01/11/2013 10:56 GMT | Updated 23/01/2014 10:52 GMT

The Online World Is Fueling the Creation of New Brands, Now More Than Ever

The online world fuels the creation of new brands

For years, the online has been gradually shifting offline. This has been a trend for as long as there have been digital properties (think Pac-Man, Donkey Kong, and Frogger, for a start). But thanks to a relatively recent explosion of apps and social gaming, we are witnessing a literal renaissance of digital brands extending into the physical world via brand licensing and product extensions.

The biggest difference between today and yesteryear is the fact that today's blockbuster digital entertainment franchises are coming from new and exciting places. We see this with the likes of Rovio's Angry Birds (Finland), Mind Candy's Moshi Monsters (UK), and Lima Sky's Doodle Jump (US). In the past, it seemed as if only those brands with scale, access, and resources had the ability to develop huge franchises. But today, a single entrepreneur sitting in his or her bedroom--anywhere in the world--can create a global brand or property, and a huge licensing franchise with it.

I saw this trend confirmed again and again at this year's Brand Licensing Europe 2013, a pan-European conference that drew together 280 exhibitors displaying more than 2,200 brands, as well as retailers and licensees (manufacturers who acquire licenses from brand owners to develop and market licensed consumer products). At the show, digital brands from a variety of backgrounds were undeniably present -- from Imangi Studio's Temple Run to Ubisoft and Playstation -- and focused on one thing: extending the power of their online brand into the offline space.

Consumers want both online and offline

The (re)new(ed) interest in new media isn't very surprising. For years now, there has been a shift in how consumers search for, interact with, and relate to entertainment media. But the real catalyst for today's growth is mobile. Consider the constant rise in smartphone ownership across all age ranges in the UK. Today, 22% of adults admit to even using their phones in the bathroom. Simultaneously, consumption of traditional media is pacing for a 1.3% decline, mainly due to lessened consumer interest in TV as an entertainment medium.

What is surprising is the rate at which digital media is moving offline. I mentioned Moshi Monsters and Angry Birds. There are others, properties like Minecraft, Halo, World of Warcraft, or Candy Crush, which have already extended into the physical sphere or are starting the process. I saw this begin to emerge in 2011, and a bit more in 2012--but this year there has been an explosion.

For instance, the now-famous Angry Birds app was the 52nd game released by the small Finnish gaming company Rovio. In the three years since its release, Angry Birds has expanded into theme parks, toys, apparel, and collaborations with major entertainment brands such as Star Wars, making them one of the largest exhibitors at BLE. In the past it would have only been brands such as Disney, Warner, Hasbro, and the like, to make such a splash at the show.

What it means when online brands expand

The implications of this undeniable trend are significant, extending beyond the creators of online media, to the licensees who work with brands, and to the consumers themselves.

For creators of online media, the potential to create something in the digital space that then extends into the physical means there's a powerful route to reach new audiences, new markets, and new consumers. Imagine you're a small games developer. You create an online game. You grow and gain thousands of users. People pay for your app, or maybe you're financed through advertising. Yet where do you go next? What can you do to continue to extend your brand? Here's where the extension of your brand into the physical comes into play. You can turn aspects of your game into consumer products: books, magazines, toys, t-shirts, food, a film, and so much more.

Simultaneously, licensees have so many more options today. In the past, a licensee/manufacturer that wanted to a partner with a blockbuster franchise had no choice but to work with a limited number of licensors/brands. But today, the options are so vast--and coming from the unlikeliest of places (who could have predicted Angry Birds, for example!). What remains to be seen is who ultimately benefits from this shift in power dynamics. In my mind, with more options comes more negotiating flexibility. So I think that, at least for now, the big winners will be the licensees.

But regardless of who wins, as more and more brands extend from online to off, both licensor and licensee will need to recognize the change in how consumers access entertainment. They'll have to adapt to the speed at which innovations in the digital landscape call for new and innovative brand extension strategies and products, such as those that incorporate augmented reality, 3D printing or redemption codes. For consumers, these changes mean more access to the brands they love, and in more of an integrated and immediate way.

The transition is happening, but are brands ready?

As a result of the confluence of these various trends, in my opinion the licensing industry has never been as exciting as it is today. I would even go so far as to say we are currently in a "Golden Age" of licensing. But this isn't to say that for the numerous digital companies present at BLE 2013 attempting to extend apps and move online brands offline, the process is without challenges. Recently, Mind Candy CEO Michael Acton Smith expressed concern that Moshi Monsters' young and constantly connected audience is shifting away from browser-based entertainment, opting instead for mobile and tablet versions. This suggests that there are numerous nuances still to be worked out. Even some of the greatest new media properties are still sorting out how to adapt in order to survive in an increasingly competitive and fast-spinning digital landscape.

As long as they do, I anticipate that the interest in digital properties and consumers' desire for branded products will only intensify going forward. The online world is enabling brands both large and small to expand offline. I saw it at BLE, and I think I'll be seeing it more and more.