Decoding the new economy

Who will fill the online advertising opportunity?

The State Of The Internet report reveals the twenty billion dollar advertising opportunity that still hasn’t been taken.

It’s been a big week of reports with three major sets of findings being published; Cisco’s Visual Networking Index, IBM’s Retail Therapy and, the biggest one of all, Mary Meeker’s annual State Of The Internet.

With a PowerPoint overview weighing in a 117 slides, this year’s state of the internet is a meaty tome with some fascinating observations that compliment Cisco and IBM’s findings which hopefully I’ll have time to write about on the weekend.

On slide five of the State Of The Internet is what hasn’t changed Meeker describes the $20 billion internet opportunity being missed.

Basically online advertising is not keeping up with the audience, the time spent on media versus advertising spend is lagging.

What’s notable is that this is the third year that Meeker has flagged this disconnect, yet advertisers still aren’t moving onto the web in the way audiences are.

The print media industry though seems to be dodging a bullet with a disproportionate amount of advertising continuing to spent on traditional advertising – 23% for only a 6% share of consumers’ time which implies there’s still a lot of pain ahead for newspapers and magazines.

For the online media, it shows there’s a great opportunity for those who can get the model right.

What that one graph shows is that the disruption to the mass media publishing model is a long way from being over.

Discovering an online media model

Who will be the David Sarnoff of the web?

Peter Kafka of the Wall Street Journal’s All Thing D blog has been closely following Google’s attempts to position YouTube as a successor to television.

Key to that success is getting advertisers on board to spend as much money with online channels as they do on broadcast TV.

To date that’s failed and most of the online ad spend has come at the expense of print media – the money advertisers spent on magazines and newspapers has moved onto the web, but TV’s share of the pie is barely changing and may even be increasing.

The challenges facing web advertising is discovering what works on the new mediums.

McDonalds Canada Behind The Scenes campaign is touted as one of the success stories of YouTube advertising, although Kafka isn’t fully convinced.

McDonald’s modest ad tells a story, flatters viewers by telling them they’re smart enough to go backstage, and still ends up pushing pretty images of hamburgers in front of them. That’s pretty clever advertising sort-of masquerading as something else but not really.

We’re trying to apply old ways of working to a new technology something we do every time a new technology appears.

Moving from silent movies

Probably the best example of this is the movie industry – if you look at the early silent movies they were staged like theatrical productions. It took the best part of two decades for movie directors to figure out the advantages of the silver screen.

Shortly after movie directors figured out what worked on the big screen, the talkies came along and changed the rules again. Then came colour, then television, then the net and now mobile. Each time the movie industry has had to adapt.

It isn’t just the movie and advertising industries facing this problem; publishers, writers and journalists are struggling with exactly the same issues.

Most of what you read online, including this blog, is just old style print writing or journalism being published on a digital platform. Few of us, including me, are pushing the boundaries of what the web can do.

Waiting for Sarnoff

David Sarnoff figured out how to make money from broadcast radio and television in the 1930s with a model that was very different from what the movie industry was doing at the time.

Sarnoff built Radio Corporation of America into the world’s leading broadcaster and the modern advertising industry grew out of RCA’s successful model.

Today both the broadcasting and advertising industries are applying Sarnoff’s innovations of the 1930s to the web with limited success. Just like movie producers struggled with theatrical techniques at the beginning of the Twentieth Century.

Figuring out what works online is today’s great challenge. Google are throwing billions at the problem through YouTube but there’s no guarantee they will be the RCA of the internet.

We may well find that a young coder in Suzhou or a video producer in Sao Paolo has the answer and becomes the Randolph Hearst or David Sarnoff of our time.

The future is open and it’s there for the taking.

Facebook’s struggle to stay relevant

Are Facebook’s advertising policies alienating users and leaving advertisers unimpressed?

Are we getting sick of Facebook? Tech magazine CNet stirred up the interwebs on the weekend with the claim that Teenagers are Tiring of Facebook a meme was pushed by the New York Times’ Nick Bilton dissecting his experience with the service.

It’s not just teenagers moving away from social media sites though, many adults are getting sick of intrusive adverts and promoted posts getting in the way of the news about family and friends.

As an example, here are the ads taken off the page of one fifty year old woman’s feed.

“I find these offensive” she says, “I’ve been posting my results from a fitness program and now my Facebook page is plastered with ugly weight loss advertisements.”

Clearly the targeted advertisements are working too well and clumsy marketers are destroying the user experience with ugly and offensive ads.

Not that those ads are working as Nick Bilton found when he decided to promote a post to his 400,000 followers.

From the four columns I shared in January, I have averaged 30 likes and two shares a post. Some attract as few as 11 likes. Photo interaction has plummeted, too. A year ago, pictures would receive thousands of likes each; now, they average 100. I checked the feeds of other tech bloggers, including MG Siegler of TechCrunch and reporters from The New York Times, and the same drop has occurred.

When he decided to advertise, his engagement went up by ten times. Leading Nick to conclude that Facebook were suppressing his unpaid posts while pushing the one’s he pays to promote.

Even for advertisers, a few hundred likes doesn’t translate into much of a return.

That suppression of useful posts is one of the reasons teenagers are moving, one 17 year old I asked about why he’s moved from Facebook said the ads cluttered up his feed.

Which leads us to the reason why people use Facebook – they use it to talk to friends and relatives; not to watch ads.

It took commercial radio and television a decade to figure out the right mix of advertisements and contents, a balance that is still tested today. Social media sites are going to have to get that mix right soon.

Facebook has the most at stake and their time is running out.

It’s too late, baby – when digital reality bites

Sensis decide to move on from a print based model to digital advertising – a decade too late.

Yesterday Sensis announced it would restructure for digital growth by sacking staff, offshoring and “accelerate its transition to a digital media business”.

The directory division of Telstra has been in decline for years, a process that wasn’t helped by then CEO Sol Trujillo embarking on his expensive “Google Schmoogle” diversion.

A decade later, Managing Director John Allen has announced another 650 jobs to go from the remaining 3,500 workforce.

John’s comments are worth noting.

Until now we have been operating with an outdated print-based model – this is no longer sustainable for us. As we have made clear in the past, we will continue to produce Yellow and White Pages books to meet the needs of customers and advertisers who rely on the printed directories, but our future is online and mobile where the vast majority of search and directory business takes place.

Carol King put it best – it’s too late, Baby. These are words that should have been said a decade ago.

Can media salespeople think digital?

The future of journalism is bleak if sales teams can’t figure out how to sell ads on news sites.

The future of journalism is bleak if sales teams can’t figure out how to sell ads on news sites.

Eighteen months ago News Limited, the Australian print arm of News Corporation, put out the first indications that content was going behind a paywall.

This was always going to be controversial so a softening up process was put in place including the then head of News Digital Media, Richard Freudenstein, speaking at various conferences.

Inviting bloggers to a briefing on News Limited’s online future was another strategy which, predictably, resulted in varying views on the prospects from attendees like Laurel Papworth and Ross Dawson.

Another part of the process was Freudenstein penning the odd article for The Australian describing the rationale behind the paywall.

“And we will have completely solved how to sell advertising across print, tablet and digital.” Freudenstein said at both the end of his Australian article and a later Q&A at the Mumbrella 360 Conference.

Sadly this appears not to have been the case, a year later News was struggling with digital revenues.

This is not just a problem for News Limited or Australian publications, The Economist looked at the struggles of print media in 2012 and cited a graph from Reflections Of A Newsosaur showing how newspapers’ digital revenues have been flat lining for nearly a decade while their print revenues collapse.

One of the reasons for traditional media’s stagnation is their salespeople have been bought up selling newspaper display ads, are locked into antiquated KPI’s and have commission structures that reward print over digital.

This was bought home to me a few weeks after News Limited started its charm offensive at a presentation by Cumberland Press, News Limited’s suburban division, where the salesman told a room of small business owners about the range of print advertising products available in the local newspapers.

Not once was True Local, News Limited’s Google Places competitor, mentioned. When I asked about it, the salesman waved the idea away and said he’d throw in an annual sub if I took out a week’s worth of quarter page display ads in the Manly Daily.

Many of the small business owners in the room thought that was a good deal, which shows its not just newspaper managers who are having a digital steamroller running over their revenues – but that’s a post for another time.

As The Economist and Newsosuar shows, News Limited’s experience in selling digital advertising is the norm and it’s genuinely shocking that newspapers’ digital revenues have flatlined while the revenues of Google and other online advertisers soar.

When News Limited announced its new strategy they also announced a community site to discuss the issues of digital news gathering and online advertising. They called it The Future of Journalism.

Just over a year later The Future of Journalism site looks like this;

That’s a dismal view of the future of journalism but it’s pretty accurate if somebody can’t figure out how to sell ads on news sites and break newspapers out of their online advertising stagnation.

Facebook starts driving away brands

Could Facebook be more like old media than we thought?

A few days ago we looked at how giving marketing and communications control to Facebook was a mistake for businesses.

It seems US entrepreneur Mark Cuban agrees and he’s moving his basketball team, the Dallas Mavericks, and the 70 businesses he’s invested in away from Facebook onto other social media channels like Tumblr or even MySpace.

The final straw for Cuban was Facebook wanting to charge $3,000 to reach a million of the Maverick’s online fans.

Facebook’s response that the sponsored post program is not just about the service’s revenue, but also to reduce noise and spam has merit

Last week tech uber-blogger Robert Scoble complained about the noise on social media and many users agree as they find their social media services and email inbox clogged with messages.

Reducing irrelevant noise is essential for any online service to succeed. No-one likes to spam or be spammed and many startup social media platforms have failed because they’ve killed their brand by spamming users and their contacts.

In this respect social media is like journalism – it has to be timely, relevant and useful to its users. If it isn’t the readers will leave and the advertisers will soon follow.

The worry for Facebook’s investors is that the service could be caught between making no money from its massive user base and getting a reputation for irrelevant spam.

Could it be that Facebook has more in common with newspapers and other “old media” than we thought?

What business are newspapers in?

To understand the future of news, we need to define the business

The problems of The Guardian and other newspaper groups around the world raises the question of what business they are actually in – news or advertising?

“Going digital only is not an option” was an agenda item for a meeting of Guardian executives claims the Financial Times.

Digital only however is the option most of the readers are taking with the Guardian’s online channels attracting 9.5 million UK readers a month compared to a print circulation of 6.5 million. The Guardian’s total global online audience is 65 million, ten times the size of the print edition.

Making matters worse is the trend, according to the UK Audit Bureau of Circulations (ABC), newspaper sales are declining at 16% per year while online readership is growing 14%.

As the Guardian readership figures show, the number of readers isn’t the problem and the same is true for the New York Times or the Sydney Morning Herald. More people are reading these publications than ever before, but the advertising has gone elsewhere.

Essentially a newspaper was an advertising platform, the cover price barely covered the costs of printing and distribution while the classified and display advertising provided the “rivers of gold” that made the business so lucrative through most of the Twentieth Century.

Most of those rivers have been diverted as dedicated employment, real estate, travel and motoring websites have stolen much of the advertising revenue that sustained newspapers.

As classified advertising platforms, newspapers have reached their use by date and now they have to build a model that is more focused on online display advertising and getting readers to pay for content.

Getting readers to pay is difficult when the market has been trained to expect news for free or pennies a day, a problem not helped by some newspapers chasing online eyeballs with low quality content.

Equally difficult is training sales teams to sell digital advertising, too many sales teams have grown fat and complacent over decades of flogging lucrative and easy real estate print ads.

The challenge for newspaper managements around the world is figuring out how to get the advertisers onto their online platforms and providing a product which readers value and are prepared to pay for.

It may well be that The Guardian’s management are right, that print does have a role in the newspaper’s future but first they are going to have to define what their company is and what it does.

Tag: advertising

Who will fill the online advertising opportunity?

Similar posts:

Discovering an online media model

Moving from silent movies

Waiting for Sarnoff

Similar posts:

It’s too late, baby – when digital reality bites

Similar posts:

Can media salespeople think digital?

Similar posts:

What business are newspapers in?

Similar posts: