• by Laurie Sullivan  @lauriesullivan, March 9, 2014

Internet-connected devices will change online advertising in ways that industry executives cannot yet imagine. At the OMMA SXSW conference in Austin, Texas, Saturday, topics ranged from mobile to creativity, but the one discussion that will have the greatest impact on the industry within the next three years closed the show.

Semiconductor industry executives at Altera, Cypress, Freescale and others have talked publicly about the Internet of things since 2002, as they started to put these components in refrigerators and other household appliances. Those in the online advertising and marketing industry have paid little attention until now to the shift, perhaps not fully understanding that it probably means a future without "traditional" online advertising. The first signs can be found in native ads, curated content, and the introduction of voice-assisted apps Google Now and Microsoft Cortana.

If the electronics components industry has been talking about connected devices for more than 10 years, why did it take so long for folks in advertising to pay attention? "We couldn't make any money in it," said Justin Smith, ECD and chief innovation officer at Doner, and moderator of the OMMA SXSW panel.

Some agencies have developed a business model to make sense of the Internet of things, but going back 12 years, many were not designed to address the influence of emerging technology, Smith said. There wasn't a marketplace to buy that type of media representing significant revenue and profit. The media also lacked standards, and it would likely have never come up in an assignment or a brief from consumer product goods companies or retailers.

Smith did not explain that at the time, consumer-packaged goods companies already had begun testing semiconductor chips, or radio frequency identification technology (RFID), to monitor the movement of finished products to distribution facilities and on to retail store floors at Walmart and Target.

Car manufacturers also used this technology to replenish parts in their supply chain. At that point, the electronics industry knew the Internet of things would someday materialize, and consumers would see connected cars, but they did not publicly consider privacy or network security issues.

The move will happen in waves as market segments begin to understand the transition and the use of data to push information and content to consumers. Automotive manufacturers are among the first to build a business model -- connected cars -- based on the shift. Agencies can now take that technology and push information to the consumer, telling them to take a specific route to save money and gas. And, oh, by the way, stop at the Chevron station at Broadway and Third to fill up because they have the least expensive gas in the area.

Whitney Browne, group director and head of user experience at Geometry Global, said agencies hope to use data from connected cars that integrate real insights from consumer behavior into these types of campaigns or sponsorships. The data must transition from raw numbers to insights to something actionable and useful.

"I don't think agencies are set up for that right now," Browne said. "They are moving toward a more product-centric approach, but it will require good user insights from the data and creative thinking to pull a program like that together."