A subcommittee of the House of Representatives will holding hearings Wednesday on “The Impact of Online Advertising on Small Firms.” Texas Democrat Charlie Gonzalez of San Antonio chairs the Subcommittee on Regulations, Healthcare and Trade that will conduct the hearings on Wednesday, June 25, 2008, at 10:00 a.m. The subcommittee is part of the Small Business Committee chaired by Brooklyn Democrat Nydia Velazquez. I’ll look for follow up information when it is available.
Category Archives: Advertising
Feast, famine, cannibalism in newspapers
What’s up with the newspaper industry? Surprisingly, readership is up in developing nations where globalization is raising incomes, according to the World Association of Newspapers which recently unveiled its exhaustive summary of the print news industry in 2007. A WAN press release offers detailed results by region and country. The other big theme I noticed is the rise of the free dailies which are proliferating faster in mass-transit dense Europe than in the suburbanized USA.
U.S. press leaders are part of WAN. The following quote from Dean Singleton, chief executive of the MediaNews Group, caught my eye. Singleton owns a string of papers in my San Francisco Bay Area, including the Hayward Daily Review, to which I subscribe. According to WAN Singleton says:
Why should we cannibalize our newspaper, why not simply adjust and wait and see? Personally I prefer to have a cannibal in my family rather than to have one as my enemy.
I assume that Singleton made those remarks in the context of explaining why newspapers should be moving their businesses to the web. But seeing as how MediaNews employees will soon vote on whether or not to join the Newspaper Guild, let me emphasize that Singleton could not have meant cannibalism literally. California law would clearly forbid such behavior though I believe the federal protections may have been amended after 9/11.
Meanwhile there must be consternation in the Los Angeles Times newsroom as the Tribune Company enforces a chain-wide edict that there be a 50-50 split between pages devoted to advertising and news. According to MediaPost:
If the 50-50 policy were already in force, this would have necessitated a 13% reduction in editorial volume, resulting in a total size reduction of 26%. Plotting the trend out, presuming that advertising inches decrease at the same pace, the newspapers would be less than one-quarter of their current size within five years.
But while newspapers, the foundation of mass media, suffer readership and advertising declines, it appears that readership is growing for alternative papers that are presumably weekly in periodicity. When the Media Audit looked at readership in 117 alt papers in 88 media markets, it found a three percent increase in print readership and a seven point increase in web unique visits. The print gains sound good in comparison to daily newspaper losses but the online viewer ship seems anemic.
What does it all mean? Search me, but the prevailing wisdom is summarized in an IDC forecast to the effect that:
Internet advertising revenue will double from $25.5 billion in 2007 to $51.1 billion in 2012. During the forecast period, Internet advertising will grow about eight times as fast as advertising at large.
So maybe Dean Singleton is right. Newspapers shouldn’t say “cannibalism” as if it’s a bad thing.
Lead generation: golden land of advertising?
Pricewaterhousecoopers recently analyzed Internet advertising in 2007 which rose 26 percent to $21.2 billion in a year-over-comparison to 2006. A summary of its findings reveal that:
Search revenue accounted for 41 percent of 2007 full year revenues, up from the 40 percent for the full year 2006. Display advertising, Classifieds, and Lead Generation accounted for 34 percent, 16 percent, and 7 percent of 2007 full year revenues respectively.
Thus far the communications industry has been mesmerized by the rise of search which correlates with the rise of Google. But search — and perhaps Google — will crest as ad magnets. Big things don’t grow fast and the novelty of search ads is wearing thin. One mainstream web and magazine publisher who will remain nameless recently told me that the share of search revenue to the chain’s flagship web site had crashed from $20,000 a month circa 2004 to under $1,000 a month recently! Why hasn’t Google crashed? Because the web must be bringing new sites and eyeballs to its search system faster than interest is eroding at the places where it is already. But it would be interesting to see, in the search context, what the retail guys call year-over-year, same-store sales. Is income from search at top websites growing or shrinking over time?
But content creators don’t really care about search revenues except insofar as they are a tax on attention that Google is currently able to levy because people are still creating their habit patterns in the new medium. Search, for content creators, is chump change.
So where should content look for advertising support? Big Web content can chase display ads but that competition demands huge traffic and when you get those campaigns, you must rely on exotic methods to prove that you are hitting ephemeral targets like making people love your brand.
So how do small websites grow revenues?
Go after lead generation. It gets to the heart of business. Companies sell products and/or services. Follow the audience. Elicit feedback. If your audience clicks or calls,prospective advertisers will sign and pay.
Better consumtion through technology?
Â CiscoÂ blogÂ touts 1960s TV show!
OurÂ most powerful modernÂ myth is the notion of “progress” as defined by an every-expanding galaxy of consumer choices provided by that bubbling caudlron of double-double toil and trouble that is the global economy. And consumption is of course tightly tethered to advertising and branding, which are the mother’s milk of media, making the whole question of how to goose sales an issue of survival for us “content creators” whose works are the flypaper that Big Consumption uses to attract and retain ears and eyeballs.
So I was particularly amused to see TNS, one of the world’s leading advertising firms, summarizeÂ a report on a survey that asked consumersÂ in Canada, China, France, Germany, Japan, Spain, the UK andÂ USÂ how theyÂ expect technology will change the nature of shopping in stores in the future. The summary says:
A confident 73% of shoppers globally say they expect to be using interactive touch screens in dressing rooms to communicate with sales assistants by 2015, while half or more expect that 3D body scanning and interactive dressing room mirrors will eliminate the stresses of trying on that new outfit.Â
Really? Will these 3-D programs also make you look just a wee bit slimmer? Or will a soothing mechanical voice of a gender appropriate to your shopper profile — hot or husky depending on your orientation –Â tell you that the outfit looks great on you? And will you be able to believe it?
The TNS summary offers no details regarding methodology which is OK given that it is a free teaser circulated to draw attention to what is presumably a costly and thoroughÂ analysis that global retail brands will buy and take seriously. We are not those people and so we can amuse outrselves by thinking how the future never really turns out to be like the predictions. The future almost always manages to catch us by surprise.
The cartoon above is, for instance, shows a character from the 1962 TV show, the Jetsons, talking into a videophone. A Cisco blog used that image in October to talk about a new telepresence technology. But after 40 plus years ordinary folks can now get telepresence of a sort for little more cost than access to a camera-carrying PC with Interent access. Longer lead times than expected but broader impact when it arrives. That’s my sense of how technology affects the future.
Blogged on my (your-product-here) PC
I must be a bit bonkers over product placement. The term describes how broadcasters drop branded items, as if serendipitously, in entertainment media. Of course this is advertising in disguise and I have been an aficionado of this guerrilla marketing tactic ever since I saw the thoroughly silly movie called, “And God Spoke,” in which the makers of a Biblical epic inject a soft-drink commercial into the movie because that was the only sponsor willing to fund the project.
The film is fun if you have the time to watch it. Meanwhile, the Center for Media Research reposted Nielsen data showing that product placements rose 39 percent in network television in Q1 2008 but fell in cable television. As I noted yesterday network advertising has been off sharply while cable ads have risen. So the hard-up networks are pimping whatever they can. “There were 117,976 brand occurrences on cable and broadcast networks in the first three months of the year,” the Center reported.
Here is the Center for Media Research report on 2006 product placement which was even then growing 40 percent. So the current gains continue a trend. That report said:
â€œproduct placement spending surged 42.2% to $2.21 billion in 2005 with double-digit growth expected to continue in 2006 and beyond. Product placement spending in TV, film and other media is expected to climb another 38.8% to $3.07 billion in 2006.â€
Finally here below please find my summary of aesthete and critic David Hadju‘s remarks on product placement. One thing in my notes from his talk (at a Columbia University J-school alumni event) was this: circus owner P.T. Barnum used products in his big tent shows and found that circus goers were amused that he had done so. Apparently, Hadju said, the public is tickled that entertainers pluck items out of their lives and drop them into media. Here are Hadju’s previously-published remarks taken from a lengthy blog posting mocking the “religion” of journalism:
I decided to expand my horizons at a lecture from aesthete and critic David Hadju. And Iâ€™ll be damned if he didnâ€™t deliver some news I could use. Hajdu talked about the notion of product placement throughout history. Seems like ever since Homer entertainers sucked up to the rich and powerful, a practice that continued up through the Renaissance when painters PhotoShopped their patronsâ€™ faces into artworks. Hadju said this practice stopped during the modern industrial era ((which corresponds with the rise of democracy, nâ€™est-pas?) during which time the â€œstarving artistâ€ made integrity the cornerstone of art. Nowadays, Hajdu said, culture is going to back to this suck-up future, as evidenced by the placement of Tequila references in a Broadway remake of Sweet Charity. So Iâ€™m thinking, is this Aristocracy 2.0?, so I ask Hadju something like: Does this mean weâ€™re returning to a he-who-pays-the-piper-calls-the-tune paradigm? And he says something like: Yes. Which I find very useful because it dovetails with an essay from techno-seer Kevin Kelly who recently wrote the New Age Guide to Sucking Up As a Business Model. (Memo to self: work on this ingratiating thing.)
For advertising, niche rules, mass drools
I continue to be impressed with the signals that favor specialty media over mass or homogeneous media. For instance I only recently noticed the TNS Media Intelligence U.S. advertising summary for 2007. Overall the U.S. advertising market was flat withÂ a 0.2 rounding error increase over the 2006 figures to bring the total spendingÂ to $148.99 billion last year.
But niche media posted respectable increases: the Internet rose 15.9% to $11.31 billion; consumer magazines, the most web-like old medium, rose 7% to $24.43; even cable outpaced the GDP to rise 6.5 percent to $17.84 billion.
Down were the homogenizing media: network TV off 2 percent to $22.43 billion; spot TV down 10.2 percent to $15.59 billion; syndicated TV off 1.5% to $4.17 billion; local newspapers down 5.6 percent to $22.66 billion (how long before surpassed by Net?); and radio fell 3.5 percent to $10.69 billion.
I saved outdoor advertising for last. It roseÂ 4.9 percent to $4.17 billion. Why? Not for itsÂ niche appeal but I would guess because of a general lessening of faith in the traditional advertising media.Â My guessÂ is that outdoor benefits from advertiser confusion over how best to reach the busy consumer — catch them in a car staring out the window. Otherwise the winners allow for greater targeting and specificity and the losers are the unfocused aggregators of eyeballs. Â
A news media not in thrall to advertising?
One of my daily newspaper colleagues wrote a story Sunday whose headline should serve as a wake up call to the beleaguered media industry: “Dollar’s fall forces new standard of frugality.” It’s a good piece that notes what may seem obvious — the probable recession, the mortgage bust, the persistent trade deficit and the sudden distaste of foreign investors for American debt will restrain the credit-driven consumption binge that can no longer be sustained.
Now let’s think about that in the context of a mass media industry in which display advertising money is being shifted to search-driven queries and sponsorship advertising at far lower cost per thousand than newspapers of television. The TNS Media Intelligence snapshot in 2007 repeated the trend we already know — newspaper and television post declines, Internet posts double digit growth.
Now the nation has slipped into what appears to be a housing-driven recession of uncertain depth and duration. What happens when advertising spending, pegged to economic growth, shrinks? The data suggest that advertisers are looking for new and supposedly more cost effective ways to spend money. When Advertising Age surveyed the media job scene earlier this year marketing grew off the charts. Spenders are using blogs and social networks to burrow inside peer groups (the AdAge article is behind a firewall; a past blog entry has excerpts).
Mass media advertising that rains down on the general populace is so 20th Century. Mass media are already being clobbered by Google et al on display ads. Craigslist and its fellow travelers are cashing in on classifieds. Now comes a spending contraction coupled with a shift in advertising fashion.
When does the news start to get good? Well not now because I truly believe that we are entering a period on which the word “frugality” is likely to make a lot more headlines. We may be coming to the end of 80 to 100 years of a consumption economy and a mass media that coexisted quite nicely inside a cocoon of ever-increasing spending on creature comforts encouraged by advertising messages that encouraged that consumption.
And my point? Advertising is not going to completely evaporate but it will never come back the way it used to be for the times they are a changing. The audience is changing. And that means that as we look for a new business model we have to take our cue from the times. We live in a knowledge economy. We are told knowledge is power. Does it not therefore follow that knowledge is also valuable and can therefore command money?
Tomorrow I will outline how journalism can stop being the “Extra, extra, read all about it!” loss leader for advertising — and start to bring home the bacon by selling information, connections and community.