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Is IBM going into the digital advertising business?

IBM's Watson computing system.
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IBM's Watson computing system.

Digital advertising is a rapidly growing industry expected to hit $60 billion in the U.S. this year, according research firm eMarketer. Now that IBM has struck a deal to buy The Weather Company's digital products and technology business, the company may be positioning itself to take a chunk of that pie.

IBM announced Wednesday that it was acquiring The Weather Company's B2B, mobile and cloud-based Web properties. It said The Weather Company's divisions will help construct the new cognitive technology Watson IoT ("Internet of Things") unit and IoT Cloud platform.

It's more than being able to create a better weather forecaster. One of The Weather Company's digital properties is WeatherFX, a marketing platform that uses the weather to determine ideal digital ad placements. Deutsch's chief channel planning and investment officer, Anush Prabhu, said it has previously worked with The Weather Company to inform media planning for its clients.

"A lot of the decisions we make are emotional in nature, and weather does drive your emotions," said Prabhu. "When it rains, the fact is you feel like something is wrong, or you feel like watching a movie. Even when you hearken back to your youth, a large part of our behavior is based on the emotions that weather advises."


WeatherFX's current recommendations could be as simple as knowing when it is raining in an area so potential customers can be shown images of all-season tires, said The Barbarian Group's director of analytics, Will Sandwick. The Barbarian Group has used IBM's technologies for its clients.

Or, it can determine other hard-to-see trends, like what type of weather will make you most likely to want to buy a beer. WeatherFX data have shown that Chicagoans were more likely to buy beer when experiencing three consecutive days of below-average temperature. For New York residents, they wanted a brew after three consecutive days of above-average temps.

Maxus Americas' chief planning officer, David Gaines, used weather data for one of its pharmaceutical clients. Maxus determined through Google Analytics that higher delta temperature, or fluctuations between hot and cold temperatures, made people more likely to develop flu or cold symptoms. It found the right value that correlated with the right time to start talking to people about flu season.

"We have a gamut of people who can collect dots for us, but the number of people who can draw dots in a consultative function is low," he said. "IBM has a long history in areas of their business of being consultants with good, rigorous information. It's really a potential move into a business that is not just collective data, but making it useful data with something actionable. These guys are well placed to do it."


Combining IBM's Watson — which can "learn" from experience to determine insights — with weather information create even better targeted advertising, said Sandwick. As people rely more on their mobile phones to access the Internet, he added knowing a consumer's surroundings could be a game changer.

"More data means more specific targeting," he said. "The thing that is interesting is that what Watson is really good at is identifying these implicit correlations that humans might not look into."

If IBM does make the move into becoming a digital advertising platform, it will have stiff competition. Google AdSense has long been one of the top ad-serving companies using proprietary Google data, while many advertisers have been applauding Facebook Atlas for giving them further insights into consumer behavior.

"I could see it as a step in that direction, but there is definitely a long way to go before competing with AdSense," said Sandwick.

However, Prabhu said if IBM decides to just focus on its analytical technology to help brands without entering the programmatic advertising space, it could have a lucrative business.

"The (digital advertising platform) area is pretty crowded," he said. "I don't know if that is the place they're going into. But even without going into the space, given that they are in the business of big data, in many ways it could be a benefit for a company's advertising."

IBM and The Weather Company declined to comment.

Disclosure: The Weather Company is a consortium owned by NBCUniversal, which is the parent company of CNBC.