Latest “Next Generation Media” from Aegis. Oddly enough trying to find relevant up to date stats is more difficult than you may think. Makes good reading
Next Generation Media Quarterly January 2011
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Tag Archives | media
The Times paywall
The Times paywall flags up a lot of the challenges facing the publishing industry and its ability to get back on some kind of even keel. There have been lots of stones thrown at The Times for what is seen as some blind, desperate attempt to put the old pay model on the new world, but I believe it represents a major shift.
1. They are doing something
Many businesses and publishers are in fear and denial about what is going on with their business. One thing you can be sure of, the team down at The Times will be onboard with the fact that something advertising alone won’t work and thats why they are having to do something. They are starting to address the problem.
I was at an IAB event recently and there were a number of publishes talking about initiatives that were driving large traffic levels, but you knew that traffic volume is not their problem. Its how do you sell the traffic. Innovation with platform, technology, ad format, content strategy, structure is all good but when was the last time you saw someone innovate with their commercial model? (and please don’t talk about behavioral – not to be harsh, that wasn’t their idea)
2. They are talking about users
Customer, customer, customer. No more talking about the intergalactic figures that no one understands
Publisher:”We have 3.2 million unique users and 129 million impressions, with even more ad impressions and we are far bigger than everyone else, who we know are confused and challenged like us”
Adevrtisers: – “That’s great – can I buy those 3 million people? with an ad”
Publisher: “Don’t be daft, you can buy impressions though”
Advertiser: “?!”
The Times are thinking about people (albeit a small number). They have set up a model that gets the business thinking about users and the revenue they generate. Publishers are going to have to start to take some reader money directly (through subs) or indirectly (through commercial deals) at some point and the sooner everyone (ad sales and editorial) start to talk about their revenue per user the quicker things will start to improve.
I would bet that more people at The Time are getting their calculators out and working out what the ad revenue per user is vs. subscription – that in itself is quantum leap.
There are some great pieces of analysis that are worth a read – Beehivecity has had a good dig round the numbers and really look at what the possibilities are.
99% of publishing businesses have editorial one side and commercial on the other. They don’t meet until they report into the CEO. “churches, needing each other, but very different. I believe the journey that The Times has started on is cultural and for once a business has potentially unified the business under a common cause and goal.
Publicis falling short on its ad deal with Microsoft
So news is out that Publicis may be having problems meeting its spend commitmment with Microsoft. When the original deal went through last year for an estimated $530 million, it was viewed that together with cash and shares there was also a media spend commitment put in place. Publicis (or its media agencies) would agree to move money across to Microsoft’s media busines (predominatly display and search) to sweeten the deal.
I imagine the media negotiators were suddenly cock of the pack. The only downside is that trading on big commitents works well with TV, press, radio and some elements to online. The issue comes when direct response comes into play. Probably 75% of display and more or less all of search budget is feeding off direct response cash.
The simplicity of direct response is that it self strategises. What works works and gets more money and what doesn’t doesn’t and gets cut (this being the reason why Google’s could scale beyond any previous model seen – it worked!!).
This being the case Microsoft had to perform if it was to remain on any media schedule – if it didn’t the media agencies would be having some fairly awkward conversations with their clients why Microsoft stays on the plan when it isn’t washing its face and as such making a commitment with direct response money a fairly high risk business.
A tough one and its really beggars belief looking back that any media commitment was openly admitted.
Now I don’t know the whole picture and it may well be that Publicis would have brought a couple of clients into the deal “We use our money and your money and we both share in the upside”, now that would be innovative and honest and transparent.
Get your feet wet
The digital media market. Two things that really affect our perspective.
1. It grows like mad
2. It continues to change shape.
It’s always interesting to see how people react to these 2 factors. I spend a lot of my time trying to help companies relax and adapt to how they approach digital. Interestingly there are those who are intrigued, some in denial, some rip off their clothes and dive straight in and there are those who get a bit redder and angrier and say through gritted teeth “Just tell me the rules”.
I really believe in that old saying “Better a good plan today, than a perfect plan tomorrow” and invariably businesses need to get stuck in, make a few mistakes, learn from it and be conscious that they are learning. 5 year plans don’t work in digital. Rupert Murdoch’s quote still resonates “The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow.”
Companies that start to crack it are the ones where a whole management team is engaged, willing, excited (perhaps a bit worried) but with their sleeves rolled up and leading from the front. The market is littered with companies who have gone backwards due to hiring a “Director of Digital” – who is given responsibility to solve “the problem”, invariably not given the seniority and usually fairly technical (as execs have already assumed technology know how is the key). The execs waiting outside for the answer
There are so many good business leaders who continue to delegate their future direction to digital technologists and then wonder why things are even more confusing. To be honest it’s a cop out, uninspiring and not necessary.
Come on, take your socks off.
Value of content
The NY Times announcing that it is moving to a paid for content / subscription model is a bold move and probably about time. Will it work? I have no idea. One thing it will answer is what is the value of their content and if anything start to bottom out the answer of what is the value to written content online. I used to think the old adage of “content is king” had lost its relevancy. The majority of the biggest sites in the UK don’t have editors or even create so called content – application was king, relevancy was king, context was king … content wasn’t really up there.
I have changed my view. I recently spoke to a natioinal TV station who gave an insight into the usage of their video-on-demand service (super big), the sell through levels of the advertising (it was all sold) and the yields being achieved (I reckon they must have been getting yields 4 – 5 times that off your common gardenal natioinal newspaper site). The point being they were nailing it. The reason being it was great content. TV shows that people wanted to watch again. The thing that was raised eyebrows was the amount of archive footage that was generating plays and carrying these valaubale ads. From the ARCHIVE.
Janey L Robinson – Chief Executive of Ny Times, was using the iTunes micro payment model as proof that perhaps the market was ready to pay for content. I’ll be honest I think this is perhaps a stretch too far. The nature of the contrent is very different, but it made me think of the archive word again.
My thinking is, would the creator of content archive it and would someone then come along and pay for that content. I think that this is the model at the moment, in markets where it works. Music, video, financial even porn. Succesful paid for models. Perhaps they are selling the freshness of the content of the stories – but will people pay for that? Especially with the explosion of free media services, national funded broadcasters and wire services.
The saying of “Good strategy is about sacrifice” stands here. The papers really need to think about the type of content people may pay for and for now I kind of like “The Archive Test”. Fingers crossed they need a break.
Digital and Regional
“Digital or regional” – that was the view given about 5 years ago to me by an outgoing chairman of one of the large media agency networks. If he had to start again now – that is where he would put his money? No prizes for dropping the “D” word, but going regional? leaving Soho, Noho, Madison Avenue, Charlotte Street etc? Urghhhh
“They make a shed load of money. No one sees them coming. Low cost base. Less churn of good people” – was the longer response.
I recently read a book called Blue Ocean Strategy. In a nutshell the authors look at how you can grow a business by nailing what is called your “Value innovation”. Innovating to increase value to your customers while also innovating within your own business model to reduce costs.
If you can have one proposition that does both. BINGO!!! Change the rules vs. compete within a finite market.
Anyone that has been involved in an online unit within an agency or publishing business will at some point have been “thrown in” as value on a pitch or deal. Crass, but if anything it solves the big issue of “How do we charge for our digital thinking?” or “Are we willing to have the conversation with the client about how we need to charge for our digital work”.
Interactive digital work (I’m not talking digital radio or TV) is labour intensive and can’t be charged on historic execution percentages. If positioned correctly it can be a higher value proposition as well higher margin for the agency. It also provides a counter balance to the commoditisation of print, TV or radio buying (planning traditionally be paid as % of what was bought).
Media agencies have been worried about the commoditisation of the industry for years. It is seen as real threat to their pricing. Finally a non commoditised, higher value, product comes along in online media …… and it’s used to plump up the commoditised side of the business. Something has gone wrong.
So, back to the start. As I read my book, I wondered how the agency world has really innovated with its own value model and there it was …. “Digital and Regional” – 2 sides of the same value coin.
It begs the question – why are the agencies based in central London? Most advertisers aren’t the media owners are, as they need to be near the buyers. But why the agencies? If we started again would we choose central London? In the 80s – when media was probably taking about 4% on the gross spend and people in the industry were driving read Ferraris, it made sense. How many big (offline) accounts are now on sub 1.5%? How many have moved out of central London?
You sense that moving out of town would never be seen as an “innovative” agency move, yet I sense the time is to be honest about what we are and what we do? Treat our high value products correctly and treat the lower value products accordingly and both will flourish.
What price for your Middle East digital media?
Photo - Retro Traveler
So back to digital media in Dubai, UAE and across the region. My Mum always told me never to ask someone about their religion, their politics or how much they earned. Not sure how much of that stuck. I find no one ever asks about people’s numbers and spend a life guessing. When asking in Dubai what the size of the digital media market in the GCC was, the view ranged from US$25 million to US$50 million for 2009 and closer to $US70 million for 2009. Interestingly when you hear the agency billing numbers and main publisher numbers I’m inclined to think the latter is more accurate. It may be an idea to ask people though – I find they do tend to tell you.
The big eye opener was the yields and sell throughs. Many publishers were saying average yields of between US$30-US$40 CPM weren’t uncommon and 90%+ sell through was regularly being achieved!! Figures to dream of. This seems to be in part to the lack of direct response money that is being placed.
The age old question of how do you set your pricing? In the world of direct response – it’s what ever someone is willing to pay to achieve the objective they have set – cost per …. you decide. The market is forced to price round the business model. There must be a balnce between how robust is the business model vs is the publisher over priced. I remember back in 2000 the agency had a client called petspyjamas.com, who always needed to push prices down and found that their media wasn’t really working. Business model or publisher.
Famously Google took this all the way, letting the market price its media. Conversley, take magazines. You buy into the brand, the audience, the environment. People aren’t maent to physically interact. So yields stay high. As a market it appears (and please correct me if I have got this wrong) – the % of “brand” money or non response money in the GCC is still relatively high (well over 50%). This is probably closer to 10% in the UK. Result is yields stay high in the high non response markets.
Google are growing like mad, the performance networks are entering the market and perhaps the cat will be out of the bag soon. The medium is only thought to be 2% of total media spend and perhaps the right pricing will mean a growth in online spend up to the15%+ seen across Europe and the US. The worry is, this is money straight to search and the reduction in yields will kill any category growth for the publishers.
Absolute fantasy
Football starts on Saturday and for me that means fantasy football. I’m a crap fan and gave up years ago trying to pretend to be the “real fan”. I do however love fantasy football which has the additional benefit or providing some key football knowledge and boozer currency. For many publishers, they have a fairly large fantasy football programme. The Telegraph, The Sun, Metro, all generate major traffic figures but are converseley the big commercial white elephant when it comes to ad money. Odd when you think of the passion and community of fantasy football and even the “shared moment” of 100,000s or millions even, checking their scores on a Sunday evening or Monday morning. It’s probably the first example of a real mass online social community.
So I come to Absolute Radio, who I contine to be amazed at by their linking of online into their brand and radio station. For example the swapping of registered information for the chance to pay off the January credit cards was enviously simple and appeared successful. The last couple of weeks the DJs have been talking about their Absolute Fantasy Fotball teams, who they have picked, who they haven’t, laughing at some poor sod’s misguided selection based on a loyalty to Burnely. I love it, its what I do, what my mates do, the DJs appear human and like me. I understand exactly what they are talking about. I don’t want to over egg it but there is a connection there. Digital is a great leveller and when media companies use it well, it can really connect the media “celebs” to the audience. So, brace yourself for Saturday and “Come on Burnley !!”
Money in interaction
Digg announced back in June that it was going to try and prioritise its ads based on whether people liked them or not and it seems that Techcrunch seem to have unearthed one of the fist screen shots of the trial.
It must be said this is something Google nailed back in 2002 or so when it moved from a CPM (cost per thousand) sales model to a CPC (cost per click) model. Many people think Google sells clicks (albeit clicks that do stuff). The reality is that that is just the way the business trades. Google realised years ago it doesn’t have clicks to sell, it has searches. It just so happened that selling clicks was the best way to monetise the searches.
In blunt terms paid for rankings are based on the costs per click you are willing to pay x the average click through you get.
£1 CPC @ 1% click though would mean for every thousand searches you would generate Google £10, if however someone else was playing only £0.70 but got a 2% click though rate – that makes Google £14 for every thousand searches, lets call that a CPM. They get priority and are seen as more valuable advertiser. Genius really.
So – we now now know that:
1. Google sells on a click but values on a search
2. Ad interaction makes Google more money
3. Ad interaction creates efficiencies for an advertiser
This opens up all sorts of questions about what makes some click? A more favourable brand? Someone having a more favourable view of that brand at that moment in time? Could it be?!?!?
So Digg’s new model look good. As usual though, you get the top of the mountain and realise there are Google footprints up there already.
Who is looking over your shoulder?
As the media industry continues to change shape, many businesses find themselves starting to question where they are sitting on the value change. Are you still relevant to the people who buy from you? Are you more relevant to a new and different group of people? Do you still need your existing suppliers?
As the purses tighten and people look for higher ground, one thing you can be sure of is that many organisatioins are going to be looking to move closer to the money and if that means moving across someone else, then tough. Areas where I think you will see this are: (beware, may not be pleasant reading)
1. Ad networks bolstering their client direct proposition
These guys are smart and have nailed their proposition. If it doesn’t work you don’t pay. They have the technology, they have the hook onto the advertisers’ site, they have the skills to trade the right media. Don’t be fooled in thinking this is about finding the right advertiser to fit their unsold. They’ll trade what suits and what works. To be honest a fairly compelling offering and something I think agencies need to argue hard against to prove their value. Ad networks see this. They have seen how Google can move past the media agencies as well as service the small businesses. Agencies will all talk about having to have central tracking, hence the danger or dealing direct, but this can’t go on forever.
2. Agencies start to forward buy
In many ways the counter to the above point. Ad networks only really appeared because media owners didn’t want to admit they weren’t selling all their inventory and didn’t want surplus unsold to affect yield. So they gave it to the ad networks to repackage. Agencies got lulled in the wonders of CPA and CPC buying (when times were busy and buyers were only too happy to have prepackaged, definite delivered deals). Agencies lost ground on the technical side of mass optimisation across multiple sites and tend to use licensed off the shelf technology with no competitive advantage. By not taking a risk the ad networks have taken all the margin (20%-30% on gross vs a 8% for an agency). Agencies still have the respect and ear of their clients and I think it won’t be long before some agencies start to forward buy with certain media owners. Get a small group and start to buy up the excess. Prices will mitigate risk. Risk and reward can be shared with an open minded client and pressure can be applied on the media owner. It needs a different level of trading with some serious underwriting and planning – but there is money to be made.
3. Publishers go for consumer direct money
“They already do!” I can hear you saying. The do indeed, many publishers will have a commercial partnership arm, or product arm or customer direct. What ever they call it, it tends to be inbedded deals, almost affiliate plus and to be honest many see this as backfill, playing second fiddle to selling ads to agencies. The reality is for many large publishers the penny is starting to drop that there are too many people in the boat and by the time everyone has taken a cut, there isn’t too much left for them. They know their readers, viewers, listeners, surfers (all of the above) buy and consume, thats the whole point of advertsiing with them. “So how about we try and start to sell direct to them”. The key is that this needs to be marketed and managed correctly and with focus and not necessarily “Yahoo Beef Burgers”, but the right structure will work. Customer money can no longer be the poor cousin, no longer every advertiser and their dog. For years media owners have been talking about the relationship their audience has with their brand, surely this is true realisation of that relationship. Share of wallet not share of spend.