Wednesday, June 24, 2009

Mid-Year Media Reflections

Digital drives ad industry growth and business models. But it’s not all about the new.

Whether or not we’re pulling ourselves out of this (hopefully) once-in-a-generation economic quagmire remains to be seen. New jobs are being created, but the rate of unemployment is at 25 year highs in most parts of the country. The financial markets surged 40 percent after hitting 12-year lows in March, but they’ve been stuck in neutral the past month and most indices are about where they were at the start of the year. That means, investors haven’t lost real money, but they’re not keeping up with inflation either. Home sales are rising, but the median price of homes continues to plummet. Interest rates remain at historic lows, but no one’s really in a position to act on the bargain rates.

Despite this macro-inertia, it’s heartwarming to see that as in tough times before, innovation is thriving – no thanks to the venture capital community -- and long delayed-tough decisions are being made across all industries and walks of life.

In the media business, newspapers and magazines are taking it on the chin as both subscribers and advertisers are fleeing to more immediate and lower-cost outlets for news, information and entertainment. No surprise there. Some of the lost advertising and subscription revenue will return when the economy rebounds, but the rules of the game have changed so much that the tipping point has long since been passed.

What’s most striking about the media landscape in this downturn is that the audience (not the media gatekeepers) have stormed the cockpit and taken over the controls. Whether you’re in old media, new media or somewhere in between, you better get used to the idea that the audience/customer is calling the shots, not you. Get used to it.

Audience in control

Christian Dirschl, Content Architect for global information company Wolters Kluwer calls it the 4A’s: “Anyone can say Anything about Any topic at Any time.”

As Michael Marcel Fenez, Global Leader of Pricewaterhouse Coopers’ Entertainment & Media practice observed in a report released last week, “The accelerated migration to digital technologies has reinforced and proliferated new consumption habits and ‘digital behaviors’ as consumers seek more control over where, when and how they consume content while, more than ever, watching their pennies and seeking the best value from the choices they make.”

Over the next five years, PWC projects newspapers will lose $13 billion, dropping about 32 percent of its advertising revenue as digital technologies become increasingly widespread. The report expects print advertising overall to fall the most from $36.7 billion in 2008 to $24.3 billion in 2013. Online advertising revenue is anticipated to decline over the next two years. PWC expects online ad revenue to grow at a 2.5 percent compound annual rate from 2008.

Can’t hide from the digital migration

Fenez says the economic downturn has accelerated and intensified the digital migration among both providers and consumers of content. “Companies who grasp the opportunities which are appearing in this fast changing marketplace and are agile enough to adapt their business models will be able to take full advantage of the potential and new revenue models as they emerge.”

For instance, end-user spending through digital/ mobile platforms accounted for 23.4 per cent of the overall consumer/end-user/ access market in 2008 and should account for 78 per cent of total growth during the next five years, says PWC.

Consumers are taking control in various ways.

• They’re “time-shifting” via digital video recorders and video-on-demand to free them up from the TV schedule enabling them to watch what they want when they want.

• Increased broadband penetration is enabling them to get what they want from wherever they want while improvements in technology allow better downloading and streaming.

• Growth in mobile access is allowing consumers to access the Internet from any location and giving rise to the popularity of high-end devices such as smartphones, iPods, and the Kindle that combine mobility and access.

• The advances in digital music are also allowing consumers to purchase songs individually through digital channels (unavailable in physical format) and generating growth in “sideloading,” which allows consumers to buy music less expensively online, then transferring that music to mobile devices.

The changing face of advertising

PWC predicts that over the next five years, as consumers receive an increasing proportion of their E&M through digital/mobile platforms, advertisers will shift their resources to reflect the increasingly fragmented ad market. In the mobile arena, opportunities across the advertising continuum will enable the growth between brands and consumers, ranging from click-through banner ads and pre-roll ads on video clips through coupons and online subscriptions.

The growing proportion of Internet and mobile advertising in the overall global advertising mix will rise from around 12 percent in 2008 to 19 percent in 2013.

Age of accountability

However, the migration reinforces the need for greater transparency and accuracy over audience metrics which together with accountability for ad results, is becoming a “must have” in this new media world.

“Though operating in challenging and fast-moving times, this has never been such an exciting time for the industry,” say Fenez. “The accelerating digitization is why there is no place to hide from new models and dynamics across the industry. The winners will be those players who focus on driving and leading change that delivers real value for consumers.”

It’s Not All About the New

“Never adapt technology for the sake of technology,” cautioned Richard Oppenheim in a recent CPA Technology Advisor editorial. Make decisions based on usability and company business support. Technology requires frequent assessments that are often confused by the emotional pull of the new, the sexy and the visually gorgeous. Knowing how and when to make the decisions to change technology means doing evaluations and analysis that effectively measure the impact of that change on dollars, resources and people.”

Great ideas can come from anywhere at any time from all types of people and organizations. Don’t throw out the old, just to make room for the new, but keep your eyes wide open for new opportunities, apps and technologies that can bring fun and bottom line value to your business. Explore everything. It doesn’t matter if you’re currently twittering or tweeting, just keep testing, tweaking and exploring.

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