ADVERTISING TRENDS DURING THIS PERIOD OF ECONOMIC CRISIS AND TECHNOLOGICAL CHANGE

Transcription

1 ADVERTISING TRENDS DURING THIS PERIOD OF ECONOMIC CRISIS AND TECHNOLOGICAL CHANGE We are in the midst of yet another technological revolution. We have grown up with radio and television and now the internet and the mobile phone. It is not clear what will be next in the delivery of program and advertising material or what the next business model will be. Lets start our discussion with what is going on today and perhaps we can be a little bit smarter about tomorrow. A. IMPACT OF THE ECONOMIC CRISIS ON THE MEDIA The headline in Crain s New York Business of February 2, 2009 announced AD DROUGHT RAVAGES MEDIA FIRMS. Newspapers, magazines, radio and television stations have all experienced demoralizing declines in revenue, the biggest magazine publishers have folded well known titles, and book sales have plunged by double digits. (However, this does not given take into account Amazon s KINDLE and Microsofts competitive electronic book) KINDLE was sold out at Christmas and many titles are being made available for sale on this portable electronic book. There has also been some speculation as to whether this pay for download model may help magazines and newspapers. The New York Times is available on KINDLE. We shall see whether this is a model that can help replace the lose of advertising as revenue for the delivery of news. Many of you are aware that New York City is the capital of the American media world and, while that business is not Wall Street, it is crucial to the city s economy. Media companies account for more than 160,000 jobs and $15 billion dollars in wages, according to the city s Economic Development Corp. New York controls 50% of all the revenue in magazines, broadcast television and books, and about a quarter in radio, cable television and newspapers. Media is among the areas in the economy hit hardest by the downturn. The decline of advertising in newspapers has been so steep partly cyclical and partly because of the shift to the Internet that some wonder if they will even survive. The newspapers depend on automotive, employment and real estate classified advertising for half of their revenue. They have not been able to monetize their 1

2 websites and they face a young demographic that doesn t embrace newspapers as a source of information. Magazine publishers have also announced cutbacks and folded publications. Even Rupert Murdoch who as you recall last year purchased the Wall Street Journal is reported in the New York Times as saying: While we anticipated a weakening, the downturn is more severe and likely longer lasting than previously thought. We are implementing rigorous cost cutting across all operations and reducing head count where appropriate. The New York Times reported that reflecting a sharp downturn in advertising across the broadcast television industry, the News Company had its steepest drop in the television unit, where income fell to $18 million from $245 million a year earlier. The company s television stations had a 44 percent decline, reflecting a significant overall weakening of the local advertising markets despite increased political advertising revenues, the company said in a statement. These figures are for last year and do not take into consideration the future impact of loss of local car dealer advertising and non repeat of political advertising. The film division had a loss of income as well. One bright spot was cable networks, including Fox News. The division reported income of $428 million, up $91 million from the period a year earlier. The News Corporation stock is down 52 percent over the last six months, and 70 percent off its 52 week high. Time Warner, Viacom and Disney are all down less than News Corporation, while CBS is down more, off 65 percent over the last six months. The January 29 th ADVERTISING AGE reported that the price of advertising is dropping all categories with vast amounts of inventory available. It is having its impact on internet ad prices as well, making it even harder to monetize that media. And yet, on February 8 th, 2009 the New York Times reported: television stands out as the one old media business with surprising resilience. Though Americans are spending a record amount of time online, including a record amount of time watching video, we are also watching record amounts of very old fashioned television, according to Nielsen Media Research. American attachment to the medium, of course, is obscured by the splintering of attention across so many cable offerings, in addition to the major networks. The video mode has been reinforced by the rise of YOUTUBE. In December, almost 100 million viewers in the United States watched 5.9 billion YOUTUBE videos, according to Com.Score. Tellingly YOUTUBE has not cannibalized TV viewership it has instead carved out another chunk of leisure time for video on a screen. The article goes on to observe: Advertisers follow viewers wherever they happen 2

3 to be. Online, of course, the healthiest category of advertising is search related. Google s revenue, most of which comes from search, was $21.8 billion in 2008, up 31 percent from But once that special case is put aside, online advertisers have a stark choice: The first option is to place display ads at very inexpensive rates, thanks to an overabundance of supply, but these disappear in the vast ocean of the WEB: some 4.5 trillion display ads were shown to United States internet users in 2008, according to com.score. Or advertisers can use ads that resemble television commercials and match those to online content that most resembles television because it is actually television programming. HULU, which was created by NBC and FOX, offers many TV shows online and had a 57 percent increase in viewership in the last six months of Even with that growth advertisers have been somewhat hesitant with budgets heading into the New Year. On line still needs to prove its return on investment. On line still needs to prove its return on investment. It is not clear to advertisers what is working when you have multiple platforms for your advertising message, TV, on line and mobile. Local ads have accounted for some of the fastest growth in Internet advertising in recent years. While it is expected to be flat this year there continues to be a lot of experimentation Social media is a fast, efficient and relatively low cost way to get an advertising message to an audience. Over 100 million plus videos are downloaded from YOUTUBE each day. In fact, that is how we are going to view the Super Bowl ads today. There are millions of blogs and millions of profiles on social networking sites such as MySpace, Facebook and Twitter. These new tools blogs, wikis,podcasts, Facebook, Twitter, on line video and social networks all present intriguing opportunities for customer engagement. Recently a local New York City advertiser, a sports bar, has been using the site Meetup to attract groups of fans of teams like the Boston Red Sox to special events. These sites provide a way to target customers based on their interests and to keep in touch with regular customers. A New York city owner of a Gourmet Food truck uses Twitter to tell customers when his truck will be be particular neighborhoods. A software designer uses it to post free trial deals for their particular product. They have been successful in attracting people to try the software. These new experiments on making the social media commercial are just a few examples of Advertisers trying to reach consumers. In that context we should look at the likelihood of hand held phones becoming the portable pc s of the future. There is significant interest in mobile advertising. But before it becomes that advertising media of choice it has to deal with the problem of cluttering up the small 3

4 screen. Also, a lack of common standards across the industry in how operators, handset makers, and advertising agencies approach the service and the little research showing its effectiveness mean the handheld industry is still a little way from taking off as an advertising vehicle. Monetizing of mobile applications will probably come from a mix of advertising, charging fees and third party sponsorships, such as mixing a new music album with a game. In spite of the economic news there is innovation going on. Disney, for one, is chasing after the young male demographic by launching a new Brand, Disney XD. A brand aimed at boys 6 to 14, a group that market researchers say accounts for about $50 billion in spending worldwide. At the center of the effort are a cable channel, scheduled to start at offering action adventure programs and youth oriented sports news (provided via ESPN, which is owned by Disney) and a Web site offering games, music and social networking tools. In the US Disney has renamed its struggling animation channel, Toon Disney which is available to 72 million homes, to Disney XD. Companies that have signed up as official sponsors are, Lego, General Mills, Kellogg s, Kraft and Poke e mon USA. Disney is producing some new live action series for this channel as well as feature animated offerings. Note that Disney is using multiple platforms to reach this demographic. Others are watching how differing demographic groups gather information on line. According to a new study by Razorfish and online community CafeMom there is a predictable difference in media use between moms under the age of 35 and those over 45. The under 35 group shows greater use of social networks. There are companies looking at ways of allowing moms to input their marketing messages within the ads themselves and then share them within their networks. It is about connecting with people with products and services. Moms are likely to play games on line, read consumer reviews and watch or listen to pod casts. Again, this is experimentation with a discrete demographic, Moms for delivery of specific information B. TRENDS SET BY THE SUPER BOWL ADS OF 2009 Given the current economic crisis one might have thought that NBC would not sell out and/or would not receive top dollar for its 30 second spots. They would have been incorrect. Super Bowl XLVIII, like those that went before it, was the ultimate creative awards competition. The judges were the consumers. The creative, had its usual amount of humor. But the economic conditions did influence who advertised, what was featured and how the ads communicated to the audience. 4

5 While, unprecedented economic times did alter the mix of advertisers and the messages. NBC sold all sixty five spots for a record $206 million with in game ads running at $3 million dollars for each 30 second spot. Now lets watch some of the ads. Note that I am getting them off YouTube and the particular site purports to have had a group of consumers select their favorite ads. You can go to http.// In watching these ads, please note that the Doritos ad was developed by consumers in response to a contest on the internet. What is interesting is that it successfully wins the creative contest with consumers, i.e. it is chosen as the favorite by a panel of consumers. Here is a listing of the advertisers: Annheuser Busch (Bud, Bud Light, Bud Light Lime) BP (Castrol) Bridgestone Firestone (Bridgestone Tires) Career Builder.com (placement agency) Cars.com Cash4Gold.com Coca cola (Coke Classic, Coke Zero) Denny s Walt Disney (movies) Dreamworks Animation/Viacom (Paramount Pictures) E*Trade General Electric GoDaddy.com H&R Block Hulu.com (Owned by NBC Universal and News Corp) Hyundai Motor America Kelloggs Frosted Flakes Mars (Pedigree) Monstor.com (jobs) NBC Universal Pepisco (Cheetos, Doritos, Gatorade, Pepsi Cola, Pepsi Max, SoBe)

6 Roll International (television) Sony (Sony Pictures) Toyota Motor Viacom (Paramount Pictures) Volkswagen of America (Audi This was the first time that many advertisers took full advantage by unveiling their spots early. Every major news outlet and video site had a section that featured Super Bowl ads, allowing for quick viral distribution. Additionally, social tools such as TWITTER and on line polls allowed the ads to be discussed and voted on in real time. The total effect on this was unprecedented on line user engagement with these ads before and after the game. For the first time in years the biggest category in the Super Bowl wasn t beer, beverages, or cars, although they were present. Instead it was the movie studios with seven minutes of total advertising time. Nine separate movies were represented. In addition, services, jobs, e trade, cars.com and direct response, cash4gold were represented. The Doritos spot was user generated as part of a contest by Doritos and was also voted the most popular by USA Today s 21 st Annual Ad Meter poll beating out some of the pricer advertising of Annheuser Busch. What does that mean for current business model of Advertising Agencies? Will the Advertising Agency be replaced by the media buying Groups and the Advertiser, with no role for the Agency? What does that mean for the regulator? The messages differed as well. There were food promotions, as well as, direct response ad cash4gold. Just a year ago cash4gold would not have advertised with a large advertising agency. And the ads have had an after life. At least one Super Bowl advertiser has found a way to extend the reach of its TV spot to millions more users. Pedigree has partnered with Dog Time Media to include the ad on the Spark Media Center, which has already been embedded on over 70 publisher and blog sites with 6 million visitors. Sparky Media Center is a content sydication and brand engagement venue. The Pedigree Media Director has said: With DogTime we are able to work with a vertical pet network that can bring us to the right audience at scale and help us with larger initiatives and goals, finding dogs good homes.

7 We have just begun to see the development of mobile advertising. If you combine social networking and/or TWITTER one is able to reach one s neighbor, friend, and/or relative to determine where to dine, etc. The United States on line industry is expected to increase 9% to $25.7 billion in 2009, slowing from its earlier growth rate of 11% according to estimates from rearch firm amarketer. Internet retailer Overstock.com is becoming a big user of performance driven ad products. They intend to spend $15 million or 20% of their overall marketing budget on personalized ads. Choicestream uses the data to select what personalized products and offers to insert into Overstock as as they appear to potential customers browsing the web. Coupons, Inc which makes software to help companies create and distribute coupons is among companies benefiting in this downturn. They expect to issue $1 billion in coupons this year up $300 million from last year. The current economic situation will slow development of some applications like advertising on mobile phones but there will be experimentation as advertisers continue to want to reach consumers efficiently and the economics will force them to be creative in that effort. The GSM association, the mobile phone industry group as developed a method to measure the effectiveness of mobile ad campaigns, and gives brands, publishers and agencies access to aggregated user behavior data enabling comparison with other media. How will regulators be able to cope with the electronic media? It will be a real challenge as there are no intermediate reviewers. In fact, the law finds no real liability on the part of the carriers, Google, YouTube, etc. I leave that discussion to Carla Micholetti.