Thursday, October 20, 2011

Glimmers of Hope Within Tepid 2012 U.S. Ad Forecast

Tech spending holding steady despite gloomy economic indicators. Digital now on par with TV. Display and email still working. Is mobile cutting into paid search revenue?

While forecast after forecast comes into our inboxes projecting another humdrum year on the ad spending front, we thought we’d point out a few glimmers of hope.

2012 is a quadrennial Olympic and election year. That means we get plenty of juice from the networks sports media and political campaigns regardless of which media properties you own.

Digital media—which includes online, social and mobile--has approached parity with TV as the most important medium among agency executives, according to the latest quarterly survey from Strata, a media data processing provider. Asked what their No. 1 medium of choice was during the third quarter of 2011, more than one third (34%) of agency executives cited digital, only one point lower than the 35 percent who cited local TV. According to Media Post’s Joe Mandese, that's the closest point of parity in the three years since Strata began querying its agency clients on the dominance of various media in their workflow and budgeting, and represents a 43 percent leap from the second quarter of 2011.

The findings, which are based on a segment of more than 900 agencies. In fact, the survey indicates that digital may be at the tipping point of overtaking all other media in terms of importance, especially if the economy becomes any more unstable. While the third-quarter survey indicated that advertising budgets remain relatively stable and continue to grow overall, the agency respondents said print (52%) and local TV (24%) are the media most likely to take a hit by ad spending cuts.

“The economy is forcing many advertisers to look for more affordable ad avenues--i.e., digital and radio,” said Strata President John Shelton. However, Only 56 percent of the agency execs said they believe their clients “understand the value” in digital, while 44 percent said they don’t see the value.

Corporate profits, spending decoupled from rest of economy

As expected, last week’s post “Financial Markets Decoupled from Economy” got us a lot of attention and some naysayers, but IBM’s strong quarterly profit reported earlier this week gives more credence to our argument. Corporations continue to spend on information technology despite the lousy economy. They’re hording cash and investing in systems, infrastructure and efficiency—not in people—to cut costs and get more productivity out of the headcount they already have in place. The IBM’s of the world sell to big corporate customers, not to Main Street, so that’s why they can report solid profits at a time when the jobless rate is still so painfully high.

Lots of analysts consider IBM a bellwether of IT spending because it’s the largest supplier of computing technology, hardware, software and services to corporations. IBM’s results mirror what we reported to you from Oracle, and others corporate technology players over the summer.

Our take: In a tough market, there’s always a flight to quality. Smart media owners will find a way to pry that cash out of CMOs’ and their agencies, tightly wadded fists by stressing audience quality, editorial integrity and measurable ROI.

Display advertising shifts from direct response to branding media

Most media buyers and some media owners still think clicks, impressions and conversions are the way to measure performance of online display advertising, but researchers say the more important metrics often point to return on ad spend, online searches for brand names, product recall, and sales.

"The Digital Advertising 2011: A Portrait of Conflict" study released by Collective finds that 57 percent of agencies believe the majority of their display objectives are to build the brand, yet only 11 percent cite ad creative as critical to the campaign's success. Still, three in five (60%) of agencies cite brand recall and intent to purchase as the most important measures of online success. However, clicks and conversions remain the key criteria agencies say they use to evaluate media, according to the Collective study.

OUR TAKE: Through a combination of laziness, arrogance and feeling overwhelmed, agencies tend to fall back on McMetrics, things that are easiest to measure rather than business-building metrics that are harder to measure, but derive real value from a campaign.

Is mobile cutting into paid search ad revenue?

More searches being done on mobile phones where people are less click on ads and the ads cost less. Even mighty Google received 5 percent less for clicks in the second quarter of this year, vs. 2nd quarter last year according to a New York Times report late last week. E-mail remains most popular way to market events. Social media, the least effective.

On average, business use 5.5 different methods to promote their events and email remains the most popular, according to a new eBook released jointly by HubSpot and Constant Contact. More than 70 percent of marketers surveyed by the two aforementioned organizations cited email, followed by word-of-mouth (65%). Social media was deemed least effective.

Just as in a sluggish stock market, there’s always a flight to advertising quality in a tight economy. Savvy marketers and media owners know they have to keep their minds open to new ways of reaching—and measuring—their target consumers, but they should ignore time-tested legacy media such as display, print, broadcast and live events. Those legacy media have been around longer, but they’re still improving at the same rate, if not faster, than some of the new kids on the block.

Resist the urge to go “EITHER/OR” in your media planning process. Just go with a balanced portfolio of media options and make sure you’re always using best in class. Not cheapest in class.


Tuesday, October 04, 2011

Financial Markets Decoupled from Economy, Ad Sentiment

Ad spend continues modest increase thanks to automotive and financial services. Online video most popular on tablet vs. smartphone or social networks

The financial markets have never been a reliable indicator of true economic growth (or lack thereof). They’re a better indicator of investor psychology than they are of underlying corporate earnings or consumer spending intentions and right now uncertainty is trumping confidence. If nothing else, we’re officially in a global economy so when a Euro Zone country gets overextended or when China overheats or plays games with its currency, we all suffer. Hey, our little banking crisis in 2008 wreaked as much havoc overseas as it did at home. Payback’s a bitch.

The markets usually tank in October anyway—check your history books for that month in 2008, 1987, 1929 etc. True, most indices are close to 20 percent off their recent highs in April—a technical bear market signal, but they’re about a percentage point or two off where they were a year ago. We don’t remember things being too rosy last October either.

Right now things are very uncertain, but it doesn’t mean they’re horrible. Housing prices remain depressed, but their holding steady. The jobless rate is way too high for an alleged recover, but slightly improving. U.S. vehicle sales rose almost 10 percent in September to their highest level in five months. More impressive, the Big 3 Detroit automakers significantly outgained Toyota and Honda. Even in our auto-dependent nation, folks aren’t going to shell out tens of thousands for a new vehicle unless they’re pretty sure they can finance the purchase. Perhaps more telling, bank stocks are taking a beating right now but financial services companies are still leading the charge on the ad spending front.

Ad spending up modestly

For the first half of 2011, Nielsen research found that U.S. advertisers overall spent 5 percent more in the first half of 2011 than they did in the first half of 2010 and the categories showing the greatest increase were financially-oriented, said Randall Beard, the global head of advertising solutions for Nielsen. Auto insurance increased 25 percent from first half of 2011, bank services increased 24 percent and financial investment services increased 19 percent. “People are very interested in saving money, getting the best possible deals and making sure their financial situation is as strong as it can be,” Beard told the New York Times in a recent article about his organization’s findings.

Kantar Media’s latest research found that ad spending in major media in the United States in the second quarter rose 2.8 percent from the same period a year ago. The percentage gain was the sixth quarterly increase in a row since the end of 2009, according to Kantar Media data, but it is the smallest of the six. For the first six months of the year, Kantar estimates ad spending was up 3.2 percent from the first half of last year.

The numbers for the second quarter “are painting a mixed picture,” Jon Swallen, senior vice president for research at the Kantar Media North America unit of Kantar Media, said in a statement. On one hand, “a majority of media types actually improved their performance” from the first quarter to the second quarter, Mr. Swallen said. On the other hand, spending growth among the 100 biggest advertisers “stalled” in the second quarter, he added, “and the ad market became more dependent on the comparatively smaller budgets of midsized advertisers as the main source of growth.”

Tracked by media type: Internet advertising was up 10.4 percent and magazines were up 2.9 percent; television, up 1.8 percent; and radio, up 1.4 percent.
Marketers respecting consumers

We popped in last week at the Online Media & Marketing Association conference in New York and were impressed by the attendance levels, the quality of the questions during Q&A sessions and the overall positive buzz and energy despite the gloomy economy. As MediaPost editor Joe Mandese noted, “Marketers are growing up. We came out of an era in which marketers didn’t respect consumers, they just force fed them their messages. Now they have to engage them, earn their trust, before trying to sell them. Is this the dawn of UX (user experience) media planning?”

This week, the 8th annual Advertising Week confab convenes in New York and most of the media pooh bahs expect advertising spending to grow modestly in 2012 and 2013. Tim Jones, CEO of ZenithOptimedia thinks the quadrennial effect of 2012 presidential elections and London Olympic games will give media sellers a lift and Russ Sapienza, senior partner at PricewaterhouseCoopers said most major advertisers still want to sell products in a slow-growth economy. They don’t want to “take [media] money off the table” even when they may put the brakes on major capital investments like factories and infrastructure.

Online display shifting from direct response to branding tool

A number of panelist indicated that the “wow” factor of new ad technology is wearing off and now we’re back to focusing on content—what you actually put inside all those cool ad spaces and time slots. While many media buyers still cling to clicks, impressions and conversions to measure performance. But the more important metrics often point to return on ad spend, online searches for brand names, product recall, and sales.

New research from the online agency Collective indicates that that online display advertising continues to shift from a direct-response form of advertising to branding media.

"The Digital Advertising 2011: A Portrait of Conflict" study released by Collective finds that 57 percent of agencies believe the majority of their display objectives are to build the brand, yet only 11 percent cite ad creative as critical to the campaign's success. Still, three in five (60%) agencies cite brand recall and intent to purchase as the most important measures of online success. However, clicks and conversions remain the key criteria agencies say they use to evaluate media, according to the Collective study.

Want folks to see your Videos? Research says viewers embrace tablets, more than smartphones and social media

A new PwC study finds that consumers increasingly embrace alternative screens to watch TV shows and movies. Nearly three in five surveyed consumers (58%) said they spend more time now viewing movies and TV shows online than they did a year ago. "This was further validated in qualitative discussions, where consumers confirmed that they spend more time using their Internet-connected devices, especially iPads," stated the PwC report. The study emphasized that people considered tablets a "wholly different mobile viewing experience" compared to smartphones, given screen size. Less than one-quarter (23%) had an interest in watching premium video on smartphones. PwC said the lack of enthusiasm for mobile video is consistent with research it has done over the last 18 months.

The research also noted growing interest from a year ago in cloud-based media storage offerings. The idea of a digital locker for music, shows, movies or other content especially appealed to more mature audiences, people in their late-30s to mid-40s, given their understanding of storage technology. Younger people were also intrigued, but had concerns about pricing.

The PwC study found social media was the channel people were least willing to pay extra for to obtain premium content, in part because there's typically no charge for using most social networks. Two-thirds of survey participants said they wouldn't pay anything to watch movies and TV via social properties. But because distribution through social media is still nascent, the consulting firm suggested there is still an opportunity for Hollywood studios and TV networks to leverage Facebook and other social sites.