Tuesday, October 14, 2014

Has Online Video Finally Arrived?

On October 6th, THE WALL STREET JOURNAL published an interview with Daryl Simm, the CEO of Omnicom’s Media operations. He is ultimately responsible for the spending of approximately $55 billion in media across the world.

In the interview he noted that his firm is currently advising their client base to place some 10-25% of their TV dollars in online video.

When I read it, I immediately sent it out to a few friends who responded pleasantly with comments such as: “Wow” or “It’s about time” or “We are already doing that.” Over the next few days, the tide turned and my e-mail box filled up with angry comments largely from local broadcasters.

The passionate remarks included, “Why can’t he just shut up” or “who cares what he thinks, the stuff never works.”

I do not think many of the angry people read the interview. He was quite measured. The Journal reported that Mr. Simm “said that cable and broadcast network owners are getting a significant portion of that money back, since their programming still makes up a large share of the premium online market.”

Mr. Simm also went on to say that, “We look at delivering against segments of an audience. If you are trying to increase your reach against light TV viewers, the answer is to move a significant part of the video budget to online video. We council the client depending on what businesses they are in.”

A few people said a hard and fast percentage is a bad idea. I agree but 10-25% is a pretty big range. He is clearly stating that individual analysis is required depending on the account and its target.

Being longer in the tooth than most of you, I remember when Ted Bates way back in the early 1980’s published their 5% solution. What they were saying was that to hedge your bets and get the total audience for many brands, you should put 5% of TV buys on WTBS, then known as a Superstation. Many in the media scoffed and said all TBS had was Atlanta Braves games and Gomer Pyle reruns. But, did you notice that within a couple of years, cable took off as an advertising medium and then, a decade later, local cable finally got the recognition that it deserved?

Online video may not garner 10-25% of TV budgets next year or even in 2016. The die, however, is cast.

Also, did you notice that today You Tube announced that their Google Preferred ad space is sold out? Coincidence? Hmmm.

Still another train is leaving the media station. Do not get left behind, my friends.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Saturday, October 11, 2014

Moving The Goalposts

The term “moving the goalposts” is a metaphor for something that is changed while in progress. It originated in Britain but is frequently used in the United States when the rules of the game or measurement metrics are changed.

I first became aware of it as a young adult reading claims of the East German government for industrial output (yes, I led a wildly exciting youth). They were so ridiculous that I knew that someone was cooking the books.

In the United States, they move so gradually that you have to watch carefully or you will miss them or dismiss them. It first hit me in the early1980’s when Social Security increases were adjusted to reflect a “more realistic” cost of living for recipients. They took mortgage interest rates out of the calculation saying that few recipients were in the market for a mortgage. On hearing, I nodded and moved on.

Then, coming off the terrible 1982 recession, the Reagan administration suddenly blended the 1.5 million Army, Navy, Air Force, and Marine personnel on active duty with the civilian work force. Presto! The unemployment rate fell--some say by as much as two percent.

A decade later, the Clinton administration upped the ante big time. The moved goalpost was also unemployment figures. If you were so discouraged that you gave up looking for work, you were no longer counted as unemployed. If you wanted full time work but could only work part time, you were not in the unemployment figure. And, full time work was now 21 hours per week even though benefits had to be paid at 30 hours per week.

The Core Consumer Price Index no longer includes food or energy costs. Actually, it has not for years. What? Nope. Food and energy price swings are considered too volatile and short term. Recently (2012), the Core CPI has been replaced and even a stat geek like me is having a hard time sorting out the new formula.

So, are our government statisticians a bunch of liars? No. I am sure the staffers are very careful about the calculations. Are they forced to manipulate statistics and data by policymakers? Yes! When the criteria change, the formulae change.

It is hard to tell whether the economy is really improving when “the goalposts are moved.”  Interestingly, people on both sides of the political and economic spectrum share their annoyance with governmental adjustments. Jim Sinclair, a “gloom & doomer” and passionate gold bug and Chris Hedges, a strident left wing journalist, both swear by John Williams’ Shadowstats. Williams once had a job analyzing government statistics and decided to publish his own as the “official” numbers in his view were so divorced from reality.

Critics say this cozy arrangement has lots of benefits. The government pays less in pension adjustments and social security and private companies can pay less in wages by claiming that the cost of living has hardly budged. Our Social Security time bomb has a slightly longer fuse and business can drop more to the bottom line by citing government cost of living stats at raise time.

While preparing this, a panel member suggested that a similar scam is going on with the Nielsen +7 audience measurement (actual viewing plus playbacks for the next week). I thought that was a bit unkind as a broadcaster or cable entity has the right to charge for their entire audience. He countered that most of the people playing back a program days later would edit out the commercials as they went along. He also said that prices were driven not by audience size but supply and demand so the Nielsen +7 was another example of a “moving a goalpost.”  His point was certainly well made.

Mark Twain once said that, “There are lies, damned lies, and statistics.”  The great humorist was on to something.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Friday, October 3, 2014

The Useful Life of Legacy Media Properties

There is an old axiom that makes the list of most personal finance rules. It is simply, “Don’t finance anything for longer than its useful life.”  Practically speaking, they are saying do not borrow money for vacations or clothes or anything else that is consumed quickly or depreciates fast. A 30 year loan on a house is okay if the interest rate is reasonable as the house may last 100 years. A four year car loan is also okay as the car should last much longer (the new seven year loans could be problematic).

Recently, I had a lively e-mail exchange with a retired broadcaster and asked if he would be interested in buying a TV or radio station. He responded, “Don, I only borrow if the item has a useful life. Today, I do not know what that would be for a local TV or radio property.”

Intrigued, I began asking around. No one was as succinct as my e-mail buddy, but they tended to agree with his assessment. A TV executive said, “ I was asked by a local business man if I would like to form a group to buy a local TV station (not mine). I started laughing and he was annoyed. Look, I told him. We have all worked hard the last six years in this market and billing remains lower than it was in 2007. How long can TV last as an effective TV medium? I don’t know. I do know that we cannot continue here as a viable business if we see revenue dropping almost every year for a decade.”

A radio executive put it this way: “I get so tired of industry wide averages. Okay, so radio is up 1% or maybe 2% nationally. That is an average. If a sunbelt market or a cluster of them is up 8%, good for them. But my podunk mountain time zone market is down almost every year. Do I want to put my savings plus that of some trusted friends in a wasting asset? We try hard but billing is shrinking. Some larger market guys can grow some with solid online sales. We get little response there. Our young sales folks work hard but earn very little. The game has changed.”

A lively radio guy told a great story that may contain some exaggeration. It went like this: “We have a kid who grew up here who made a couple hundred million in Silicon Valley. He loved sports but was just terrible at it. A local lawyer said we should approach him and get him to buy my station which has been a dog for several years. He could even go on air when he felt like it but control his own sports format. I thought it was crazy but I approached his dad whom I know slightly. He laughed in my face. “My son would like to own a major league franchise but he is not a billionaire yet. What he will do is bet a few million per year on start-ups or launch his own creation. He can fail 30 straight times for the rest of his life and still leave my grandchildren a bundle. I will not tell him about this local idea.” It was hard to argue with that!”

Broadcasting used to be a great business. Now, especially in large or growing markets it remains a really good business. Yet, the game is changing as digital takes over and commercial avoidance grows especially among the young. Why go in to big debt or any debt in markets with a weak economy or declining demographics? There may be no one to sell the property to several years from now as the baby boomers age and even they abandon legacy media.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Wednesday, September 24, 2014

Median Income Woes

In the last week, two different government agencies released income data. The Census Bureau provided a report on “income and poverty data for 2013.” Many, if not most of the reports that I saw in the press trumpeted the datum that the poverty level had dropped from 14% to 13.5%. Some in the political arena stressed that this was one more indicator that our economy was on the mend.

Maybe so. At the same time, Don Cole, the crusty curmudgeon, is not so sure. When I dug into the data, I saw that median household income (the 50% percentile) is still where it was 15 years ago. It is stuck at $52,000.  That is not progress. I had a few allies. Annie Lowery of NEW YORK MAGAZINE wrote, “We peaked in the late 1990’s.”

One issue that I have harped on over recent years is that those of us who work in advertising, marketing, or communications tend to live very comfortable lives. The people that we work and socialize with tend to be very affluent. As we age, we get free of basic money worries and some of us get rich.

I heard a stranger say the same thing to me recently. Showing up at a golf course, my playing partners got confused and did not post for our tee time. The starter paired me up with another group and I was put in a golf car with a pleasant gentlemen from Oregon. When you spend four and a half hours with someone the talk often strays from golf.

He told me after a while that he was a low level millionaire who runs a small insurance office. Here is a close paraphrase of some of his comments: “I was at a dinner party recently and looked around the table. All of my friends were easily worth a lot more than I. One has to have a net worth of $25 million. We discussed our children, trips we would take, and a few mentioned how great things were now that the Dow Jones Industrial Average had cracked 17,000. I explained that a buoyant Dow was great for all of us but many people, including most of my customers, were not affected. I told them they would be shocked if they knew how many of my car insurance customers were on food stamps and how many adults had aging blue collar parents paying their premiums for them. Finally, I talked about a young man who visited me that week up to his ears in debt. He wanted to buy a big Dodge Ram pickup truck. I advised him to buy a used truck but he went ahead and got the new one. If gas prices go up he will not be able to fill his tank. And, I bet $1,000 that he will miss an insurance premium this year.”

This gentlemen, although affluent, is in touch with what is going on. The middle class is shrinking. The Pew Survey, a study that I really respect, has illustrated that two decades ago, some 60% of Americans fell in to that sweet spot of middle income. Now, it is down to 45%. Forget what the pundits on CNBC say, the middle class is getting squeezed and there is no relief in sight.

There is one key thing about median income that is rarely mentioned. Demographically, median income has to decline in the years ahead. It is a virtual demographic certainty. Each day, 10,000 Americans turn 65. As these baby boomers retire, their incomes will drop. Median income has to go down. Their purchasing power may not be affected all that much as they will spend less on clothes, lunches, dry cleaning and automobiles and 40% have no mortgage. Yet, the median income will decline.

Separately, the Federal Reserve, a quasi-independent government agency, released their Survey of Consumer Finances--2013, about 10 days ago. Sifting through the turgid prose, I found a statistic that made me feel very sad. Household income for those under 35 years old is at $35,509. Adjusted for inflation, this is the lowest report since 1989. That was 25 years ago!

All of this has to have a profound affect on marketing and advertising in the years to come. Most of you who read this are in the top 10% of American income. A handful are in the infamous 1%. Congratulations! Try to get in touch like my Oregonian acquaintance on the golf course.

Forget your circle of friends. How do you market to people who are struggling? For them, the American dream has become a nightmare.

If you would like to contact Don Cole directly you may reach him at doncolemedia@gmail.com or post a comment on the blog site.

Monday, September 15, 2014

Mobile, The New Out of Home Medium

These days mobile advertising is hot. The growth rate of mobile is a bit hard to track but it appears to be clobbering all other media types year to year. In spite of that, some advertisers and some small to mid-sized agencies are afraid to take the plunge. Others say that they tried it a few years ago, it did not work, so they have written it off as a consideration for 2015 media plans.

To me, part of the reason that people failed is that they did not know how to use mobile. Yet, they will need to and very soon. Facebook has reported that the average person uses their phone 100+ times per day (when I watch my students before and after class, it has to be higher for an under 30 demographic). This is where they are spending their time even when they are allegedly watching TV. No one leaves their home without their phone. They may forget ID or even a wallet but phones are now as ubiquitous as car keys. Missing people who are heavy mobile users is increasingly creating a big hole in any advertiser’s reach potential.

So mobile is now very clearly, to me, an out of home medium. We need to recognize it as such. Advertisers large and small are using it very successfully. For example, I was in a small local restaurant a few months ago and they had a five digit text code on tent cards on each table. You could review the service and the owner would get instant feed-back. If you participated, you were given a 20% coupon for a future meal. This was a great way for a  small player to get inexpensive research and promote at the same time. Others are adding mobile activation to menus or even small ads in suburban newspapers.

A friend in Texas sent me an e-mail recently that was fascinating. “I took my two sons to a Rangers game at the Ballpark at Arlington. The game plan was that it was going to be an expensive afternoon. I was prepared to buy a Rangers jersey for each of the boys favorite player. Well, we went up twice to get the jerseys and the line was long and the boys told me that they were missing the game. Then, as an ad guy, it hit me. They had my e-mail and phone number as I had bought the tickets on line. Why did they not have an app where they could reach me in the stadium and I could order the jerseys between innings without leaving our seats?” I found my friend’s comments interesting.

The next day I was reading Michael Dru Kelley’s new book, ALL THUMBS, Mobile Marketing That Works (Palgrave Macmillan, 2014).  He had a remarkably similar story about taking his son and friends to a concert and discussed how a two way exchange with concert goers would be great for the sponsor.

It would seem that mobile could be a great sales or marketing tool at many live venues. Been to a ball game lately? How many people are busy with their phones during a game? It is stunning to watch.

How about putting simple codes on old fashioned billboards? Or, with geo-targeting getting feedback on a great or poor retail experience. Those who participate get a  nice % off coupon and the few disgruntled customers get quick feedback which may turn a customer around a great deal.

For years, media planners have boasted that they craft strategies that reach people on the go. If mobile is not a real part of that mix, they have to be regarded as primitives today.

If you would like to reach Don Cole directly, you may reach him at doncolemedia@gmail.com

Thursday, September 4, 2014

Spot TV And The 2014 Elections

The past few months have not been kind to most forms of television advertising. Even the fabled “upfront” market in network TV was weaker this time around with some clients switching to more digital options with video online ads and others simply holding back money to allocate at the last moment.

The local TV market has been interesting. There are some parts of the country that are doing just fine. The energy boom in the plains states and stretching down to Texas has insulated them from the soft marketplace and a few pockets in the Southeast have done nicely as well. Many markets (Nielsen DMA’s) are down double digits from last year and station managers and sales executives scoff when they hear signs that the economy is recovering slowly but surely.

Well, some markets are about to get a much needed shot in the arm. Between now and election day on November 4th, some $2 billion dollars is about to be injected into local marketplaces for Senate and House of Representatives races alone. The problem with that is that the money will not be spread out evenly.

Only 35-40 of the House seats are really strongly competitive races so the impact of heavy spending will not be felt nationally. The U.S. Senate, which could conceivably return to the Republicans, are the races where the big bucks are being spent. Right now, the Democrats have a precarious hold on five seats that could go either way in two months. They are in Alaska, Colorado, Arkansas, Louisiana, and North Carolina. Should the GOP run the table on those five races, they would almost certainly take back the U.S. Senate. Even Mitch McConnell, minority leader from Kentucky, faces a stiff reelection bid in the Bluegrass State.

Here are a few verbatim comments that I received from broadcasters across the country:

-- “Business stinks right now. We do not even have a Senate seat up this year so our political billing will be modest. Station ownership is putting real pressure on me. There is little that I can do until confidence returns.”

-- “I am way down for the year but I do have a juicy battleground Senate race. That will bail me out for the fourth quarter. Years ago, we considered political advertising a royal pain. Now, I admit I pray for it every other year.”

-- “Okay, so I will finish the year fine due to a hot Senate race with record-breaking  spending and a reasonably tight Governor’s race. What do I do in the first quarter, 2015?”

-- “My station group told me to get political money. We are a one party state. I do not remember the last competitive race that we have had. The sure winners only spend token amounts and they are doing more on the internet this year.  Only a miracle will save me for this year.”

Looking ahead two years, campaign strategists with, by then, ever more improved targeting techniques will probably continue to cut back on TV usage. And fundamentally, more advertisers are pulling back on TV in general shifting to online options, which are often video, but not conventional or even local cable TV.

Things are changing. The biannual political bailout for local TV stations seems set for an irreversible decline.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Friday, August 29, 2014

Beyond TV Commercial Avoidance

For the last few years, every several months I have posted something about the topic of TV commercial avoidance. Essentially, the argument goes like this: TV is not working as effectively as an advertising medium as it did a decade ago.  Reasons appear to be that nearly half of viewers have a time shifting device and tend to skip commercials during replays, a huge group (varies by demographic) is using another device while viewing (laptop, smartphone, or tablet) and misses many or most commercials, and  video options such as Netflix and Hulu or Hulu+ eliminate many TV spots. I still get push back from some creatives at agencies and a few broadcasters who say that if one creates a better commercial people will flock to it. To me, this is a child’s dream in the world of 2014. May I suggest that you leave it to the children?

I think that over the last few years that I have said enough about commercial avoidance. It is here to stay and will only increase given usage patterns and the addiction to mobile devices especially among the young. So, the realists out there at advertisers, agencies and broadcasters need to accept it but not give up on their medium. The new goal of the ad industry should be to get people to PAUSE on TV spots. Yes, the avoidance or ad skipping will always be there. You have to accept that. Focus on using technology to make TV work better for you. Right now, most TV advertisers simply send viewers to a brand website or Facebook page. Many, if not most, are generic and do not really relate to the specific commercial or campaign they just witnessed.

With mobile being the growth medium of the next decade (more on that in upcoming posts), advertisers need to use their TV spots to engage with it. The key is what many have dubbed “mobile activation.” Instead of sending a TV viewer to a sterile brand website, put some creative calls to action in your mobile efforts linked to responses from your TV work. Also, some now have a text at the bottom of the TV screen that offer coupons or special offers that you can activate with your phone. You will find over time that mobile activation can target consumers much better in terms of likelihood to buy and also find those who respond quickly.  Others are putting their long form You Tube videos on mobile which people can see when they respond to the TV spot.

The technology will keep getting stronger and the opportunities are boundless. Clearly, TV is weaker than it has been in past years. So, stop fretting over commercial avoidance or denying it and use TV and mobile as complimentary vehicles.

Much more to come on mobile.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com