Tuesday, 13 March 2007

Is The Internet Punching Below Its Weight In Media Value?

There has been and continues to be a huge shift in the media landscape. Just look at the volume of media options available to us – Radio, TV, Magazines, Newspapers, Internet, etc. Not only are there more options open to us today within each option there has been an explosion of channels. I remember the days of only having 3 Television channels (BBC1, BBC2 & ITV), and they did not broadcast all night. This is well before Sky / Digital TV entered the market and flooded us with channels reaching out to niche groups of people with targeted channel programming.

TV is not the only area, what was once a habitual process of buying the local regional newspaper has now been replaced with multiple copies of regional / local newspapers either delivered to your home or free to pick up on your way to work. It doesn’t stop here, walk into a supermarket or newsagent and you will see multiple examples of consumer magazines tailored to any hobby / interest imaginable, with launches and closures occurring on a monthly basis. All this before we even mention the Internet. Consumer usage/time is not the only change to the media upheaval; businesses also play a huge part.

The battleground is basically on 2 fronts, the first being “eyeballs” or consumers and the second is advertising spend. If you can deliver the first should you be entitled to a decent share of the second? Logic tells me the money will follow the audience.
The interesting observation however is how the media explosion is dissecting the size of audience to each channel and the time spent viewing. The Association of Online Publishers are arguing that this has led to an end to targeted mass marketing

Traditional media are currently leading the way in terms of their share of the £18.96 billion in advertising spend in the UK, the biggest being press (National & Regional Newspapers, Magazines and Directories) with 45% of all revenue and TV second with 25%. There is, however, a clear warning that things need to change for them to maintain this moving forward. The current share of ad revenue is disproportionate to the share of media consumption ie time people spend interacting with that media. My feeling is that this balance will be addressed, and has in fact started. As time passes and technology changes there are massive implications for what were traditional media companies. The under 25’s today have a very different pattern of media consumption to that of the older generation (as highlighted by KPMG) and as a result need different communication and interaction

The technological advances are also now offering advertisers new, more cost effective, better ways to reach their potential customers. A prime example is the shift of classified advertising from newspapers to internet sites. Large lists of items / jobs / properties / cars are not the most interesting of reads. When you are looking for something specific it takes time to trawl the columns within newspapers and magazines to find what you want. The internet allows you to interact, search and filter information much quicker and now from multiple sources. It is free and the presentation of a car ad for example with large multiple images (possibly even video) and expansive descriptions is a giant step from a black and white lineage ad on newsprint. With audience and advertisers taking advantage of what the Internet has to offer it is no surprise that spend and time is transitioning online. The internet now takes a 7.8% share of advertising spend and is showing growth of 65.6% year on year on what otherwise is a declining market (IAB 2006).

Is TV next in line for attack? Viewing figures / time spent watching what were the traditional TV channels are falling, and advertisers are finding it harder to get response. Internet based technology is evolving with video streaming common place, the growth in usage is resulting in sites generating huge audiences, improved connectivity and performance is enabling faster transfer of larger amounts of data. Website operators can claim unheard of targeting for advertisers with new pay per response charging models. The move is towards tailored “one to one” marketing with minimum waste. Can ROI for advertising finally be calculated accurately?

Google, amongst others, are taking advantage of this by delivering video ad clips across websites in its adsense network. Google and the content partners sell the ads and revenue is then shared. Companies like Conde Nast and Sony BMG Music Entertainment being early adopters in the market. Search based targeted advertising is not a thing for the future as it is currently being tested.

Where does the future lie? Google have had huge success in generating content and viewers through Youtube but Media owners are fighting back by speeding up their investment in their own web offering and they believe Google/YouTube should pay for the privilege of using their copyrighted content. Viacom's suit demands the removal of 100,000 unauthorized clips so will restricting licensed programs on Youtube work? Google boss Eric Schmidt unsurprisingly thinks not. Media companies must take a step into the online video delivery arena, The Telegraph are doing this with their Online TV Business News and the BBC are linking with Youtube to deliver their proposition. It is not clear to what extent time viewing online will continue to transition nor the ad money that goes with it. We can be sure TV will be affected in some way and as a result expect to see some radical changes being introduced by traditional media companies in a bid to position themselves to protect and fight for a healthy share of adspend in the future. Whether they do this alone or in partnership with a Youtube type operation remains to be seen.

Does it stop at TV? What is next for targeted advertising? Technology is impacting in all areas of society in terms of advertising space and messaging. Football billboards are no longer static posters, they are much more dynamic enabling timed messages such as betting odds for the next goal. Bus shelters have been enabled with SMS messaging and the next generation of Hi Definition TV screens with Bluetooth technology used to showcase ads outdoors are now available. The key for advertisers is to get consumers to interact with them as this is much stronger than bombarding consumers with messages. Consumers interact with what is designed to be personal advertising by downloading clips or reminders as they pass by. This interaction is then measurable. The opportunities are endless as technology advances campaigns can become highly targeted. Take tube advertising in London and poster sites up the escalators at stations. These can be brought to life and be used to target different consumers based on time of day. McDonalds breakfast on the way to work for example or commuter times and routes can hit the business traveller compared to mid morning tourist focused messaging around the lines used to visit popular destinations.

Technology is changing, media consumption is changing the question is which businesses will be able to change stay in touch?


Anonymous said...

Good to know that our UK friends are thinking the same thoughts across the big pond. New Media companies will be content companies AND technology companies.

Tim said...

Interesting comments, but I'm not quite sure that I agree with your arguement.

The graph shows that Internet is capturing a very low percentage of advertising spend - relative to the amount of time spend "using" the medium. From this you claim that the DOLLAR amount of advertising online must increase.

Although I agree with you that online advertising is growing rapidly, you seem to have forgotten one item: ONLINE ADVERTISING IS MUCH CHEAPER.

Online Advertising is much cheaper for both the advertisers and for the media content providers. The variable costs of creating a website to publish news stories are neglibable vis a vie the costs of printing, distributing and delivering a physical magazine or the production and broadcast costs of a TV program. This has led to a far lower premium being required from the advertisers.

My question - "Is the dollar amount the correct KPI when it comes to measuring advertising online?"

RW said...

I agree with your comments on the cost of online ads relative to offline, but as it proves itself as a viable alternative then traditional media will have to react to the price differential or lose revenue completely. I also believe as many media companies have interests in the online alternatives as soon as the market will enable price increases they will implement them.

I think the impact of the lower cost alternatives will result in a deline in the total size of the advertising market over time, this should not impact profitability as costs tend to be lower and margins higher.

The current market is showing movement of spend from traditional media to the internet. The Internet is proving itself as an alternative to other media rather than an addition in some verticals. Newspaper and magazine publishers in the UK are experienceing declines in ad revenue and as a result the overall spend in the sector is declining. Their reaction to this is twofold, firstly they are investing heavily in online businesses and secondly embarking upon cost cutting / re-organisations within their traditional publishing divisions to try maintain margin.

As I elude to in the article this trend may well hit TV next, radio may not suffer the same as it is a media that can be consumed in conjunction with Internet usage. Overall the internet will continue to grow revenues from ad spend that transitions from old media, the overall market will possibly fall and as a result the Internet should take a greater share of this market.

I still think the disparity of share of audience compared to share of spend can not continue.