Feeds:
Posts
Comments

Archive for the ‘vertical media’ Category

I recently watched the PBS documentary, art and copy. it’s a feature about advertising focusing mostly on the big agencies and agency personalities. absolutely fascinating. partly because these are big personalities but mostly because the campaigns featured are ones almost all of us know well and probably love.

there’s a stat at the end… 186000 employees at ad agencies worldwide. 26000 agencies. but 4 holding companies produce 80% of the advertising spend.

what that implies there just isn’t that much advertising that gets big, mass consumer popularity (and likely nor does the products behind the advertising).

so the questions for me:

is most advertising unappealing? just noise?

do people only have so much attention to give? the populace can’t support more than a few campaigns getting big?

are most folks in advertising biz just not very good?

is the ad biz really about unglamorous, small campaigns that work for small companies?

is the old ad model going to last? more and more big brands didn’t need an agency and an ad budget at all to go big (google, facebook, twitter, crocs…)

when should a biz use a big traditional campaign?

I don’t question whether a well capitalized, well executed branding campaign works. they do. I think it’s hard to get all the right things to make it happen and only those with the deepest pockets, best products and most aggressive teams will ever have a shot.

I think that’s why other advertising approaches are more appropriate for most businesses and growing in spend online advertising, for the most part, isn’t artful. it’s math. it’s about getting frequency and follow up and flow just right. science based advertising works better for the majority of products and services where there’s little differentiation or brand value between competitors. price and location (at time of purchase) are the keys, not artful impact.

also worth noting is that the current context in which online is viewed doesn’t lend itself well to bigger more potent messages like tv or radio. I think some of that has to do with the fact that tv and radio are more passive consumption around visuals and sound of people rather than text about the world. and tv and radio are usually consumed with others generating more shared experiences. the built in fragmented personalization of the web means known of us ever have the same basic experience.

I’ve worked on a lot of online campaigns that tried to do the big budget big branding thing. no shortage of good ideas and mostly good execution. the consumers just never respond.

there are no best way to do it.

one thing I think the folks in the documentary have in common with the successful math based online advertisers and agencies is a willingness to try and be wrong. too many folks think there’s a best way to do it and that you can know that a priori. you can’t.

as one of the agency celebrates. fail harder.

Read Full Post »

Across all mediums, advertising $$$ is off 2.8%.

Of course, this is in line with the overall economy so it’s not totally surprising.  Advertising typically lags because the budgets go in so early into the spending season.

A recession in ad spending that goes well into 2009 is going to crush many an Internet company, more than a few agencies, and a lot of traditional media companies.  Oh, by crush, I mean put them out of business for good.

Unless you work on the ground in the advertising world it’s hard to understand just how devestating the recession is especially when consumption of media will always be going up.  That means there will always be more supply of advertising impressions and the cost of media businesses are NOT coming down.  With the ad spend so far down, the prices on this oversupply of inventory is highly depressed further adding pressure to a broken model.

Many people ask me what I think then is going to work with media companies… well, I’ve said it before… media companies have to SELL SOMETHING REAL, not just ads.  Not just an impression.  Sell DVDs, sell shoes, sell licenses, sell special events… anything.  The ad rates simply will not cover the costs of running these media companies.

Oh, and if we thought 08 numbers were bad, just wait for q1 2009 when we will see the real effect of ad budget cuts.

Yes, I’m being a bit DoomsDayish.  Because there’s not a lot of runway left for folks and if they aren’t finding a strategy to cope by now, game over.

Read Full Post »

This is a pretty useful data dump from Google’s CEO

Economic situation pretty dire. Combination of what we’ve seen does not appear to have a bottom. People are using the Internet more. Obviously will affect online ad market because our systems are so tightly tuned. It will eventually be reflected in CPC, CPM. We are not immune to this. We may be better positioned from ad perspective, but ultimately the real pain felt by companies worldwide will sometime translate to our world

Read Full Post »

Someone did the work I wanted to… well, sorta wanted to…

Here’s a decent set of data about one of the latest internet ‘memes’, 25 Things.

Still, viral marketers might take note of the patterns that “25 Random Things About Me” obeyed. The best hope for someone looking to start a grass-roots craze is to introduce a wide variety of schemes into the wild and pray like hell that one of them evolves into a virulent meme. If evolution is any guide, however, there’s no predicting what succeeds and what doesn’t. Just look at the platypus.

A decent non-conclusion, and probably accurate.

Read Full Post »

Ah, TechCrunch.  You whipped out the old Excel and made the industry famous Up And To The Right Chart.

There is no strong conclusion to draw from this very limited data set.  The only piece of interesting data is:  of the big 4 media companies presented here only Google has any sustained growth and makes up the majority of 4th quarter growth.

The Industry is NOT doing well at all.  Time Warner and News Corp had major losses, and they have huge stakes in the internet.  Yahoo, MSN, AOL all suffered major losses.  Mid-tier Smaller publishers are getting crushed, and you won’t see that in any of this data or any emarketer reports.

If companies in the media industry want to actually survive, get real.  The existing ad model stinks and this recession just nailed the coffin shut.  Don’t take my word for it, run your own analysis. (Just for fun, go look at the ads running on Yahoo, MSN, Facebook, MySpace, Video game sites… let me know if you see a direct sold campaign.  Let me know if you find a non adnetwork ad tag…) Hurry and do it, because this is one short runway and there ain’t no Hudson river nearby.

The biggest advertisers in the game (financial services, computer companies, and auto makers) all took huge hits and continue to falter.  The ad budgets have been slashed and they aren’t moving product.  With that mix, media companies can’t do anything about their ad revenue streams if they don’t find other ways of making money.

No, I’m not doom and gloom.  This is all about reinvention and change and exploration.  The old model stinks and now we get to find out what to do next that is better for the user and the advertiser.  This is good.  It is also painful. It is not Up and To The Right, despite the fact that excel seems to only spit out charts of that type.

Read Full Post »

Failure to understand how users and money flow through the Internet costs media and etailers a lot of money every day.  There are huge misconceptions about where the “value” actually lives for user data, advertising performance and profit margins on all this high tech.

The following figures attempt to disambiguate some of the confusion.  The summarized conclusions come from a variety of data sources and real life experiences analyzing financial statements, traffic reports, advertiser analysis and experimentation.  Specifically one could get someone exact figures by combining comScore, Quantcast, Compete, Google Analytics, TNS, @Plan, SEC Filings, internal reports, revenue statements and DART forecasting as I have done several times.

This post is meant to be a demonstration of the core concepts, not a statistical treatise on the topic.

If you hate reading too much, skip to the end for a somewhat realistic example of how traffic flows.

Traffic on the Internet roughly splits 7 segments.  (as shown in the figures below).  These segments are defined by where the sit in the user experience by amount of consumptive behavior (clicks, reading, sharing, watching). How the user gets from segment to segment is not completely linear in actuality, but when you coagulate a users behavior you’ll roughly see a funnel in terms of time spent, pageviews and ad impressions.

Traffic Funnel

Traffic Funnel

The segments can be characterized also by their ad performance, ad targeting (how specific is the user in their activity), and their audience coverage (how much of the particular audience segment does a type of site/service reach)

Funnel Traffic Segments

Funnel Traffic Segments

Each segment has a different cost profile.  Here I look at labor costs to maintain and capital expenses to build and power.

Where's the Cost?

Where's the Cost?

As you can guess, each traffic segment has a different profit profile too.  This is largely the result of combining the advertising/revenue performance with the cost profile.  Certain Internet services simply do not have a strong profit opportunity because they borrow old models and/or cost more than the market is willing to pay. (Perhaps that will stabilize one day, but I think software tools and low cost hardware disrupt the demand curve A LOT because users can often supply their own demands once the cost gets too high, hence why TOOLS are the most profitable segment.)

Profit Margins by Segment

Profit Margins by Segment

Make no mistake about what I’m presenting here.  The profit online is all in retailing, portals/search and tools/utilities.  The stuff in the middle of the funnel is highly susceptible to competitive displacement and has very little intellectual property protection.  You can verify this conclusion by reviewing revenue statements and SEC filings for the big tech and internet companies.

The advent of citizen journalism and self publishing flattened the media market.  Owning a printing press was once “high tech” and a capital investment barrier.  Owning the right location on the main street was once a logistical barrier.  High speed computers and difficult programming languages was once a technical barrier.  Those 3 feature are gone.  Media is now, well, almost purely a creative barrier.  There’s a huge pool of creative talent constantly struggling against each other.  Creativity is worth a lot once it rises above everything else.  That happens so rarely to make it a bad investment.  Every minute more and more people enter the creative market (how many blog posts per hour? how many videos go up each day?… a lot.)

organizing, sifting, filtering, distributing, aggregating… that’s the sweet spot.  There is a technical hurdle, but the investment is worth it as there will never be less of a need to filter, sift, find, distribute.

This week we had a beautiful illustration of these concepts with the Presdential Inauguration.

Most of the US users watched the Inauguration, most on TV, a lot with online video streams and 2 million in person.  During and Immediately following the inauguration the Internet lit up with content creation and massive usage.  The portals and search engines featured as many new links and breaking stories to the news coverage.

The social networks shot pictures, tweets and status updates around, occassionally referencing links to the confirmation gaff, benediction speech text, and satelite pictures from DC.

Micro bloggers summarized everything as fast as they could, while the search engines and utilities sucked in that content.  The original content creators probably released a previously composed story and put that live.

Mainstream users shut down their video streams and took to the portals and search engine, seeking more info on what just happened or insight into a specific moment.  Most times they ended up at CNN or NYTimes.  Many times, but less frequently, they hit a blog that had some recent content.  Most users probably ran into a wikipedia reference link or youtube video.

Some users ended up on amazon to buy Obama’s books or some inauguration swag.  Finally as the day concluded and original content creators finally had enough time to craft something, users might find themselves falling asleep to a good OpEd on the history of the day or an interview with the Michelle Obama dress designers.

By 3 days later the amount of content available on the inauguration is 1000x greater than within the first 10 minutes.  Original content creators are hopelessly buried amongst the blog posts, tweets, continuosly AP feed CNN articles and YouTube embeds.  The bloggers are buried by other bloggers.  The news stories give way to other news stories.

The utilities that sort, sift, filter and monetize on it all just got a 1000x better experience and continue to catch the huge volume of user investigation and digging.  The own the head, the trunk and that dreaded long tail and collect user targeting data all along the way.

Read Full Post »

Yay! A useful post on techcrunch!

As a friend of mine said:

Consumer magazines, on the other hand, sold for only 1.5 times revenues and 8 times EBITDA.
worked

That’s a bigger stat than it might appear.

But we already knew that.

What isn’t so obvious in all this madness is that digital properties are far harder to defend than well established offline.  Sure the world has changed, but no acquiring company should ignore defensibility as people go digital.  Though the multiples are high now eventually very real difficulty of maintaining audience for the long term will start to bring these multiples down.

For instance, CNET is not a good buy at that valuation.  They are built mostly on SEO and some older properties.  {traffic profile} They will be hit badly by this ad recession AND they have very little staked out in social media (they have some minor efforts).  It’s certainly a beachhead for CBS, but the SEO game will collapse eventually – it already is for a lot of people.

Think about that insane investment!  1.8 billion for maybe 10-12 million UUs.  I’ve spent probably 10 million of investor/corporate money in 3 years and generated upwards of 20 million UUs across various properties which reeled in 35 million or more in revenue (at a 21x multiple this would be 735 million valuation).  I’m not saying that i’m worth more or have found a magic formula.  What I am saying is that 1.8 billion could have been spent far more strategically.  i.e. a bunch of micro acquisitions that have huge upside.

Getty Images wasn’t a great acquisition either at that price.  I mean with citizen journalism, exclusives on photography are just not going to matter as much.  Getty has some nice services, but it isn’t a growth company at all.

Sometimes the mass of these media operations gets in the way of good financial sense.  That’s the one bad part of old media going digital.  They haven’t learned from Google, Yahoo, WordPress.com… you just don’t need the same resources when the computers and users take over.  Old media has been acquiring with their pre 2009 excess money and their fear of extinction.  Unfortunately, there’s a lot of lame M and A out there which isn’t going to help old media much.

Read Full Post »

Older Posts »