Bob Dylan sang: “The times they are changing” and that is certainly the case in traditional media, where television, newspapers and magazines are being traumatized by the new medium (the Web).
While the population has grown by 23% in the last two decades, newspaper circulation has decreased by 20%. Classified advertising, a source of revenue for newspapers, has lost business as Craigslist took in $7 billion in revenue. The New York Times is selling 75% of its corporate headquarters and has borrowed money from Carlos Slim at high interest rates to stay alive. eMarketer forecasts that newspaper revenue will fall 16% in 2009, following a 16.4% drop in 2008.
The story is no better for magazines. Gross advertising pages in magazines fell 22% in 2009, and recently PC Magazine, Country Home, CosmoGirl and O at Home all dropped out. U.S. News and World Report went from weekly to biweekly to monthly and TV Guide, which at one point had 17 million readers, sold for $1, less than its $2 price on newsstands.
Bernstein Research predicts a 20% to 30% drop in advertising revenue for television stations in 2009. Television has been hit on three different fronts that have the industry reeling. First, the recession has caused companies to cut spending, especially on advertising. Second, the digital video recorder (DVR) has had an impact on the way people watch television.
Some 30.5% of TV households will have DVRs by the end of the year, according to the Interpublic group of companies, Magna, and that number could rise to nearly 44% by the end of 2014. Even TV executives say they believe that 60% of DVR owners use them to speed up the pace of commercials, and in the process, destroying a fundamental economic pillar that makes the industry work. Steinberg, March 31, 2009.
While television has its place in providing reach to millions of people, the cost has risen as viewership has shrunk. The costs of thirty-second commercials were reduced by 25% to 30%; however, with the sharp decline in viewers, the actual cost per 1,000 viewers increased.
Third, last year’s writers’ strike turned off viewers and they haven’t returned (Heroes is down 30% from last year’s viewership), accentuating a long-term decline in viewership. .
This means that advertisers need to find consumers. But where are they?
Consumers move online en masse, watching TV, getting their news, and connecting with other like-minded people. Netviews, AC Nielson’s online company, puts the number of people active online at 167 million. Dennis Woodside, US sales executive at Google, thinks TV advertising on the web will be huge, and he’s right, as 39.7 million people watched the launch online, more than on TV and more than 1 million connected on Facebook during that time.
Advertisers can no longer get their message across to their customers through the standard means of television, radio, newspapers, and magazines. Woodside also says that the Internet is fragmented and fragmentation will only increase, so advertisers will need to work hard to get their message out and use multiple methods.
Television media buys accounted for a significant portion of advertising dollars spent on a campaign for consumer-facing companies. However, in today’s fragmented society, it doesn’t make sense to air a Pampers commercial that will reach empty nesters and teens on a TV show when a company can advertise on a website that caters to young mothers. In addition to being able to target small interest groups, the website is online 24 hours a day, seven days a week, and advertising is there, waiting. The web is also not restricted by geography, unlike radio, where you have to buy advertising for each metropolitan area.
People not only watch TV online and read its news, but also buy products. eMarketer forecasts online spending to grow 8.9% in 2009, 11.3% in 2008, and 25.6% growth in 2007. Compare this to negative retail store sales (i.e., sales Macy’s fell 9.5% in the first quarter of 2009).
As people have moved online, advertising has too. Online advertising started with banner ads, which resemble traditional print ads and were not very effective, however, they have resurfaced and will be a major second to search generated dollars in the near future.
One of the reasons online advertising is growing is that it can be measured. The AC Nelson company provides data on viewers, but these are only estimates; no one knows for sure how many people are watching a show. Digital advertising is measured by click-through rate (CTR), the ability to measure when an ad is clicked. While clicking on an ad doesn’t necessarily result in a sale, it does indicate interest; a much better measure than the number of TVs turned into a show, especially in the days of DVRs. A CTR is obtained by dividing the number of users who clicked on an ad on a web page by the number of times the ad was delivered (impressions).
Although online advertising is young compared to conventional radio and television advertising, it is already undergoing changes. The biggest change is social media, or as people in the industry prefer to call it, social media. They are growing dramatically with Facebook having over 200 million accounts; 130 million of them are used regularly, 5th in Internet traffic. Twitter is growing exponentially, up 131% month over month in March this year with 9.3 million unique visitors.
People are using social media to share common interests and this will be a gold mine if companies can find a way to use it effectively without offending the people they are trying to reach.
“While overall marketing spend may increase, traditional media spend is declining and spending on the creative and technology required to run social campaigns on Facebook, Twitter and MySpace is growing. Agencies have to find a way to continue to make money.” in this setting (Learmonth, Advertising Age, April 7, 2009).
Social networks are attractive to people because they can improve parts or interests in our lives. The number of people using social networking tools has surpassed the number using email. Along with user growth on social media, ad spend on these forums is expected to rise to $3.7 billion by 2011 according to PQ Media. MySpace is working with grocery retailers to build a bridge between loyalty shopping cards and digital advertising on MySpace. P&G Pringles has the most popular marketing-generated Facebook page with 2.8 million followers.
Many businesses use Twitter to connect with their most avid customers by tweeting about promotions, events, and special offers, including companies like Quaker, Pepsi, Southwest Airlines, Smirnoff Vodka, and Express. The National Basketball Association has 140,000 Twitter followers (Shaquille O’Neal has 6 million of his own).
Land Rover has a more ambitious plan by paying the army of highly-followed Twitter users to have Land Rover branding on their profiles. It will be interesting to see the results of this effort, both from the ROI of the campaign itself as well as any potential backlash or fallout from brand-alienated followers. If it works, there will be more to come. “Because of the times, they are changing.”