 35+ demographics makes up for many of the profiles and accounts created on social media sites but credit must be also given to them on their ability and usage of the functionalities of the sites.

Some key takeaways I left with:

• Internet usage by 70-75 year olds has increased from 26% in 2005 to 45% today.
• Only 73% of teens say they use email now, as opposed to 89% in 2004.
• Teen internet users’ favorite online activity is game playing (78%), significantly higher than any other age group.
• Almost no one is visiting virtual worlds.  The highest concentration is teens, at only 10%.
• Generation X lead online shopping habits, with 80% buying products online, compared with 71% of users 18-32.  Only 28% of online teens buy products online.
• Downloading video is gaining across all age groups, most noticeably among users age 73+, now 13% up from 1% in 2005.

Check out the chart below for an overview of each generation.

Does your generation’s analysis accurately represent how you use the internet as an individual?

eMarketer released some big numbers last week on the growth of user-generated content creators and consumers.  The report estimates that by 2013 the number of UGC creators will reach 115 million (just over half of all internet users), up from 83 million in 2008.  That’s significant, and indicative of the growing popularity of user-generated content (specifically video) as a platform for fluent self-expression.  And as the quantity of content increases, so too does the audience.  An estimated 70% of all internet users, roughly 155 million, will be consuming some form of UGC by 2013.

The study goes on to suggest that the growth in UGC may be unprofitable if the advertising climate for user-generated media remains stagnant, citing ‘unpredictability of UGC’ and ‘absence of ad standards’ (among others) as the culprits for these conditions.  While these issues pose a concern for a company like Google who are still seeking to profit on YouTube after its acquisition in 2006, marketers are presented with an amazing opportunity to reach their audience in an organic and credible way.

Marketing Vox covered an Ad-ology survey last week on the influence of video game selection.  The survey, called Fall 2008 Median Influence on Consumer Choice, reported that of consumers between the ages of 18-24 nearly 65% were influenced by online video.

“‘Gamers want to see new releases in action before they buy, and online video is an effective way to show actual game play,’ said C. Lee Smith, president and CEO of Ad-ology Research.”

This significant level of influence of online video on video game purchases presents an opportunity for leveraging the growing number of UGC creators and consumers.  At Affinitive, we integrate online video, official or user-generated, into the majority of our programs when it makes sense, and have experienced a great deal of success in most cases.

For example, we recently executed a user-generated video contest for the release of an RPG-style video game.  The contest was set up to encourage those who bought the game to upload their best game play videos (see an example here), with the winner earning a gift certificate and autographed merchandise.  By the end of the contest (roughly two weeks after the game’s release,) the contest had received over 50 entries totaling 300,000+ views.

That’s not to say that every marketing campaign needs online video, rather I’m simply pointing out that the audience and creators are increasing, and the influence is there.  It is a growing opportunity that should be considered when developing an online marketing strategy.

With media moving to more non-traditional means, it was only a matter of time before the idea of the product placement hit the web. Last month, Sprint PCS launched a consumer promotion on YouTube where they ask you to make a family or summer video that features their new Sprint Instinct phone, as a product placement. Shill their product in your home vid and you will get $20 for your efforts. Their name of the promotion “Sell Out” would indicate that perhaps this all is just some joke, meant to combat the edge and wittiness of Apple’s marketing, owners of the iPhone, which this phone was made to directly compete with.

The idea of this type of placement has had mixed reactions across the board. To me, there are several key questions that have come up from the consumer and brand perspectives that leave gaping holes in a promotion like this that could ultimately note bode well for Sprint’s credibility within non-traditional online channels. A few of these questions being: Is a measly $20 a strong enough value proposition? Will any viewer of this video see it as a genuine endorsement? Is this just some publicity stunt by agency Goodby, Silverstein & Partners to try out the social media space and perhaps garner some blogosphere buzz? And perhaps most importantly (and most unanswered) will this really translate to any sales of the Instinct?

With reference to the latter, only time will tell, but as someone who prides themselves on working for a company who builds Word-of-Mouth the genuine way, I feel as though the distinction between a genuine brand reference within a social media channel and one of placement must be made. There is a vast and incomparable difference between Word-of Mouth that is cultivated by simply giving your product to a consumer and allowing them to experience it, engage with it, and then let you know how they feel, the natural, raw, organic way that is based on opening up a dialog versus these paid placement promotions that don’t come from any basis other than people willing to shill if the price is right without any passion or affinity towards the brand.

At Affinitive, we pride ourselves on building programs that result in user generated content as a by product of an engagement strategy, where consumers participate because they are interested in learning about the product or because they already have a passion for or relationship with the brand. We could not have the quality or quantity within our library of content for each program that we have by shelling out a few twenties for some videos.

We love to reward consumers for their willingness to engage and create content, but doing so in a way that is about the consumer and not about the creation of a tool for the brand makes a world of difference.