I don’t know when this started happening, but the digital media industry has been going down a path in which every company is making a pitch that’s takes the following course: crabs in a barrel, transitioning to the dog ate my homework.
To be a little more blunt, companies are now lining up with a digital media value proposition that consists of a “crabs in a barrel” explanation for market development. When pressed, the explanation is akin to “the dog ate my homework.”
Some funnels are good, and others are bad. For example, funnel cakes fall into the “good” category, but funnel clouds are considered by many to fill the obverse role.
In the world of marketing, there is the often-mentioned “marketing funnel” which shows the range of marketing activities from awareness all the way down to (purchase) intent. The proverbial “line” of above- and below-the-line fame lies somewhere about two thirds of the way down the funnel, and it speaks volumes to the types of marketing objectives that exist in the world of advertising.
Put simply, brand advertising dollars are invested at the top of the funnel where they drive brand and product awareness. Further down the funnel, performance marketing budgets reach closer to purchase intent. As this happens, it becomes easier to measure campaign effectiveness in terms of click-through rates and intent to purchase.
A few days ago, I was talking about targeting with someone who quickly repeated the current industry assertion that online marketers will want to deliver an automobile advertisement to someone who’s in the market for a new car. This is true, but the true question isn’t whether targeting can deliver such an advertisement — it’s how much will marketers be willing to spend to reach buyers in this stage of the process. Dollars per funnel inch…or something like that.
Because not every advertising dollar will get spent at the bottom of the funnel. And even as hundreds of companies hope to make it big by bringing scads of targeted digital inventory onto the market, we have to ask this fundamental question — what is the proper ratio of dollars spent at the bottom of the funnel in comparison to dollars spent at the top? 1:2? 1:3? 1:5?
It’s an open question, but I have to wonder whether anyone is thinking about the size of the market for below-the-line, performance-based, digital advertising targeted at consumers at the “intent” stage of the marketing funnel.
Sorry to be such a reductionist, but this is the epistemology that keeps coming to mind. Digital advertising can be disruptive, but it won’t likely change the core fact that no marketer will want to wait until someone is looking for a new car to introduce them to their brand. Imagine trying to sell a Lexus over a Toyota when that time comes. If you can’t explain the brand at the top of the funnel, then how will you succeed by focusing all your resources at the bottom?
You won’t. And that’s why — as a marketer — I’d prefer to make a calculated investment across the funnel, not just concentrated at one spot on the bottom.
I wanted to let enough time to pass since Yahoo!’s search announcement with Google so that the (other) windbags had the chance to state the obvious. And then I figured that I’d weigh in with a point-of-view to look at the deal from a completely different angle.
I should start by saying that I’m not an expert in search algorithms, and that topic has the same effect on me as a warm glass of milk, a 37-slide PowerPoint presentation and the entire activity we know as golf. Okay, so that last one wasn’t warranted, but you get my point.
Anyway, I’ve been pitched just about every angle on Yahoo!’s inclusion of Google search ads amongst their paid search advertising options. And I have one word for you: AdSense.
Let me explain. Let’s suppose that you run a digital media company. Many people do this every day, so this should be relatively easy to imagine. And you have an online property that you wish to monetize through advertising. Again, relatively straight-forward and believable.
So you do the thing that each of your peers has chosen to do, and that is to select a couple of advertising networks to place advertising at different locations on your web page. Again, this is a common practice in digital media.
And one of those ad networks is Yahoo! and the other comes from Google. Again, no surprises here.
So what’s the rub? Isn’t it just fine to use multiple ad networks? Isn’t it acceptable to use multiple sales channels?
So what if it’s search? Couldn’t we make the same argument for a social network, webmail property, or anything else for that matter?
After all, how exclusive are these bits? And what are the barriers to entry?
You gotta love the progression of the communications bundle. After a decade of getting into each others’ businesses, the cable companies and telecoms operators are thinking long and hard about their bundles. Brian Stelter at the New York Times has written an interesting piece about how internet service providers are starting to look at the meaning of “unlimited” internet access. Evidently, many large ISPs are thinking twice about the levels of bandwidth and traffic that they’re honestly willing to provide for a fixed rate. And Brian hits the nail on the head by talking about online media consumption. In the world of flat-rate internet access, iTunes, Netflix and Hulu are free riders.
Last week, I was listening to the radio and heard a nearly identical story about airline travel. The editor for that piece took the angle that airlines are nickel-and-diming the flying public by charging for baggage, seat upgrades and so on and so forth. Because now that the load factor for major airlines is over 80%, those seats are filled with people who buy their tickets based solely on price. And with rising fuel costs, airlines are looking to the amount of weight they’re carrying around, and those 90 lb suitcases are coming to mind as a way to cut costs…or at least grow revenues.
As a marketer, I see this very differently. This is just the natural evolution of a marketplace bundle sold around a single value proposition — price. Read the rest of this entry »
2.0 is all about comparative advantage and nothing more. Adam Smith would be proud.
In this whole 2.0 world, I just can’t keep things straight. Was I born at 1.0 or 0.1? And where am I today? Am I in my 3.0s or just 1.9.2? Because I’d say that it looks like my 4.0s or my 5.0s are on the horizon, and I definitely feel like I’ve learned lessons from my 2.0s. And what will version 2.1.7b be like when we get there?
Unless I’m in the world of technology…which feels the need to 2.0 everything. Whatever you were doing is 1.0 and whatever you will be doing is 2.0. So according to the recent Advertising 2.0 conference, I’m destined to do tomorrow what I’ve been doing for years, which is going to conferences and looking for cellular signal. Or looking for a way to cram a day’s worth of work into the 30 minutes between sessions.
The biggest take-away from Advertising 2.0 is that, no matter what happens, the best that digital advertising can do is to grow its comparative advantage against other media. This is a difficult concept to grasp, but it’s very important. Everyone looks at Google, and they think that digital advertising is the land of milk and honey where riches abound.
I spent a few days last week at Advertising 2.0 New York. As if virtually every advertising-related event isn’t in New York City. In my previous job, I found myself traveling the globe on a regular basis, but now that I work in digital media, it’s a trip to New York every couple of weeks.
The program was interesting, and the speakers were strong, but I found myself sitting in yet-another-basement-cum-theater-wishing-for-cellular-signal. This appears to be par for the course in New York. Theaters below ground. Poor signal. BlackBerry blackout.
The thing that amazes me about the digital advertising business is its relative size (small) and its relative impact (large). Even more interesting is the role that advertising agencies play in the process. Everyone gets paid along the way, and it’s expected that either you’re managing the client, or you’re a line-item in the budget.
So here are a few trends that appear to be surfacing:
And that’s the news that’s fit to print from Advertising 2.0. Thanks again to Victor Harwood, the team at Digital Hollywood. And Advertising Age for putting on an excellent show.
I seriously have to wonder whether or not most communications industry executives would ever pass Lemonade Stand 101. The reason I say this is the plague of declining average revenue per user (ARPU) that numerous bright people inflicted on the entire communications industry. It’s almost as if the industry went through a rebellious phase, partying all night, going to raves…and the rest of us have the cold sores to prove it.
Because nothing says race to the bottom like dropping prices and hoping to make it up in volume.
I bring this up, because lately, several major communications companies — that are also internet service providers (ISP, for those of you who’ve recently awakened from a 20-year slumber) — have claimed that the only way they can make money in the internet access business is by spying on their users and selling that information to marketers.
Now before we go down this absurd exercise in market valuation, let’s just remember that maybe people find this downright creepy. And I’ll add that the last thing we need (especially after all this Layer 4 switching, load balancing and everything else we’ve done in the past decade) is another set of network boxes in the data center serving absolutely no purpose other than driving additional (what I’d call meager) incremental advertising revenues at the expense of the trust of…the entire world.
I know that Andrew Jaquith will soon weigh in with his utter abhorrence of this practice. Yes. It’s creepy. And yes. It’s of arguable value. But I’ll throw in a link to the Wired blog post that mentions BT’s recent efforts in this area. I’ll leave the privacy discussion to Andy, and I’ll ask the obvious question:
Why not charge more?
’cause if you can’t make money at the current prices, you should raise them. That’s what the five year-olds on my street would do.
Last fall, we were working on our research agenda, and we thought that out of home would be an emerging category for digital advertising. Part of this was clearly a result of having seen all the cool new things that can be done with public signage, especially on things like transport. But there was something far more subtle in our research agenda. We had recently moved into the Prudential Center in Boston’s Back Bay, and the management company was in the process of upgrading the elevators.
At the time — and we had plenty of time to think about it as we waited for the two operational elevators for our bank of floors — we could only imagine what would await us in the form of new elevators with a full out-of-home media experience.
A few weeks ago, I was explaining OOH to one of my colleagues, a longtime hand in the communications industry. I finally pulled him out a meeting room, pressed the button, and finished my explanation in plain view of the two screens in the elevator powered by Captivate Network.
This is a bonus feature of working in the media industry. Back in the days when I focused on telecommunications, the most I had to show for a SONET ring was a big piece of equipment with blinky lights in a data center somewhere. Now I can send people to the train station to look at the huge ads plastered on the floor.
Look! It’s advertising!
Every industry analyst reaches that point in time when he says to himself that he “really needs to get on top of _____ before it becomes unmanageable.” In an emerging market, it’s important to take an early position and set an agenda for market analysis. For example: the weather’s warm, and lemonade will be in demand. But without such a take on things, suddenly, there are companies coming in the door explaining about the new category of “summer refreshments” explaining how their lemonade is fundamentally different from its core components of water, lemon juice and sugar.
If you’ve ever owned a dog, it’s the same as that feeling of … I’m going to have to take the dog for a walk in the next hour, or the poor creature is going to explode. A sense of impending action that must be dealt with one way or the other.
I’ve been having that feeling for several months about targeted digital advertising. I first raised my concerns in February with my colleague Anette Schaefer. I mapped out the core of my systemic, industry-destructing argument and Anette then asked the obvious question – “do people really want targeted advertising? Or will they respond negatively?” We shelved the idea, because we had other things going on and really needed to build some internal consensus on what may be a strong position against accepted industry thinking.
So when mobile entertainment and advertising guru Linda Barrabee was working on her mobile advertising forecast, targeting reared its ugly head yet again. Linda had placeholders in her forecast to account for some form of revenue acceleration for mobile web display advertising…based upon improved ad performance because of targeting.
At that point, I again put forth the arguments for and against targeting. And I begged Linda to hold off until she and Anette and I could sit down and come to some level of consensus about where targeted digital advertising will go.
Because it’s not just about digital dollars. There are many other traditional types of advertising which offer some form of targeting, be it geographic, demographic, behavioral, psycho graphic or down to the individual and household.
The One, Two, Three Punch
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It seems to be that major news items like Microsoft’s proposed acquisition of Yahoo! always have a way of winding down on weekends. I read the news about Microsoft abandoning their offer on Saturday, and I was reminded of another major news item that ate up huge amounts of my time and went away with a whimper. That was the RIM/NTP injunction which was hot news for months and then fizzled away with a settlement on a Saturday in March 2006.
Now that the Microsoft/Yahoo! flap appears to be winding down, the media may be willing to consider the real news — that maybe Microsoft has bigger fish, than Yahoo!, to fry. As we’ve pondered numerous times in the past half year, where will Microsoft’s future profits come from?
Because they’re most certainly not coming from a secondary position in the competitive $50 billion global market for online advertising. We addressed this question of magnitude, margins and market dominance in our November 2007 Note: Microsoft Posts on Facebook.
I mean. After all. Yahoo! makes a decent amount of money…but nowhere near the kind of mad money that Microsoft currently earns from Windows and Office.
Now that the fund managers, desperate to make a quick buck (presumably to offset massive losses from the mortgage industry), are stepping back. Perhaps it’s time to get back to the business of digital media.
Which is to say. To get back to the difficult task of building digital audiences and monetizing them through subscriptions, advertising or a combination of the two. There’s a lot of work to do.
And that’s what Mike Goodman and I will be talking about tomorrow at the breakfast we’ll be hosting in New York City.
It’s good to be back to the business of digital media.
