Andrew Keen on New Media

Even this advertising giant admits he was 'too late' for Web 2.

How is new media changing the communications business? What has been the impact of Web 2.0 on advertising and PR? And what can a traditional marketer learn from the intrinsic openness of new media?

Who better to ask such questions than Sir Martin Sorrell, the financial wizard who runs WPP (Wire and Plastic Products), the world's second-largest marketing and advertising company? It was he, after all, who magically transformed WPP from an unprofitable maker of shopping carts into the holding company of such iconic agencies as J Walter Thompson, Ogilvy & Mather, Young & Rubicam and Burson-Marsteller. And now he is back in the metamorphosis business – this time, plotting the transformation of the 20th-century WPP into a global 21st-century digital-communications company.

Sir Martin acknowledges that he needs to unlearn much of what he once knew. I first met him last autumn in Greece, where he invited me to WPP's "Digital Unconference" – Stream '07 – an "unconference" being an event without any formal agenda.

Stream '07 reflected Sorrell's increasingly digital-centric strategy. He invited a couple of hundred new-media mavens to a Club Med just outside Athens for a weekend orgy of technological futurism. WPP provided the beds, the food and drink and, most importantly, the network of mavens. Everything else at the unconference was just us – we the people. There were no rules, neither owners nor consumers of the message, no established authority at Stream '07, not even Sir Martin himself who, like everyone else, paddled around Club Med in shorts and sandals and gave his own subversive little speech about the digital future entitled "All I need to know I learnt from cricket".

So it doesn't surprise me, when I catch up again with Sir Martin in a phone call to New York, to find that he is still in the unlearning business. The great challenge, he confides, is convincing both WPP staff and its corporate clients that they need to let go. Today's internet teaches us that the future is all about open communications, he says, "full transparency" being the key ingredient in successful marketing, branding and advertising strategies. Thus, he implies, the most profitable companies of the future will be those that utilise the open-source tools of the Web 2.0 revolution – the blogs, the wikis, the unconferences – to successfully communicate with the outside world.

"Geography" and "technology" are changing everything in the communications business, Sir Martin tells me. As a global medium, the internet is significant in the emergence of the increasingly profitable Asian, African and Eastern European markets. Even more than geography, though, it's the new digital technology itself that is the fundamental agency of change in his industry. Thus, he explains, WPP's focus on hiring talent who are "at ease with technology" rather than the "old farts" at traditional advertising agencies who look back with nostalgia at the unwired Sixties and Seventies.

There was no single eureka moment, Sir Martin confesses, when he suddenly recognised the centrality of the internet in the evolution of the communications business. It was only in mid-1996 that he started to steer WPP toward a core digital strategy – "too late", he acknowledges in retrospect. Sir Martin is proud of some of his new-media babies at WPP, however – particularly the acquisition of innovative digital agencies like Spot Runner, Blast Radius and 24/7 Media.

Still, Sir Martin, who once ran the money side of the original Saatchi & Saatchi so successfully that he was known as the "third brother", isn't completely won over by today's Web 2.0 economic euphoria. One consequence of the speed of technological change, he acknowledges, is the fragmentation of traditional advertising business models. In a digital era in which communications businesses rise and fall with dramatic speed, it is "hard", he says, to determine long-term economic value – for example, today's Web 2.0 darling, the social networking site Facebook, being "not worth" its formal $15bn valuation.

Regarding the future of the communications business, I ask Sir Martin what will be the next big thing in new media. What will Web 3.0 look like? "Wish I knew," he replies, before confessing that he suspects it might be in video communications. I should, of course, have asked him what cricket could teach us about digital video communications. No matter. Sir Martin has been kind enough to invite me to WPP's Stream '08 Digital Unconference later this year. I'll have to remember to ask him then.

Is death imminent for Second Life?

No news is nearly always bad news in the new-media business. Take Second Life, for example, the San Francisco- based three-dimensional internet community. Last year, it seemed as if not a week went by without another story about the real-world economic success of this virtual business.

We were told that hundreds of thousands of new settlers were flocking to Second Life every week. There were endless stories of how major corporations – from IBM to Sony – were setting up virtual storefronts in Second Life. Then there were the ad nauseam tales of why living in 3-D on the net was preferable to our dreary first-life existence.

But recently, it has all gone quiet on the Second Life front. There are no more stories about why virtual existence is preferable to the real thing; no more rags-to-riches tales of entrepreneurs setting up successful companies within Second Life. Then Philip Rosedale, Second Life's evangelical founder and CEO, announces last week that he is quitting. Not good news for the inhabitants of the 3-D community.

I suspect that it won't be long before Second Life experiences its first death – just another digital dream without any economic reality. Then it will be back to the real world for all those millions of Second Lifers, back to the dreariness of their first lives.

Television for free could be Napster part two

Remember the damage that the peer-to-peer technology of Napster did to the music business? Napster made music free. Now, it seems, we might have arrived at a Napster-style crisis in the history of television. Let's call it the Zattoo moment. Zattoo is a Swiss start-up that has developed peer-to-peer technology that allows internet users to watch many thousands of hours of mainly European television shows on their computers. Zattoo is making television free, and this is not pleasing European broadcasters who believe that Zattoo's estimated 2.15 million users might be inadvertently breaking copyright law.

Enjoy the Zattoo moment while you can. Like Napster, Zattoo might get shut down by the courts. But, just as the Napster moment represented the beginning of the end of the recorded music industry, so the Zattoo moment might well end up symbolising the beginning of the end of the traditional television business.