I've been attending the networking sessions launched this year called the New York Media and Information Exchange Group. It's hosted by my friend Bill Sobel, who seems to know everyone worth knowing. The sessions are attended by a great group of folks with some terrific speakers.
The last session, on November 9, featured Jack Myers, the editor and publisher of the Myers Report. It was a very insightful talk, centered on the question: audiences are ad-oriented, but where's the revenue?
Jack started with CBS sales and marketing for their TV stations. At the time, Teletext and videotext were expected to be the big revenue streams of the future. Cable was expected to be a small business since the prevailing use of cable at the time was merely to improve reception. Jack, however, saw much greater potential in cable and its proliferation of content, especially having grown up in Utica which had only one station in 1962.
He tried to convince stations to ally themselves with cable for news production. He also worked with UTV, which tried to create interactivity with TV stations via telephone for games and shopping, before moving into consulting for advertisers.
He now feels that the nature of change is itself changing: everyone now expects change; they are not resisting as they had in the past. Furthermore, changes are happening at an exponential rate.
First there are the incipient signs of change coming, then it happens quickly, as with the fall of the Berlin Wall, which was the culmination of many years of decline in the Soviet Bloc. Advertising last year declined at the networks by 3% and at the stations by 5%. While some of the decline may be due to lack of elections and the Olympics, advertising is no longer growing in line with GDP. Even the growth in online ad spending is declining to only 20% next year.
Instead, advertising dollars are going to smaller, unique applications such as movies and Wal-Mart’s TV network, which are considered to provide better ROI and be closer to the point of purchase.
In addition, search advertising has peaked, especially since click fraud will be a problem for the foreseeable future. Online video does not have enough inventory, while traditional media is over-supplied. Magazines, however, seem to be making a comeback, with Proctor & Gamble announcing that it is going back to magazine advertising.
In general, the old patterns and cycles will not repeat, and instead new patterns are emerging. This is the most disruption in advertising that he has seen in 25 years.
Virtual worlds are the next wave, as described in the recent New York Times article about Second Life: http://query.nytimes.com/gst/fullpage.html?sec=travel&res=9F06E3D8133FF930A35752C1A9609C8B63. The next generation will view the Virtual World as real, such that he suggests referring to the Physical World rather than the Real World, to distinguish it from the Virtual World.
The measurement of advertising will also change, in this case away from mass audiences. The quality of the eyeballs will be more important. Currently, commercial ratings do not measure quality or engagement.
Cable CPM has leveled off at 60% of broadcast CPMs. The Internet has allowed itself to become commoditized at a $2 CPM. Furthermore, auction models are developing via web to sell mass market ads, causing further commoditization.
Jack is focusing on Emotional Connection Research. Broadcast TV is better than ever, in terms of creativity, production and technology. Advertisers, however, are still moving away from TV in order to be more targeted. Marketers want media to encourage relationships with consumers and are moving away from the mass market, industrial method. In keeping with that development, ad agencies will move from the siloed model to an integrated approach. New entrepreneurial shops will emerge.
The strongest brands will be multi-platform, whereby the brands can carry their audiences across multiple media.
Advertising and marketing is moving into a Relationship Age and away from the Industrial Age. As a result, corporate schizophrenia is developing due to the need to operate in both the Physical and Virtual Worlds, similarly to amphibians that needed to live in the sea and the air. Yet the Physical World constitutes 90-95% of the environment, while marketers need to invest in the 5-10% that is made up of the Virtual World despite Industrial Age pressures created by Physical World structures and Wall St.
Q: TV viewing on new devices.
Home PC equipment is in its early stages in comparison to TV viewing, but the direction seems clear. At this point, 32% of NBC's programs are on the Internet. Advertising is moving to new formats, such as 5, 10 and 15 second ads.
In general, the broadcast networks are responding better than had originally been expected. Going forward, the DVD windows for TV programs will become shorter, and networks will post shows on the Web even before broadcast.
Small screens will suffice depending on the circumstances; mobile is just another video platform.
Q: Measurement across multiple platforms.
Sales are the best measure. Other techniques are in development: IAG Research is testing next day recall, and Jack has his Emotional Connections platform. The industry is probably 10 years away from good answers to these questions.
Q: Who has done well in the Relationship World?
L’Oreal is probably the most effective at integrating marketing across platforms. Within NeoPets, McDonald’s has successfully introduced French fries as the pets’ favorite foods. Pharmaceutical companies are been using iVillage effectively but have not extended their efforts beyond that. Media agencies are behind the curve – they are trying but they are not being compensated by their clients for developing new platforms.
Q: Valuations of new platforms.
Jack estimated a $1 billion price tag for Second Life. Venture capitalists are making mistakes, however. They are looking for technology in an environment where there is no protection for technology and investing in some companies who happened to get lucky. Similar to a vein of gold, the viral strains are subject to too much competition and will tap out. Venture capitalists are not investing in experience, content, consumers or an understanding of market dynamics. They are also not lining up with management due to their desire to maintain control. Jack feels that we are in a bubble in that venture capitalists are in the “hits” business rather than that of building infrastructure for the long term.
Q: How to help marketers find their audiences.
It’s best to build an audience and then take that audience to the appropriate marketers, as Daily Candy has done. Marketers are not interested in investing to build audiences.
Q: Impact of technology on advertising.
The old assembly-line model made it easy to buy mass audiences, and some of the new technology-based techniques, such as Ad Sense and Spot Runner, are further commoditizing ad buys. Google is actually becoming the largest traditional media company. Ad growth is flat, projected to be 6-7% this year and 4% next year. In general, it will grow with GDP.
Jack lamented the absence of today’s Ted Turner, Bill Paley and David Sarnoff – people who develop completely new concepts for marketers.
