Technology is having a big influence on the Cannes Lions advertising festival this year – and not just because of the €220,000-a-week 132-foot yacht, which  lead sponsor Microsoft has parked in the middle of the bay.

The lines between TV spots and viral web videos are officially blurred by the inclusion of creative from any screen – from cinema to mobile phone - in this year’s Film Lions. Creatives from the offline world are getting to grips with digital tools, even if their companies’ structures and business models haven’t quite caught up.

Some agencies – and not just Microsoft-owned Avenue A Razorfish – are even wondering whether there ought to be an award for applications next year. Most of those ‘apps’ are likely to be Facebook widgets, whether to send online buddies Coors-sponsored drinking invitations or Nike’s Miles, which particularly keen joggers can install to nag them to run more often.

A more philosophical inspiration from the tech world is open source, the somewhat utopian software development movement that puts its code online for anybody to improve. The freely available Linux operating system and the Firefox web browser are the best-known examples in software, but agencies are embracing the concept as a metaphor for online collaboration and using consumers to extend marketing campaigns.

Aegis digital wing Isobar is touting open source as the thinking behind its online Isobar TV show, recording interviews with rival agencies at Cannes to foster a spirit of cooperation.

Open source was the main topic of conversation at BBH’s latest top-level pow-wow, says managing director Ben Fennell. Even with 900 employees worldwide, “we should be finding better ways to harness millions of people around the rest of the world”, says Mr Fennell. BBH’s posters for Vodafone UK’s current outdoor campaign draw on over 100 designers from around the globe.

“It’s definitely a trend,” Mr Fennell says. “But nobody’s figured out how to do it yet.”

Similarly conflicted is Richard Morris, regional director at DDB Europe. DDB can feel virtuous after the remix of Singing in the Rain used in its Volkswagen Polo ad soundtrack was used by the winner of Britain’s Got Talent. The three-year-old VW campaign’s life is extended as the Mint Royale track tops the UK charts, but DDB has not managed to hold on to the intellectual property rights.

Allowing consumers to run with an idea and enlarge its audience can only be “a good thing”, he says. “But as soon as an idea lives beyond the paid-for medium in which [advertisers] are investing, the business model on which we’re paid slightly falls apart.”

Open source is just one way in which technological developments are wrenching the organizational and business models of advertising agencies. “The above-the-line and below-the-line distinction is completely confused by online,” says Alastair Duncan, chief executive of MRM Worldwide, the digital arm of McCann Erickson, an Interpublic agency. “But the industry is structured around its output.” That can hinder the development and complicate the billing of the integrated campaigns that marketers are increasingly demanding.

Even if social media and the internet in general present as much opportunity as challenge, by enabling cheaper campaigns to achieve greater “engagement” with consumers, marketers and advertisers are still grappling with the financial consequences of technological change.

Storm clouds are gathering over the advertising industry. But, this being Cannes, media folk are happy to ignore the rain and instead concentrate on the accompanying sound and light show. The strong Euro and economic gloom has not prevented the Cannes Lions International Advertising Festival – run by GMG and Apax-owned Emap – from attracting thousands of delegates and 28,000 entries from 85 countries. That’s up 5.8 per cent compared to last year.

With even more parties promised this year, the ad world isn’t going to let anyone rain on its parade by pondering whether the cash blown on festivities can ever be recouped by the deals done between the Carlton terrace and the notorious Gutter bar.

Lightning has already struck twice for BBDO, the New York agency, for its “Voyeur” campaign for US TV network HBO. This huge video projection against the side of a New York apartment block, appearing to reveal the kitchen-sink dramas within, scooped a second Grand Prix in the Outdoor category, hot on the heels of yesterday’s Promotions gong. The talk of the Lower East Side prompted a million visits to promotional site www.hbovoyeur.com and, in ad-speak, strengthened “super-fans’ engagement” with HBO. (more…)