Last month, Penquin Press published Ken Auletta’s Googled, The End of the World As We Know It. Over the last few years, there have been several books of varying quality describing the Google phenomenon. What makes this one standout is the author, Ken Auletta. He is the media writer for The New Yorker magazine, and the author of Three Blind Mice (How the TV Networks Lost Their Way) which forecast the decline of the major television networks. Besides Auletta’s credentials and breezy writing style, he had unprecedented access to Google management. Of the 300 hundred interviews he conducted for the book, over 150 were at Google where he was allowed to sit in on many meetings and ask anything that he wished.
The book starts off in a conventional way describing as tech accounts often do of two grungy guys, Larry Page and Sergey Brin, who founded the company. They then brought in Eric Schmidt as CEO who was more buttoned up, mature, and could deal well with the outside world. But then Auletta really takes off as he describes how Google caused seismic upheavals in the media, entertainment, and eventually the retail world all in a stunningly brief time frame.
Auletta makes the point that the Google guys really are different. They have a different set of values that anyone else in tech or media. They are a bit naïve at times. But, most of all they are engineers. The engineer is king at Google. They worked very hard to develop and refine their search logarithm. As engineers, they need to quantify everything and continuously ask Why Not? They see most things in our advertising world as inefficient. “Why can’t we digitize books”, they ask. And, “why can’t we charge for advertising when someone clicks on it.” Their approach is not the old shotgun approach that all of us took for granted with broadcast or print. We sold sizzle and environment and emotion but they have replaced the shotgun with a rifle shot. (There is a very funny scene in the book where Mel Karmazin of CBS and later satellite radio fame tells Google executives that they have messed with the sizzle)
The Google team is engineering driven. Amazingly, more than half of their employees are described as engineers and 20% of their time or one day a week is free time where they can work on any project that strikes their fancy. In such an environment, many innovative ideas bubble up from the engineers.
Their business sense is also not what we traditional media types are used to. More than once we read “Google is not obsessed with killing competitors. They are obsessed with efficiencies.” One issue kept gnawing at me throughout the text. Is Google a media company? Or is it merely a media distributor? After all, most of the content is produced by others. With the purchase of You Tube, a de facto network, they are becoming a media company. And, their platform is producing its own content. Consider this blog, for example.
Some analysts see Facebook and Twitter as a threat to Google’s search engine. To me, that is rubbish. Surely, friends can direct you to things that they know will interest you but search will still dominate.
Google has ethics. To date, there is little evidence that they have abused the massive data that they have. They are being watched and carefully, but so far so good.
The tentacles of Google go far and wide. They now have affiliations with many companies that are described as being a “frenemy”. This new term describes companies that are both collaborators and simultaneously competitors to Google. They compete with phone companies, Apple, even on cloud computing.
Does Google have flaws? Auletta points out that as brilliant as they are they may lack emotional intelligence. We conventional types have a boatload of that. And, that makes us experts in branding. Can Google extinguish us all? My feeling is not if we hold on to our branding expertise. That can protect agencies, marketing consultants and brand managers. Google’s virtual ad kits for newspaper and radio commercials are fine for small retailers who may be able to do without a tiny local agency. But, there still is a place for people who can position brands, nurture them, and connect with people. Yes, social media can do some of that but the jury is out on how far it can go and whether or not it can it reach all strata of society.
Can Google be stopped? Auletta warns that they could face the normal means of self-destruction—they could become big and bureaucratic, the good engineers may jump ship for a lot more money or recognition, the competition could gang up on them, and, as happened to Microsoft, government interference could raise its ugly head if the growth continues and more people complain. Another danger, but a real one, is that two kids in a garage somewhere could knock Google off their perch with a better way of communicating via a totally new technology.
To date, their image has been wonderful as they are free. The public loves it. And, their content from Google maps to Gmail to You Tube to their new GPS competitor is excellent and free! The free aspect has instantly created a reservoir of goodwill that will be hard to dislodge.
When it comes to traditional media, Auletta is tough and he should be. He makes the marvelous analogy of media chiefs treating the internet in much the same way that the major networks did cable 20 years ago. They could have bought in more than they did to hedge their bets and now have lost a lot of their power. And now, NBC will soon be a Comcast holding! He describes tremendous insecurity among media executives with good reason. The speed of change this time is far greater than 20 years ago.
Auletta addresses the print issue nicely. When it comes to news and newspaper Google aggregates rather than creates content. If a substantial publisher such as Rupert Murdoch opts out of Google Search, he reduces the amount of people exposed to his papers. But, if he opts in his lifelong loves become a commodity. Ah, but Google might say, more eyeballs sell more on line ads. Yes, Murdoch counters but I only get a fraction per eyeball as I get with my newspaper. Both sides are right, says Auletta, and the conundrum for struggling newspapers only deepens.
Separately, the dollars tell the story. Of the $172 billion in advertising revenue last year, Google, with millions of often boring sidebar ads, had approximately $21 billion in advertising billings. This matched magazine billing which has since taken a nasty hit. Like a stealth bomber, this innovative search engine company is now poised to be the dominant media player. It is amazing but symptomatic of today’s world of communications. Google has so much money, cash flow, and no debt that they can buy virtually whatever they want. This week, Exxon Mobil received a lot of press for their $29 billion acquisition of natural gas leader, XTO. Well, Google is now the Exxon Mobil of communications. They apparently toyed with buying The New York Times but backed off when they said it did not fit their culture. And, with their deep pockets, they can buy and lose money for a long time as they fit a company into their expanding model. Look at You Tube. It has not been monetized properly yet but once the potential is tapped, it has the possibility of being a huge moneymaker. No one else in our world has the luxury of such patience that Google has.
Did Auletta miss anything? I believe he did and it was a big one. There is very little mention of Google TV ads. This is an arrangement with Dish Network where they sell advertising in several million homes. More importantly, I have seen some of the granular data that they can provide. The Google TV analysis gets you a lot closer to the truth than Nielsen ever has. We always knew that TV ratings overstated things and this was particularly true of commercial viewing. Google will likely charge as they did for search—you only pay for people who see your commercials. This could eventually put Nielsen in desperate shape and rock all current TV advertising. The topic is so important that I plan to devote a separate post to it shortly.
This criticism aside, this is a marvelous and important book. It is so rich and thought provoking that a review cannot do it justice. Auletta did a great service to all of us by writing it. Ignore Google and even this book at your peril.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Wednesday, December 16, 2009
Tuesday, December 8, 2009
Nielsen as an Economic Bellwether?
A few weeks ago a friend and Media Realism panel member sent me the following: “Don, what do you make of this? In the 08/09 season, television viewing in the US reached an all time high, up 4 minutes from the prior season and up 20% from 10 years ago according to Nielsen. The average household in 08/09 watched 8 hours and 21 minutes a day of television on average, which is an all time high as well. Why is television viewing at an all time high in a world with videogames, DVD’s, computers & internet, etc?”
I gave him a quick answer but promised this post to provide a more measured response. And, those of you who know me, brace yourselves. I will actually say something nice about Nielsen!
Many of us have been surprised over the years as TV viewing continues to go higher and higher. Part of it can be explained away by an aging population but with so many gadgets at our disposal and non-TV video options, the recent small move to a new plateau was surprising.
Here is my theory—Last Friday, the government excitedly announced that the official unemployment rate had dropped from 10.2 to 10.0%. Every believer in Obamanonics cited this as proof that the economy was on the mend and prosperity was around the corner as Herbert Hoover (sic) once said. Well, my take is a bit different. Yes, any decline in unemployment is welcome news and no one is cheering for a rebound next year more than I. But there are structural issues out there that indicate that things are still not great and the Nielsen annual data may be an indicator as well.
There are a handful of apocalyptic analysts out there who say unemployment is not 10% but closer to 20%. They exaggerate but make a good point. The real rate of unemployment is much higher than 10%. It does not include the following people:
1) Those whose unemployment compensation has run out.
2) The long term unemployed who are so discouraged they do not look for work anymore.
3) Recent graduates who cannot find jobs, live with Dad and Mom but are in no one’s statistics.
4) The young elderly who were downsized and began receiving Social Security on their 62nd birthdays.
5) Millions who work part time because they cannot find full time work.
6) The “underemployed” who make a fraction of what they once did but do a lesser job to make ends meet and have some form of healthcare.
What do all of these groups do? They watch a lot of TV. They cannot afford to do much else for entertainment. The Social Security Administration says that in the past year a record number of people applied for monthly checks. Why? They need the money and cannot find acceptable work. These early baby boomers include some who planned to retire that young, some who are burned out and wanted to leave but also a large group that knows few are going to hire a 62 year old in a meaningful job. So, they collect their checks and spend way too much time in front of the tube.
Here are a few more scary stats that make the case for record high TV viewing. Some 23% have negative equity in their homes (if they sold today, they would get less than their mortgage for it) and foreclosures continue to explode. The American consumer has never been further behind in virtually all yardsticks—mortgages, auto loans, credit card bills, and student loans. Finally, the saddest figures of them all—1 in 8 Adults are on food stamps and tragically, 1 in 4 U.S. children.
There is no shortage of things to do or ways to watch video other than TV. But directionally Nielsen is telling us something. People are stretched as never before in our lifetimes. They watch TV in record amounts because they have few options.
If we see TV viewing dip in late 2010 or maybe 2011 we have a very reliable indicator that the economy is truly on the mend.
Should you want to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
I gave him a quick answer but promised this post to provide a more measured response. And, those of you who know me, brace yourselves. I will actually say something nice about Nielsen!
Many of us have been surprised over the years as TV viewing continues to go higher and higher. Part of it can be explained away by an aging population but with so many gadgets at our disposal and non-TV video options, the recent small move to a new plateau was surprising.
Here is my theory—Last Friday, the government excitedly announced that the official unemployment rate had dropped from 10.2 to 10.0%. Every believer in Obamanonics cited this as proof that the economy was on the mend and prosperity was around the corner as Herbert Hoover (sic) once said. Well, my take is a bit different. Yes, any decline in unemployment is welcome news and no one is cheering for a rebound next year more than I. But there are structural issues out there that indicate that things are still not great and the Nielsen annual data may be an indicator as well.
There are a handful of apocalyptic analysts out there who say unemployment is not 10% but closer to 20%. They exaggerate but make a good point. The real rate of unemployment is much higher than 10%. It does not include the following people:
1) Those whose unemployment compensation has run out.
2) The long term unemployed who are so discouraged they do not look for work anymore.
3) Recent graduates who cannot find jobs, live with Dad and Mom but are in no one’s statistics.
4) The young elderly who were downsized and began receiving Social Security on their 62nd birthdays.
5) Millions who work part time because they cannot find full time work.
6) The “underemployed” who make a fraction of what they once did but do a lesser job to make ends meet and have some form of healthcare.
What do all of these groups do? They watch a lot of TV. They cannot afford to do much else for entertainment. The Social Security Administration says that in the past year a record number of people applied for monthly checks. Why? They need the money and cannot find acceptable work. These early baby boomers include some who planned to retire that young, some who are burned out and wanted to leave but also a large group that knows few are going to hire a 62 year old in a meaningful job. So, they collect their checks and spend way too much time in front of the tube.
Here are a few more scary stats that make the case for record high TV viewing. Some 23% have negative equity in their homes (if they sold today, they would get less than their mortgage for it) and foreclosures continue to explode. The American consumer has never been further behind in virtually all yardsticks—mortgages, auto loans, credit card bills, and student loans. Finally, the saddest figures of them all—1 in 8 Adults are on food stamps and tragically, 1 in 4 U.S. children.
There is no shortage of things to do or ways to watch video other than TV. But directionally Nielsen is telling us something. People are stretched as never before in our lifetimes. They watch TV in record amounts because they have few options.
If we see TV viewing dip in late 2010 or maybe 2011 we have a very reliable indicator that the economy is truly on the mend.
Should you want to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Monday, November 30, 2009
The Republican Bailout Package of Fall, 2010
After the November, 2008 elections the Republican Party was virtually given up for dead. The Democrats had not only captured the White House but added a few dozen seats to their House of Representatives majority and moved toward a filibuster proof 60 seats in the United States Senate. To those of us with long memories, it looked a lot like the mid-1960’s where the Republicans clout was at a low not seen since the 1930’s.
In recent weeks, things have changed and radically. The GOP won Governor’s races in Virginia and New Jersey and our new president’s honeymoon with both the press and the American public seems to be coming to an end. Some poll numbers are very telling:
According to a Washington Post/ABC News poll, 51% of Americans disapprove of his handling of the deficit. Gallup found that his job approval rating is 49%; it’s lowest yet. And, only 19% of voters believe that Mr. Obama’s health care reform will not add to the deficit as he is claiming. (That may be lower than those of us who believe in the Easter Bunny)
Incredibly, the party considered dead 12 months ago has, according to Gallup, a four point lead of 48-44% of those who identify as generic Republicans over Democrats. A year ago, the Democrats had a commanding 12 point lead with that statistic that most of us thought could only widen. Independent voters caused the generic shift and they now favor Republicans by 22 points.
What does this mean to the media world? Plenty! The Republicans, always great fundraisers, will break records for an off-presidential year in 2010. There are 40 House seats that are not in strong hands, particularly those won in 2008. Also, the Democrats have several Senate seats in jeopardy in states like Arkansas, Connecticut, Nevada, New York, Delaware, Colorado, and Illinois (we will give our fearless forecast on the races six weeks before the election).
Next fall TV stations and cable systems and some radio stations (who will see lots of action from the many hotly contested house seats) will benefit mightily. From Labor Day to Election Day on November 2nd things will look good for TV advertising in many, many areas.
My opinion is that the economic recovery (last quarter’s GDP growth of 3.5% has been “adjusted” to 2.8%) will emerge in the summer but be tepid at best. The political spending will be a very welcome and needed shot in the arm for local TV, Radio, and cable players.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
In recent weeks, things have changed and radically. The GOP won Governor’s races in Virginia and New Jersey and our new president’s honeymoon with both the press and the American public seems to be coming to an end. Some poll numbers are very telling:
According to a Washington Post/ABC News poll, 51% of Americans disapprove of his handling of the deficit. Gallup found that his job approval rating is 49%; it’s lowest yet. And, only 19% of voters believe that Mr. Obama’s health care reform will not add to the deficit as he is claiming. (That may be lower than those of us who believe in the Easter Bunny)
Incredibly, the party considered dead 12 months ago has, according to Gallup, a four point lead of 48-44% of those who identify as generic Republicans over Democrats. A year ago, the Democrats had a commanding 12 point lead with that statistic that most of us thought could only widen. Independent voters caused the generic shift and they now favor Republicans by 22 points.
What does this mean to the media world? Plenty! The Republicans, always great fundraisers, will break records for an off-presidential year in 2010. There are 40 House seats that are not in strong hands, particularly those won in 2008. Also, the Democrats have several Senate seats in jeopardy in states like Arkansas, Connecticut, Nevada, New York, Delaware, Colorado, and Illinois (we will give our fearless forecast on the races six weeks before the election).
Next fall TV stations and cable systems and some radio stations (who will see lots of action from the many hotly contested house seats) will benefit mightily. From Labor Day to Election Day on November 2nd things will look good for TV advertising in many, many areas.
My opinion is that the economic recovery (last quarter’s GDP growth of 3.5% has been “adjusted” to 2.8%) will emerge in the summer but be tepid at best. The political spending will be a very welcome and needed shot in the arm for local TV, Radio, and cable players.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Tuesday, November 24, 2009
No TV; No Problem!
Earlier this year, we had a dispute with a well known television provider. My wife cancelled the service and after Digital D-Day, we realized that we had no TV of any kind. We did not move quickly although we looked in to satellite services and a new cable competitor. As the weeks rolled by, we found we did rather well without TV and still were avid users of video. Today, we discuss our several months of TV free life.
There were absolutely no withdrawal pains. My wife in our thirty years of marriage has been the lightest TV viewer that I know. For me, it should have been tricky as I have certain interests that lend themselves to light but pretty regular TV viewing. And, as a media analyst, I need to keep current on programming. But, we found alternatives within a few days.
Hulu.com bailed us out by providing all of the current primetime programs that either of us watched with some regularity. We also became spoiled watching with the low commercial load. The Hulu.com option was there when we wanted it.
I am news junkie particularly of the business and political vein. Watching CNBC daily via streaming video actually enhanced my enjoyment. I only watched those interviews that I chose to and generally saw only a 15 second spot before each segment. Book TV on C-Span has long been a favorite but, again, I did not waste any time. I could go on-line and pull up any interview that I wanted. The same held true with MSNBC, Fox News, and CNN. I heard Meet the Press on the radio a few times as well.
There were two things that I missed. Some live sports just cannot be replicated and I missed the US Open Golf Tournament and Wimbledon Tennis (I saw Tom Watson’s valiant run as a 59 year old in the British Open Golf Championship in a restaurant while trying to chat with the owner who spoke almost no English). And, a summer without any baseball was annoying although I normally only watch an inning or two. What else? Turner Classic Movies! The great Robert Osbourne gives insightful commentary prior to each film. I learn so much even as an old movie buff that I sometimes watch his preamble and then do not watch the film if I have seen it before.
Netflix filled some holes as did getting an entire season of British mysteries or a year of an HBO series borrowed for free from the library. Of course, I saw no advertising under that scenario.
Many college students that I have spoken to watch very little TV but, like me, they watch a good bit of video although their choices were significantly different than mine.
Also, I must add that when we traveled, we stayed a bit too long with The Weather Channel or Headline News after not having TV for so long.
To my friends and readers in broadcast and cable, I say categorically not to worry. Most people would not be willing or maybe able to do what we did for a few months. The exercise did show how much the world has changed. So much is available in our digital world these days and you get more flexibility and see far less advertising which may appeal to some. If more people go this route, it will likely spread rather slowly, but even if only a few hundred thousand do, it will be one more leak from the depleting reservoir of advertiser supported TV.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
There were absolutely no withdrawal pains. My wife in our thirty years of marriage has been the lightest TV viewer that I know. For me, it should have been tricky as I have certain interests that lend themselves to light but pretty regular TV viewing. And, as a media analyst, I need to keep current on programming. But, we found alternatives within a few days.
Hulu.com bailed us out by providing all of the current primetime programs that either of us watched with some regularity. We also became spoiled watching with the low commercial load. The Hulu.com option was there when we wanted it.
I am news junkie particularly of the business and political vein. Watching CNBC daily via streaming video actually enhanced my enjoyment. I only watched those interviews that I chose to and generally saw only a 15 second spot before each segment. Book TV on C-Span has long been a favorite but, again, I did not waste any time. I could go on-line and pull up any interview that I wanted. The same held true with MSNBC, Fox News, and CNN. I heard Meet the Press on the radio a few times as well.
There were two things that I missed. Some live sports just cannot be replicated and I missed the US Open Golf Tournament and Wimbledon Tennis (I saw Tom Watson’s valiant run as a 59 year old in the British Open Golf Championship in a restaurant while trying to chat with the owner who spoke almost no English). And, a summer without any baseball was annoying although I normally only watch an inning or two. What else? Turner Classic Movies! The great Robert Osbourne gives insightful commentary prior to each film. I learn so much even as an old movie buff that I sometimes watch his preamble and then do not watch the film if I have seen it before.
Netflix filled some holes as did getting an entire season of British mysteries or a year of an HBO series borrowed for free from the library. Of course, I saw no advertising under that scenario.
Many college students that I have spoken to watch very little TV but, like me, they watch a good bit of video although their choices were significantly different than mine.
Also, I must add that when we traveled, we stayed a bit too long with The Weather Channel or Headline News after not having TV for so long.
To my friends and readers in broadcast and cable, I say categorically not to worry. Most people would not be willing or maybe able to do what we did for a few months. The exercise did show how much the world has changed. So much is available in our digital world these days and you get more flexibility and see far less advertising which may appeal to some. If more people go this route, it will likely spread rather slowly, but even if only a few hundred thousand do, it will be one more leak from the depleting reservoir of advertiser supported TV.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Thursday, November 19, 2009
Who Will Join Rupert's Pay Wall?
There has been a lot of print and buzz lately about attempts to monetize on-line newspaper. This past week it really accelerated when Rupert Murdoch announced he will be putting pay walls on his newspaper sites.
Murdoch in an Australian interview was a bit coy about details. It could be a situation like The Wall Street Journal (owned by Murdoch’s News Corp.) where visitors may see the lead paragraph of a story gratis but then have to pay to see the entire piece. Ironically, when Murdoch first purchased the Journal a few years ago he suggested that WSJ.com be distributed for free. When he saw the revenue the subscriptions generated, he thought better of it. Now, he appears to want to expand some version of the Journal model across his entire newspaper empire.
I cannot say that I blame him. Despite rampant cost cutting, most major metropolitan newspapers are losing lots of money. They cannot cut much more staff and be viable. Early this year we talked about how investigative journalism in many small and mid-sized markets will soon disappear as publishers cannot afford to have reporters spending weeks hunting down a story. And, forget about the next Woodward and Bernstein to come along. There will be no one who can afford to subsidize such exhaustive digging into a story like Watergate. So corrupt mayors and city councils in many markets can soon rest easy and do terrible damage. It will be much harder to catch them going forward. Some say a loss of newspapers will be a serious threat to democracy. Others say that cable news will pick up the slack. Maybe nationally cable and network news can serve as a cop on the beat, but locally the sleazebags will have a lot more room to maneuver.
Setting aside that serious issue, what about the economics? In a beautifully written cover story in Time Magazine earlier this year, Walter Isaccson argued that on-line pay walls were vital to keep newspapers solvent. He argued that historically newspapers made revenue from newsstand, subscriptions, and advertising. However, on-line advertising is not enough to keep the papers solvent as hard copy sales shrink. Some form of “micro-payment” system could be put in place that could help newspapers survive as more people moved on-line. An example was 5 cents for an article, 10 cents for a specific day’s paper, and several dollars a month for an on line subscription. He also said that most people would not have a problem paying.
The execution of micro-payments is probably tricky. How do you handle thousands and thousands of 5 cent transactions? But the broader issue is the tough one for me. Everything that I have seen indicates that most people would have a hard time paying. They have received something for free for nine or ten years and now they are asked to pay. Most seem to just go somewhere else for their news.
Some publishers have tried some unique approaches. In my home state of Rhode Island, The Newport Daily News with a tiny circulation of 12,000 had a novel offering. If you subscribed to their paper in standard format (Monday-Friday afternoon editions plus Saturday morning) you paid $145 a year. Print plus on-line was $245 and on-line alone was $345. While daring, this to me is completely counter-intuitive. You are driving people to the format, print, that is dying! I wish my fellow Rhode Islanders well and applaud their bold experiment but I am profoundly skeptical of its success. They have guts but do they have the vision?
A friend and weekly reader of Media Realism tells me that pay walls can work only if some major players do it all at once. He gave me the example of how ESPN.com had a pay wall for certain content. Immediately, he went to Sport Illustrated (SI.com), loved what he saw for free, and does not feel a need to go back to ESPN.
His point is well taken. The Wall Street Journal put up the pay wall first and it was a stiff fee ($200+) that people did not have a problem paying. A lot of their subscriptions are corporate so people were not paying a few hundred dollars personally. And, let’s face it. The Journal is unique. Most truly serious U.S. businessmen feel that they must read the Wall Street Journal to keep up to date on the financial happenings in this country and the status of major corporations. When it comes to politics and world affairs The New York Times and The Washington Post have similar aficionados. But most papers, magazines, and websites are not imperative reads.
A personal example makes the point well, I believe. In recent months, people have written or called me and suggested that I charge a subscription for Media Realism. With a straight face I told my wife who immediately broke into uncontrollable laughter. We sat down and figured that excluding relatives and a few very close friends I might have 25 paid subscribers. This for a blog that delivers 1200 readers in a slow week and as much as 3300 when the topic appeals to a lot of people and they pass it on aggressively. I am not putting myself down and certainly not you, dear readers. The blog is great fun to write and I really enjoy the hundreds of comments that I receive from you. But, I am keenly aware that you have other places to go for media/advertising news and commentary in today’s world. And, unlike many newspaper publishers I am still quite solvent, thank you, and can publish indefinitely from my basement or sun porch.
If publishers erect pay walls all it will do is reinforce bloggers such as I and even encourage more Twitter which is really micro-blogging. Yet, the American Press Institute states that 75% of publishers believe that they can successfully charge for content. Many say by late summer of 2010, they will have pulled the trigger.
To me, sadly, it may be too little too late. Newspapers over the last decade never really acknowledged on-line as part of their product line. On-line ad sales were not good and they did not package it well with their traditional newspaper offerings.
Now the rush is to provide various monetization models. I wish the industry success but a lot more papers will have to go down before the pendulum swings back, if ever. One possible scenario would be a total industry wash out where hundreds of newspapers go down in the next few years and exist only as weak on-line vehicles. The blogosphere which can no longer lift free articles from newspapers will get so bad and opinion rather than fact based that people will throw up their hands in disgust and pay for content. But, I am still not sure. Local news may fade and cable network news will dominate. It seems a shame but the tidal wave of change is impossible to hold back.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Murdoch in an Australian interview was a bit coy about details. It could be a situation like The Wall Street Journal (owned by Murdoch’s News Corp.) where visitors may see the lead paragraph of a story gratis but then have to pay to see the entire piece. Ironically, when Murdoch first purchased the Journal a few years ago he suggested that WSJ.com be distributed for free. When he saw the revenue the subscriptions generated, he thought better of it. Now, he appears to want to expand some version of the Journal model across his entire newspaper empire.
I cannot say that I blame him. Despite rampant cost cutting, most major metropolitan newspapers are losing lots of money. They cannot cut much more staff and be viable. Early this year we talked about how investigative journalism in many small and mid-sized markets will soon disappear as publishers cannot afford to have reporters spending weeks hunting down a story. And, forget about the next Woodward and Bernstein to come along. There will be no one who can afford to subsidize such exhaustive digging into a story like Watergate. So corrupt mayors and city councils in many markets can soon rest easy and do terrible damage. It will be much harder to catch them going forward. Some say a loss of newspapers will be a serious threat to democracy. Others say that cable news will pick up the slack. Maybe nationally cable and network news can serve as a cop on the beat, but locally the sleazebags will have a lot more room to maneuver.
Setting aside that serious issue, what about the economics? In a beautifully written cover story in Time Magazine earlier this year, Walter Isaccson argued that on-line pay walls were vital to keep newspapers solvent. He argued that historically newspapers made revenue from newsstand, subscriptions, and advertising. However, on-line advertising is not enough to keep the papers solvent as hard copy sales shrink. Some form of “micro-payment” system could be put in place that could help newspapers survive as more people moved on-line. An example was 5 cents for an article, 10 cents for a specific day’s paper, and several dollars a month for an on line subscription. He also said that most people would not have a problem paying.
The execution of micro-payments is probably tricky. How do you handle thousands and thousands of 5 cent transactions? But the broader issue is the tough one for me. Everything that I have seen indicates that most people would have a hard time paying. They have received something for free for nine or ten years and now they are asked to pay. Most seem to just go somewhere else for their news.
Some publishers have tried some unique approaches. In my home state of Rhode Island, The Newport Daily News with a tiny circulation of 12,000 had a novel offering. If you subscribed to their paper in standard format (Monday-Friday afternoon editions plus Saturday morning) you paid $145 a year. Print plus on-line was $245 and on-line alone was $345. While daring, this to me is completely counter-intuitive. You are driving people to the format, print, that is dying! I wish my fellow Rhode Islanders well and applaud their bold experiment but I am profoundly skeptical of its success. They have guts but do they have the vision?
A friend and weekly reader of Media Realism tells me that pay walls can work only if some major players do it all at once. He gave me the example of how ESPN.com had a pay wall for certain content. Immediately, he went to Sport Illustrated (SI.com), loved what he saw for free, and does not feel a need to go back to ESPN.
His point is well taken. The Wall Street Journal put up the pay wall first and it was a stiff fee ($200+) that people did not have a problem paying. A lot of their subscriptions are corporate so people were not paying a few hundred dollars personally. And, let’s face it. The Journal is unique. Most truly serious U.S. businessmen feel that they must read the Wall Street Journal to keep up to date on the financial happenings in this country and the status of major corporations. When it comes to politics and world affairs The New York Times and The Washington Post have similar aficionados. But most papers, magazines, and websites are not imperative reads.
A personal example makes the point well, I believe. In recent months, people have written or called me and suggested that I charge a subscription for Media Realism. With a straight face I told my wife who immediately broke into uncontrollable laughter. We sat down and figured that excluding relatives and a few very close friends I might have 25 paid subscribers. This for a blog that delivers 1200 readers in a slow week and as much as 3300 when the topic appeals to a lot of people and they pass it on aggressively. I am not putting myself down and certainly not you, dear readers. The blog is great fun to write and I really enjoy the hundreds of comments that I receive from you. But, I am keenly aware that you have other places to go for media/advertising news and commentary in today’s world. And, unlike many newspaper publishers I am still quite solvent, thank you, and can publish indefinitely from my basement or sun porch.
If publishers erect pay walls all it will do is reinforce bloggers such as I and even encourage more Twitter which is really micro-blogging. Yet, the American Press Institute states that 75% of publishers believe that they can successfully charge for content. Many say by late summer of 2010, they will have pulled the trigger.
To me, sadly, it may be too little too late. Newspapers over the last decade never really acknowledged on-line as part of their product line. On-line ad sales were not good and they did not package it well with their traditional newspaper offerings.
Now the rush is to provide various monetization models. I wish the industry success but a lot more papers will have to go down before the pendulum swings back, if ever. One possible scenario would be a total industry wash out where hundreds of newspapers go down in the next few years and exist only as weak on-line vehicles. The blogosphere which can no longer lift free articles from newspapers will get so bad and opinion rather than fact based that people will throw up their hands in disgust and pay for content. But, I am still not sure. Local news may fade and cable network news will dominate. It seems a shame but the tidal wave of change is impossible to hold back.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Friday, October 30, 2009
Trade-Off, Required Reading for Marketers
Last month an excellent new book was released. It should be read by everyone involved with branding, advertising, and consumer behavior. The book is entitled Trade-Off , Why Some Things Catch on and Others Don’t. It is written by Kevin Maney who often writes for Wired, The Atlantic, and Conde Nast Portfolio. The book’s publisher is Broadway.
What struck me about Trade-Off was the elegant simplicity of the premise. Maney states that with virtually all purchases there is a constant tension between Fidelity and Convenience.
Fidelity basically sums up the quality of a consumer experience. You go to a rock concert knowing that the sound will not be as good as you get on a CD at home. But you go to see the band, see the lighting, the special effects, be part of the crowd, and perhaps most importantly to be able to tell people that you were there. All that rolled up together spells fidelity.
Convenience is pretty obvious. It is how hard or easy it is to get what you want. Sometimes you go to a concert to get the entire fidelity treatment mentioned above. But, often you chose a low fidelity but high convenience experience like listening to your favorite group on a digital music player that is stuffed in your pocket. Sound quality may be a bit problematic.
With most purchases we make “a fidelity swap.” And, this swap is to Maney largely the key to business success or failure. Is the business set up for fidelity or convenience?
Other factors that play into the “swap” are:
1) The Tech Effect—you had to expect this in late 2009! Improvements in technology can improve both fidelity and convenience. Boundaries between the two are real but they are always changing.
2) The Fidelity Belly—if you are not extremely high fidelity or convenient you fall into the fidelity belly which he calls the “no man’s land of consumer experience. The tech effect is always redefining the borders of the belly so you brand may get swallowed up or become passé with the consumer if you are not careful.
3) The Fidelity Mirage—this one is dynamite. Businesses often say that they can do it but achieving both high fidelity and convenience seems to be impossible. If you try to do both you waste lots of time and even more resources and almost always fail. Starbucks expanded to the point where they often had locations on either side of a street corner. They were commonplace (and their baristas did not seem as well trained to me!) and when the economy started to tank, did you really need a $4.00 cup of coffee and an experience that no longer felt special? Familiarity truly did breed contempt and they have closed many stores and are now retrenching.
Coach built too many outlet stores and opened 94 conventional units between 2004 and 2008. Maney states that a big part of fidelity is maintaining aura and identity, and that is especially true with fashion and accessories. Convenience dissipates the aura and allure. Coach has lowered prices, closed locations and appears to be clawing back but they must never again become the McDonald’s of luxury.
Amazingly, even Wal-Mart tried to do both. Remember when they went in to New York City a few years back? That was a complete departure from their heritage. Wal-Mart grew by being the one stop shopping place for people in rural areas. They never entered major cities until they had surrounded them by working far outside and then gingerly stepping in to suburbs. Their empire was built on letting rural people go to one store instead of a dozen.In New York, shops abound and they are close to one another. After they closed New York, they amazingly shot themselves in the foot again by stocking higher priced and more fashionable clothes than ever before. I remember seeing TNS Media Intelligence reports stating that they were advertising in Vogue! At lunch that same day, I stopped at a newsstand and cracked up when I saw their ad was actually there. They were trying for both fidelity and convenience. Wal-Mart wanted aura it seemed and had abandoned its roots. The campaign flopped and they killed the better clothing and came back with “Save money. Live better.” As the economy sank, they rose as everyday low pricing reigned supreme again.
4) Super fidelity or Super convenience—Maney does not hedge; this is the province of winners. Most products that are hits fall at either end of the spectrum thus avoiding the dreaded fidelity belly. Apple put the i-phone at the top of the fidelity axis and they conquered despite a high price and limited geographic availability. Wal-Mart is back on top in retailing by returning to being the high convenience winner making shopping for basics cheaper than anywhere else. So Wal-Mart has poor fidelity and the i-phone is not very convenient to buy. But would you want to own either franchise? Of course!
Another example is from our industry. NFL Football with spectacular production values is the highest fidelity program in sports television. ESPN (sans MNF and college basketball) provides convenience in sports. There is always something in sports to watch on their networks.
This is only the tip of the iceberg but what struck me is that Maney has put his finger on something very important. I cannot tell you how many times I have seen companies harm or destroy their franchise because they fell for Maney’s Fidelity Mirage. You cannot be all things to all people. Yet, people believe they can. This approach is an excellent filter to use to help with positioning, expansion and pricing issues.
Get your boss to read Trade-Off, your creative heads as well, and especially the account planners!
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
What struck me about Trade-Off was the elegant simplicity of the premise. Maney states that with virtually all purchases there is a constant tension between Fidelity and Convenience.
Fidelity basically sums up the quality of a consumer experience. You go to a rock concert knowing that the sound will not be as good as you get on a CD at home. But you go to see the band, see the lighting, the special effects, be part of the crowd, and perhaps most importantly to be able to tell people that you were there. All that rolled up together spells fidelity.
Convenience is pretty obvious. It is how hard or easy it is to get what you want. Sometimes you go to a concert to get the entire fidelity treatment mentioned above. But, often you chose a low fidelity but high convenience experience like listening to your favorite group on a digital music player that is stuffed in your pocket. Sound quality may be a bit problematic.
With most purchases we make “a fidelity swap.” And, this swap is to Maney largely the key to business success or failure. Is the business set up for fidelity or convenience?
Other factors that play into the “swap” are:
1) The Tech Effect—you had to expect this in late 2009! Improvements in technology can improve both fidelity and convenience. Boundaries between the two are real but they are always changing.
2) The Fidelity Belly—if you are not extremely high fidelity or convenient you fall into the fidelity belly which he calls the “no man’s land of consumer experience. The tech effect is always redefining the borders of the belly so you brand may get swallowed up or become passé with the consumer if you are not careful.
3) The Fidelity Mirage—this one is dynamite. Businesses often say that they can do it but achieving both high fidelity and convenience seems to be impossible. If you try to do both you waste lots of time and even more resources and almost always fail. Starbucks expanded to the point where they often had locations on either side of a street corner. They were commonplace (and their baristas did not seem as well trained to me!) and when the economy started to tank, did you really need a $4.00 cup of coffee and an experience that no longer felt special? Familiarity truly did breed contempt and they have closed many stores and are now retrenching.
Coach built too many outlet stores and opened 94 conventional units between 2004 and 2008. Maney states that a big part of fidelity is maintaining aura and identity, and that is especially true with fashion and accessories. Convenience dissipates the aura and allure. Coach has lowered prices, closed locations and appears to be clawing back but they must never again become the McDonald’s of luxury.
Amazingly, even Wal-Mart tried to do both. Remember when they went in to New York City a few years back? That was a complete departure from their heritage. Wal-Mart grew by being the one stop shopping place for people in rural areas. They never entered major cities until they had surrounded them by working far outside and then gingerly stepping in to suburbs. Their empire was built on letting rural people go to one store instead of a dozen.In New York, shops abound and they are close to one another. After they closed New York, they amazingly shot themselves in the foot again by stocking higher priced and more fashionable clothes than ever before. I remember seeing TNS Media Intelligence reports stating that they were advertising in Vogue! At lunch that same day, I stopped at a newsstand and cracked up when I saw their ad was actually there. They were trying for both fidelity and convenience. Wal-Mart wanted aura it seemed and had abandoned its roots. The campaign flopped and they killed the better clothing and came back with “Save money. Live better.” As the economy sank, they rose as everyday low pricing reigned supreme again.
4) Super fidelity or Super convenience—Maney does not hedge; this is the province of winners. Most products that are hits fall at either end of the spectrum thus avoiding the dreaded fidelity belly. Apple put the i-phone at the top of the fidelity axis and they conquered despite a high price and limited geographic availability. Wal-Mart is back on top in retailing by returning to being the high convenience winner making shopping for basics cheaper than anywhere else. So Wal-Mart has poor fidelity and the i-phone is not very convenient to buy. But would you want to own either franchise? Of course!
Another example is from our industry. NFL Football with spectacular production values is the highest fidelity program in sports television. ESPN (sans MNF and college basketball) provides convenience in sports. There is always something in sports to watch on their networks.
This is only the tip of the iceberg but what struck me is that Maney has put his finger on something very important. I cannot tell you how many times I have seen companies harm or destroy their franchise because they fell for Maney’s Fidelity Mirage. You cannot be all things to all people. Yet, people believe they can. This approach is an excellent filter to use to help with positioning, expansion and pricing issues.
Get your boss to read Trade-Off, your creative heads as well, and especially the account planners!
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Monday, October 26, 2009
Hug Your Traffic Person!
Over the last month or so, something unusual happened. I frequently get suggestions from readers regarding topics for future posts. But, this time three people who I cannot imagine know each other and who live in different parts of the U.S., all suggested that I write about traffic managers at TV and radio stations, and cable interconnects. The more that I thought about it, the more I thought a story was there. And, when I put the topic out to some of my panel members, the response was amazing. Several had, unbeknownst to me, started out in traffic and had some strong opinions.
The core issue from all three who requested a post was that the traffic function is vital for all forms of TV and radio. It is a thankless job, low paid, and the only time anyone gets any recognition is when something does not air properly and the finger pointing goes right to the hapless traffic person or team.
My panel members had a lot to say and here are comments from three of them:
“….I agree wholeheartedly on the value of a good traffic person. Especially here in cableville, they are more important than ever and their roles increasingly complex. When I did it (20 years ago), the goal was simply to accommodate the spots sold. When we were tight, there was stress; but other times the job was a breeze.”
“Today, the stress is compounded tenfold by the sheer volume of inventory being juggled. Computers do aid the process but no traffic system is intuitive enough to deal with all the asterisks we place on each buy. This guy is an annual. That one paid a premium. Another buys volume. A fourth is a make good spot from last week. This one we owe rating points.”
“And this could be happening on 50+ networks, across 5/10/25 cable zones. It is the real world incarnation of the plate-spinner from the old Ed Sullivan show.”
Everyone commented that salespeople think that their job has concluded when the order is written. Another cable exec expounded on that by saying “I think that cable still has somewhat of a do whatever you can to get the business mentality. This often times leaves the traffic department to deal with all kinds of added value issues and special requests. I think that the other factor that comes into play is that cable is still not always easy for agencies to purchase. When they do, there are often times many hoops to jump through to make the billing work. This usually becomes a traffic nightmare.”
A local broadcaster writes “traffic is a dumping ground. We totally rely on them and rarely say thank you. If I send candy or flowers to the traffic people after a particularly stressful stint, my colleagues laugh and say why bother? My manager never includes them in group luncheons or gives them tickets to concerts or ballgames which some of them would dearly love. I do what I can personally but the message from on high is that they are expendable. It is so sad.”
Over the years, I visited hundreds of TV stations. Only about 10% would take me down to the basement to meet the traffic folks. They were all pleasant and lit up like Christmas trees if you expressed any appreciation. One manager told a lady that I knew a lot about baseball cards. She told me that she had been trying for years to get a card for her father’s hero, a journeyman who was not Hall of Fame material. When I got back home, I went to a card shop and for the princely sum of 35 cents, picked up three Topps cards of the player in question and mailed them to the Midwestern traffic lady. You would think that I had sent her bars of gold bullion. Our service from then on was extraordinary. I did not do anything of note but show her a mild kindness.
When creative was late, I would sent flowers to the traffic person who had to stay late due to our lack of professionalism. And, sometimes that generousity had enormous consequences. Back in the 1980’s, my agency was a serious player in the arcane world of regional network television. We often aired different copy in different regions and sometimes cut in a different commercial in several markets over the national spot. It required a lot of detail and perfect execution at the network end. At the end of a negotiation in New York, I asked if I could go downstairs and meet the cut-in crew. The salesman looked at me as if I were insane but the sales director smiled and nodded and personally escorted me to the technical area and introduced me to the team. I simply thanked them for their help and the youngest, Lou, asked what accounts that I handled.
When I told him that one of them was Klondike ice cream bars, his eyes lit up and he told me that he loved them. Reaching in to my briefcase, I gave each member a coupon good for a free six serving package of Klondikes. Sounds hokey, but remember all they received from clients was complaints.
A week later prior to a fall holiday weekend, I was trying to finish up some work at 6:25 pm so I would not have to come in over the weekend. The phone rang. It was young Lou from the cut-in crew. “Don, we must be the last two people working in broadcast in America”. I laughed and had to agree. Lou went on, “copy did not arrive for our Northeast advertiser in Monday Night Football. If you can give me an isskey code (commercial number), I will put Klondike in as no charge unit.”
Clearly, I had the number and we received a commercial in 25% of the U.S. with a street value in those days of $52,500 and all because I gave the crew the smallest bit of attention. Needless to say, they got all the free ice cream bars that they could eat after that!
Traffic people deserve our consideration and respect. As we move toward more :05’s and :03’s and more cable channels, there job will get even trickier. Catch them doing something right and salespeople, please give them the direction and follow-up which they must have to do their jobs right.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
The core issue from all three who requested a post was that the traffic function is vital for all forms of TV and radio. It is a thankless job, low paid, and the only time anyone gets any recognition is when something does not air properly and the finger pointing goes right to the hapless traffic person or team.
My panel members had a lot to say and here are comments from three of them:
“….I agree wholeheartedly on the value of a good traffic person. Especially here in cableville, they are more important than ever and their roles increasingly complex. When I did it (20 years ago), the goal was simply to accommodate the spots sold. When we were tight, there was stress; but other times the job was a breeze.”
“Today, the stress is compounded tenfold by the sheer volume of inventory being juggled. Computers do aid the process but no traffic system is intuitive enough to deal with all the asterisks we place on each buy. This guy is an annual. That one paid a premium. Another buys volume. A fourth is a make good spot from last week. This one we owe rating points.”
“And this could be happening on 50+ networks, across 5/10/25 cable zones. It is the real world incarnation of the plate-spinner from the old Ed Sullivan show.”
Everyone commented that salespeople think that their job has concluded when the order is written. Another cable exec expounded on that by saying “I think that cable still has somewhat of a do whatever you can to get the business mentality. This often times leaves the traffic department to deal with all kinds of added value issues and special requests. I think that the other factor that comes into play is that cable is still not always easy for agencies to purchase. When they do, there are often times many hoops to jump through to make the billing work. This usually becomes a traffic nightmare.”
A local broadcaster writes “traffic is a dumping ground. We totally rely on them and rarely say thank you. If I send candy or flowers to the traffic people after a particularly stressful stint, my colleagues laugh and say why bother? My manager never includes them in group luncheons or gives them tickets to concerts or ballgames which some of them would dearly love. I do what I can personally but the message from on high is that they are expendable. It is so sad.”
Over the years, I visited hundreds of TV stations. Only about 10% would take me down to the basement to meet the traffic folks. They were all pleasant and lit up like Christmas trees if you expressed any appreciation. One manager told a lady that I knew a lot about baseball cards. She told me that she had been trying for years to get a card for her father’s hero, a journeyman who was not Hall of Fame material. When I got back home, I went to a card shop and for the princely sum of 35 cents, picked up three Topps cards of the player in question and mailed them to the Midwestern traffic lady. You would think that I had sent her bars of gold bullion. Our service from then on was extraordinary. I did not do anything of note but show her a mild kindness.
When creative was late, I would sent flowers to the traffic person who had to stay late due to our lack of professionalism. And, sometimes that generousity had enormous consequences. Back in the 1980’s, my agency was a serious player in the arcane world of regional network television. We often aired different copy in different regions and sometimes cut in a different commercial in several markets over the national spot. It required a lot of detail and perfect execution at the network end. At the end of a negotiation in New York, I asked if I could go downstairs and meet the cut-in crew. The salesman looked at me as if I were insane but the sales director smiled and nodded and personally escorted me to the technical area and introduced me to the team. I simply thanked them for their help and the youngest, Lou, asked what accounts that I handled.
When I told him that one of them was Klondike ice cream bars, his eyes lit up and he told me that he loved them. Reaching in to my briefcase, I gave each member a coupon good for a free six serving package of Klondikes. Sounds hokey, but remember all they received from clients was complaints.
A week later prior to a fall holiday weekend, I was trying to finish up some work at 6:25 pm so I would not have to come in over the weekend. The phone rang. It was young Lou from the cut-in crew. “Don, we must be the last two people working in broadcast in America”. I laughed and had to agree. Lou went on, “copy did not arrive for our Northeast advertiser in Monday Night Football. If you can give me an isskey code (commercial number), I will put Klondike in as no charge unit.”
Clearly, I had the number and we received a commercial in 25% of the U.S. with a street value in those days of $52,500 and all because I gave the crew the smallest bit of attention. Needless to say, they got all the free ice cream bars that they could eat after that!
Traffic people deserve our consideration and respect. As we move toward more :05’s and :03’s and more cable channels, there job will get even trickier. Catch them doing something right and salespeople, please give them the direction and follow-up which they must have to do their jobs right.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Tuesday, October 13, 2009
Is It Really Account Planning?
In recent years, more and more advertising agencies of all sizes claimed to be account planning centered. It would be fantastic if they really were. Sadly, many still grind out some very mediocre advertising despite their claim to be totally driven by account planning.
Just what is account planning? The textbook definition goes something like this: The process of conducting research that is relevant to the client’s product or service and can be used in the development of creative strategy as well as all other aspects of an Integrated Marketing Communications campaign. The account planner’s role is to serve as the eyes and ears of the consumer and represent the consumer in every agency department.
Sounds great, doesn’t it? A few do it really, really well but for most the staffers dubbed account planners are really just window dressing for the clients.
When the account planning boom-let got started a number of years ago, I and dozens of other veterans at many shops immediately became suspicious. It always seemed that an account person or maybe a market researcher would attend a seminar for three days and come back full of enthusiasm about what they learned. Then, within 30 days his or her business card would change and the account person would instantly morph into an account planner. It impressed prospects at new business meetings but never really took hold back at the office. The creatives still did a lot of what they wanted and media people at many agencies were not let in to the process until very late.
In my career, I have only had relationships with two people who were extraordinary account planners and I never formally worked in the same company with either. One was a burnt out creative who sadly was really a hack by the time account planning came into vogue. He managed to reinvent himself as an account planner. Garrulous, enthusiastic, he devoured the trade press and all that was going on in marketing and consumer behavior. While his days as a creative executive had passed him by, he wrote the best creative briefs that I have ever seen. When the creative team got their marching orders from him, they were well armed for the assignment. I was pulled in for media counsel as an outsider and was always stunned at how current he was with evolving new media, especially online, and began to look forward to his endless questions. His enthusiasm was contagious and what little I contributed to the entire process was enhanced by his zeal and constant encouragement to keep reaching for more.
The other was a Brit who learned it in London where account planning was formalized. She was a renaissance woman; she did not know a little about everything, she knew a lot about everything. An omnivorous reader, she started every phone call with “what have you been reading lately.” Within 3-4 days, I would get an e-mail with a critique of the book in question. We did not always agree but she lived and breathed the game 24/7 and always was bursting with ideas. Unfortunately, I never worked with her but she had me on her “panel” or kitchen cabinet and I loved it when caller ID told me that she was reaching out once more.
Recently, I got in touch with a former colleague who is still at it after several decades. He runs a highly successful business far outside of New York and, looking at his reel, it is obvious that authentic account planning is taking place even on accounts with very modest budgets. Interestingly, he made the trek to London a long time ago and did NOT spend a long weekend there and then call himself a planner. He studied it closely, saw the flaws, and saw through the British pomposity that hid what was truly going on.
To quote him we find that “account planners are qualitative researchers, quantitative researchers, media sensitive, and sales message understanding. They weigh in on media weights, schedule timing, word selection and parsing, color themes, the entire process. A good account planner is a student of the game, a diplomat, and his/her greatest strength is pure curiosity and the endless use of the word WHY.”
His breaking of the code was that account planning often came down to dramatically improving internal communications. I could not agree more. It always stunned me when a CEO would talk about how valuable an account planner was to a prospective client. If they meant that account planning can help all clients because the agency is run better, okay. To me, they were really more valuable internally to keep the creatives in line and on track and get media involved early in the project. They pushed both disciplines to explore new options in recent years and they never forgot what the consumer had said to them. To hell with how fun a spot a young writer wanted to do would be or how it would look on her reel. They fought to do what was right.
My old colleague says that account planning is much more than a title; it is a culture that has to come from the very top. “Every ad has a strategy that consumers can understand. Management has to make it easy for all to sit around and get rejected or congratulated as a team.” Some small shops have done account planning almost by default because communication is generally far better than in larger agencies. Mid-sized shops can go either way but can implement it if the CEO empowers the planner(s) and gets involved personally as well.
How do you spot a psuedo-planner? Here is one test that I use and it has been foolproof so far. When someone tells me that they are an account planner, I ask who they think is the best consumer behavior guru among Martin Lindstrom, Paco Underhill, or Rob Walker? Amazingly, some planners at large shops say that they have never heard of any of them. The odds are good they took the three day course. Also, get suspicious if they just want to talk about Malcolm Gladwell. Everyone reads Gladwell and he is really in another genre. If they start to argue about which of the three guys mentioned above (my gurus for 2009-2010) is strongest, you at least have someone who reads widely and is trying to stay current.
If you run an agency, where can you turn for account planners? Here is an offbeat idea. Go to a large shop and try to raid a bright young media researcher. Today, the good ones have one foot in conventional media and one foot in new media. Usually, they are translating all the new terms for everyone and the boss doesn’t want the Google reps to meet them for fear of losing them. If they are personable, have a reasonably good feel for creative and are not too meek, you may have the makings of a really good account planner.
The process of account planning is happily here to stay. Just make sure that you get the real thing when you hire an agency.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Just what is account planning? The textbook definition goes something like this: The process of conducting research that is relevant to the client’s product or service and can be used in the development of creative strategy as well as all other aspects of an Integrated Marketing Communications campaign. The account planner’s role is to serve as the eyes and ears of the consumer and represent the consumer in every agency department.
Sounds great, doesn’t it? A few do it really, really well but for most the staffers dubbed account planners are really just window dressing for the clients.
When the account planning boom-let got started a number of years ago, I and dozens of other veterans at many shops immediately became suspicious. It always seemed that an account person or maybe a market researcher would attend a seminar for three days and come back full of enthusiasm about what they learned. Then, within 30 days his or her business card would change and the account person would instantly morph into an account planner. It impressed prospects at new business meetings but never really took hold back at the office. The creatives still did a lot of what they wanted and media people at many agencies were not let in to the process until very late.
In my career, I have only had relationships with two people who were extraordinary account planners and I never formally worked in the same company with either. One was a burnt out creative who sadly was really a hack by the time account planning came into vogue. He managed to reinvent himself as an account planner. Garrulous, enthusiastic, he devoured the trade press and all that was going on in marketing and consumer behavior. While his days as a creative executive had passed him by, he wrote the best creative briefs that I have ever seen. When the creative team got their marching orders from him, they were well armed for the assignment. I was pulled in for media counsel as an outsider and was always stunned at how current he was with evolving new media, especially online, and began to look forward to his endless questions. His enthusiasm was contagious and what little I contributed to the entire process was enhanced by his zeal and constant encouragement to keep reaching for more.
The other was a Brit who learned it in London where account planning was formalized. She was a renaissance woman; she did not know a little about everything, she knew a lot about everything. An omnivorous reader, she started every phone call with “what have you been reading lately.” Within 3-4 days, I would get an e-mail with a critique of the book in question. We did not always agree but she lived and breathed the game 24/7 and always was bursting with ideas. Unfortunately, I never worked with her but she had me on her “panel” or kitchen cabinet and I loved it when caller ID told me that she was reaching out once more.
Recently, I got in touch with a former colleague who is still at it after several decades. He runs a highly successful business far outside of New York and, looking at his reel, it is obvious that authentic account planning is taking place even on accounts with very modest budgets. Interestingly, he made the trek to London a long time ago and did NOT spend a long weekend there and then call himself a planner. He studied it closely, saw the flaws, and saw through the British pomposity that hid what was truly going on.
To quote him we find that “account planners are qualitative researchers, quantitative researchers, media sensitive, and sales message understanding. They weigh in on media weights, schedule timing, word selection and parsing, color themes, the entire process. A good account planner is a student of the game, a diplomat, and his/her greatest strength is pure curiosity and the endless use of the word WHY.”
His breaking of the code was that account planning often came down to dramatically improving internal communications. I could not agree more. It always stunned me when a CEO would talk about how valuable an account planner was to a prospective client. If they meant that account planning can help all clients because the agency is run better, okay. To me, they were really more valuable internally to keep the creatives in line and on track and get media involved early in the project. They pushed both disciplines to explore new options in recent years and they never forgot what the consumer had said to them. To hell with how fun a spot a young writer wanted to do would be or how it would look on her reel. They fought to do what was right.
My old colleague says that account planning is much more than a title; it is a culture that has to come from the very top. “Every ad has a strategy that consumers can understand. Management has to make it easy for all to sit around and get rejected or congratulated as a team.” Some small shops have done account planning almost by default because communication is generally far better than in larger agencies. Mid-sized shops can go either way but can implement it if the CEO empowers the planner(s) and gets involved personally as well.
How do you spot a psuedo-planner? Here is one test that I use and it has been foolproof so far. When someone tells me that they are an account planner, I ask who they think is the best consumer behavior guru among Martin Lindstrom, Paco Underhill, or Rob Walker? Amazingly, some planners at large shops say that they have never heard of any of them. The odds are good they took the three day course. Also, get suspicious if they just want to talk about Malcolm Gladwell. Everyone reads Gladwell and he is really in another genre. If they start to argue about which of the three guys mentioned above (my gurus for 2009-2010) is strongest, you at least have someone who reads widely and is trying to stay current.
If you run an agency, where can you turn for account planners? Here is an offbeat idea. Go to a large shop and try to raid a bright young media researcher. Today, the good ones have one foot in conventional media and one foot in new media. Usually, they are translating all the new terms for everyone and the boss doesn’t want the Google reps to meet them for fear of losing them. If they are personable, have a reasonably good feel for creative and are not too meek, you may have the makings of a really good account planner.
The process of account planning is happily here to stay. Just make sure that you get the real thing when you hire an agency.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Tuesday, September 29, 2009
Will Media Billings Come Roaring Back in 2010?
I received an e-mail from a long time friend a few weeks ago. He and I discuss markets of all kinds regularly. Our topics range from stocks to broadcast inventory to commodities to emerging markets. His question was: Are you going to start nibbling at broadcast oriented stocks now and make a big killing when they come roaring back in 2010?
Fortunately, the old fellow was not talking with me. I sent back a measured response and then called two days later. We basically agreed to disagree. His take is that the local broadcast marketplace is like a coiled spring ready to come unleashed once the “long recession” is officially over. My take has a bit more nuance; hence this post.
All of us are hoping for a recovery in 2010. Some say that it has already begun. P&G and Toyota have both promised to hike ad spending next year which is really encouraging. And, Microsoft says that they will attempt to take on Google with their Bing search product by spending $100 million+ of ad dollars in some venues that need the funds badly.
But the coiled spring analogy won’t apply in my opinion next year. Each medium will carve out a different path over the next several years and some will not follow the past pattern of economic recovery.
Historically, TV, particularly Spot TV, always did lead the charge into recovery. During expansions they always out performed other media types. Even during the horrible inflation of the Carter years (1977-1981), Spot TV usually increased billing by 3% or more over the increase in the Consumer Price Index (CPI). So they grew in real terms even when all others only grew nominally; a neat trick for sure.
Here is how we see things shaping up by medium over the next few years:
Internet—no surprises here and over the next few years we see low double digit increases in billing in the 11-13% range compounded. By some measures, Internet advertising has just passed radio in total billing and next year it looks as if it will hurdle over magazines as well.
Mobile—this is easily the fastest growing medium with billing set to grow by 30% and double every 30 months or so. Remember, they are starting from a low base so billing can double and double again over the next five years and they still will not be a major player.
Cable—the growth will continue both nationally and locally. Good sales organizations at both levels have positioned them for good growth even if the recovery is muted. We would forecast high single digit percentage growth here which is great if consumer prices stay flat for a while longer. Some of the national players work very hard to customize efforts for you—they have finally arrived at true integrated marketing communications. Panel members give Discovery Networks high marks for imagination and multi-platform offerings even to modest advertisers.
Outdoor— more than one panel member says there are signs of comeback here in some markets. Increasingly, people are catching on to its unique position as the last mass medium. As I travel, I see lots of open boards so “Let’s Make a Deal” may prevail for a while longer. While growth will not be as dynamic as cable, 5% growth per annum could be achieved easily.
Newspaper—Times are tough and will get tougher. Publishers are just not getting religion and the tidal wave of Internet growth and demographics is against them. Don’t be surprised if papers continue to close as the economy improves. Ad revenue declines of close to 10% compounded will take down some big names in the years to come. A shame but it will take a mass movement to Kindle or similar products to save some historic newspapers.
Magazines—some specialty titles may do okay but billings will drift down in the 5% range year to year for a while.
Radio—with car dealers closing all over and retail shaky as consumers pay down debt, the picture here is grim in some markets. A return to local ownership may breathe life into some stations in selected markets where sales people hustle and long standing relationships continue to be nurtured. People from coast to coast tell me that this medium is on the ropes but has promise with the right management and realistic expectations. Long term, they are losing lots of young people who get their music elsewhere which is a big issue. Overall, look for sales decreases to continue in the 3-4% range nationally.
TV—This one is tough. Some people will come back to TV next year. There is no way there will not be a bounce up from the horrible first quarter of 2009. But, offsetting that, hundreds of local car dealers no longer exist. They were instrumental in the “coiled spring” recovery years of past business cycles. If you do a proper Discounted Cash Flow (DCF) analysis of broadcasters the picture does not look good. Some say billings will decline by a couple percent per year going forward and they will back to mid-1990’s revenues in several years. This is way too linear for me. It is not so simple and there may be a downward shock or two. My analysis does not take into account the sophisticated number crunching of a Warren Buffett or a David Dreman who labor long and hard over revenue growth rates, depreciation, interest payments, taxes, and changes in working capital. But what I do see are two things that can cause a big drop in a few years:
1) Time Shifting Devices (TiVo et al) are now at about 35% penetration nationally. When TiVo and other DVR’s cover 40% of the US TV household base, some advertisers will abandon the TV ship including national network broadcast.
2) As DVR penetration grows beyond the 40% mark in individual markets, TV will stop working or paying out for many people. Broadcasters will have to cut rates and reach potential will accelerate its downward spiral of recent years.
This will not happen everywhere. Some TV executives will run more DRTV (Direct Response TV), cut staff even more and bring new players into their medium. Others wedded to the old model will get clobbered. And, a few will benefit from network TV declines by being in a top 30 market and scooping up money that used to be spent in the network upfront marketplace.
Right now, network TV has not been hurt yet to a big degree as advertisers do not seem to know where to put their money. When a few big players cut back and have good years, the logjam will break and they will never be the same again.
How about ad agencies? Want to bet your kids tuition money on WPP or Interpublic? Larry Haverty, a mutual fund manager who follows media for the Gabelli Group put it well—“I would prefer to bet on companies selling stuff, rather than those specializing in the art of selling stuff.”
As always, there will be opportunities for the bold, the nimble, the tech savvy, and the lucky. Be prepared and realistic and you may come out of it just fine.
If you would like to contact Don Cole directly, you may e-mail him at doncolemedia@gmail.com
Fortunately, the old fellow was not talking with me. I sent back a measured response and then called two days later. We basically agreed to disagree. His take is that the local broadcast marketplace is like a coiled spring ready to come unleashed once the “long recession” is officially over. My take has a bit more nuance; hence this post.
All of us are hoping for a recovery in 2010. Some say that it has already begun. P&G and Toyota have both promised to hike ad spending next year which is really encouraging. And, Microsoft says that they will attempt to take on Google with their Bing search product by spending $100 million+ of ad dollars in some venues that need the funds badly.
But the coiled spring analogy won’t apply in my opinion next year. Each medium will carve out a different path over the next several years and some will not follow the past pattern of economic recovery.
Historically, TV, particularly Spot TV, always did lead the charge into recovery. During expansions they always out performed other media types. Even during the horrible inflation of the Carter years (1977-1981), Spot TV usually increased billing by 3% or more over the increase in the Consumer Price Index (CPI). So they grew in real terms even when all others only grew nominally; a neat trick for sure.
Here is how we see things shaping up by medium over the next few years:
Internet—no surprises here and over the next few years we see low double digit increases in billing in the 11-13% range compounded. By some measures, Internet advertising has just passed radio in total billing and next year it looks as if it will hurdle over magazines as well.
Mobile—this is easily the fastest growing medium with billing set to grow by 30% and double every 30 months or so. Remember, they are starting from a low base so billing can double and double again over the next five years and they still will not be a major player.
Cable—the growth will continue both nationally and locally. Good sales organizations at both levels have positioned them for good growth even if the recovery is muted. We would forecast high single digit percentage growth here which is great if consumer prices stay flat for a while longer. Some of the national players work very hard to customize efforts for you—they have finally arrived at true integrated marketing communications. Panel members give Discovery Networks high marks for imagination and multi-platform offerings even to modest advertisers.
Outdoor— more than one panel member says there are signs of comeback here in some markets. Increasingly, people are catching on to its unique position as the last mass medium. As I travel, I see lots of open boards so “Let’s Make a Deal” may prevail for a while longer. While growth will not be as dynamic as cable, 5% growth per annum could be achieved easily.
Newspaper—Times are tough and will get tougher. Publishers are just not getting religion and the tidal wave of Internet growth and demographics is against them. Don’t be surprised if papers continue to close as the economy improves. Ad revenue declines of close to 10% compounded will take down some big names in the years to come. A shame but it will take a mass movement to Kindle or similar products to save some historic newspapers.
Magazines—some specialty titles may do okay but billings will drift down in the 5% range year to year for a while.
Radio—with car dealers closing all over and retail shaky as consumers pay down debt, the picture here is grim in some markets. A return to local ownership may breathe life into some stations in selected markets where sales people hustle and long standing relationships continue to be nurtured. People from coast to coast tell me that this medium is on the ropes but has promise with the right management and realistic expectations. Long term, they are losing lots of young people who get their music elsewhere which is a big issue. Overall, look for sales decreases to continue in the 3-4% range nationally.
TV—This one is tough. Some people will come back to TV next year. There is no way there will not be a bounce up from the horrible first quarter of 2009. But, offsetting that, hundreds of local car dealers no longer exist. They were instrumental in the “coiled spring” recovery years of past business cycles. If you do a proper Discounted Cash Flow (DCF) analysis of broadcasters the picture does not look good. Some say billings will decline by a couple percent per year going forward and they will back to mid-1990’s revenues in several years. This is way too linear for me. It is not so simple and there may be a downward shock or two. My analysis does not take into account the sophisticated number crunching of a Warren Buffett or a David Dreman who labor long and hard over revenue growth rates, depreciation, interest payments, taxes, and changes in working capital. But what I do see are two things that can cause a big drop in a few years:
1) Time Shifting Devices (TiVo et al) are now at about 35% penetration nationally. When TiVo and other DVR’s cover 40% of the US TV household base, some advertisers will abandon the TV ship including national network broadcast.
2) As DVR penetration grows beyond the 40% mark in individual markets, TV will stop working or paying out for many people. Broadcasters will have to cut rates and reach potential will accelerate its downward spiral of recent years.
This will not happen everywhere. Some TV executives will run more DRTV (Direct Response TV), cut staff even more and bring new players into their medium. Others wedded to the old model will get clobbered. And, a few will benefit from network TV declines by being in a top 30 market and scooping up money that used to be spent in the network upfront marketplace.
Right now, network TV has not been hurt yet to a big degree as advertisers do not seem to know where to put their money. When a few big players cut back and have good years, the logjam will break and they will never be the same again.
How about ad agencies? Want to bet your kids tuition money on WPP or Interpublic? Larry Haverty, a mutual fund manager who follows media for the Gabelli Group put it well—“I would prefer to bet on companies selling stuff, rather than those specializing in the art of selling stuff.”
As always, there will be opportunities for the bold, the nimble, the tech savvy, and the lucky. Be prepared and realistic and you may come out of it just fine.
If you would like to contact Don Cole directly, you may e-mail him at doncolemedia@gmail.com
Tuesday, September 15, 2009
Galbraith's Affluent Society Revisited
Recently, I ran into someone who was waxing poetic about John Kenneth Galbraith’s Affluent Society (1958). Fifty years after publication, he said the book held up beautifully, he was eerily prescient in his forecasts about the dangers of consumerism, and he spotted advertising as being a dangerously manipulative force in our society.
The gentleman was clearly more left of center than I (not hard!) but I told him that Galbraith’s thesis was flawed and tried to say why. I had not read the book since I was 20 years old so I just reread it and would like to take you through my thinking. Why bother? Since his death at age 97 in 2005 his muddled arguments seem to be getting more traction than they have in a generation.
It all starts with the concept of Consumer Sovereignty. This concept was popularized by the great Austrian economist Ludwig von Mises who said that, in a free market economy, the consumer was king. In his book Bureaucracy (1936), Mises says “The real bosses under capitalism are the consumers. They, by their abstention from buying, decide who should own the capital and run the plants……They determine what should be produced and in what quantity and quality. They make poor men rich and rich men poor…As soon as something is offered to them that they like better or is cheaper, they desert their old provider.”
This idea permeated economic thinking until Galbraith unleashed The Affluent Society.
Galbraith was a fascinating character. Born in Canada, he was a towering six foot eight at a time when the average American was five foot seven. A brilliant scholar, he had a long teaching career at Harvard, served as Ambassador to India under President Kennedy, and was an advisor to many Democratic candidates over the years. He was a prolific writer but was not taken seriously by many other high profile economists as he was hard to categorize. Ken, as he was known, did not appear to belong to any specific economic school (Classical, Austrian, Marxist, Monetarist, and Keynesian). He liked to criticize the mistakes of contemporary economic policy but unlike the giants in economics such as Adam Smith, Marx, Schumpeter, and Keynes he did not provide his own model which anywhere near matched the scope of the Big Four.
He was glib, sarcastic but funny, and a wonderful guest on TV or NPR even into advanced old age. With a wide circle of friends he popped up everywhere and was frequently seen skiing in Switzerland with conservative icon William F. Buckley, Jr.
In The Affluent Society, Galbraith rejects the Misean precept of Consumer Sovereignty. In the post World War II era, Galbraith said that as things gradually got better, businesses must “create” consumer wants via advertising. While this create lots of jobs the artificial affluence through the production of unnecessary good and services forces the public sector to be ignored to a certain degree.
He went further by stating that “advertising mitigates shifts in consumer tastes by controlling tastes. The size of many consumer brand companies allows for product diversification which mitigates the consequences of a shift in tastes.” Galbraith said that a “techno-structure” was developing in the US that “closely controlled consumer demand and market growth through advertising and marketing”.
The idea got a lot of attention in certain political circles and all of us in advertising have probably at one time or another been accused by a relative or new acquaintance of working in a manipulative business.
The world did not accept his comments sitting down. Businesses quietly went about doing their thing and the years 1958-1968 were extremely prosperous in the US. Perhaps his most effective critic was one of my heroes, University of Chicago and Nobel Laureate Professor Milton Friedman. Uncle Miltie said that those who felt they had higher minds wanted to take choice from the American people because they knew better. In a review of The Affluent Society, Friedman said “many reformers, Galbraith is not alone in this—have as their basic objection to a free market that it frustrates them, because it enables people to have what they want, not what the reformers want. Hence, every reformer has a strong tendency to be averse in a free market.” This was brilliant as it crystallized that Galbraith’s criticisms were about his political agenda not economic theory.
Galbraith stated that as things got better, wants are “not real or genuine”. Who are they created by, then? The ad agencies and their wicked clients? That seems to be his drift.
In the early 1970’s I was at a conference where Libertarian lightning rod Dr. Murray Rothbard was asked about Galbraith and advertising. He answered with great vehemence and then later I found a Rothbard essay on the topic. His central theme was “If they buy a product that does not fulfill its claims, the product will soon fade into oblivion. Any advertising claims for products can be and are quickly tested by the consumer”.
Here is where I come out on Galbraith’s thesis. He did appear to foresee the consumer consumption gone wild that has helped to put us into the deep economic hole that we now face. And, if you look at our crumbling infrastructure of roads and bridges and many of our public schools that are an international joke, he makes some points about public sector neglect in recent decades. Remember, however, to do those public improvements would largely come from increasing local property taxes and state income taxes which had nothing to do with advertising spending.
His point of bigness dominating things has some truth as we accelerate in to the fragmented world of communications in this new century. The cost of reaching people will soar although targeting is getting much tighter. Big companies will do line extensions and have the marketing muscle with a few large retailers to effectively keep smaller players out. There will still be strong competition in most major categories even under this scenario.
However, he really never studied advertising closely. By any yardstick, most new products fail. That is, those that are rolled out across a wide piece of geography. Most put the death rate in the 50-55% range. But, there are thousands of products that never make it out of the first two test markets. If all of us in the advertising/marketing game are so powerful and manipulative with our irresistible messages, we should have a success rate far higher than what I have observed. My panel members who worked on rollouts to a person all admitted that most of their new product development introductions were failures.
The simple truth is that freedom works. Ignore your customers’ needs and wants and they will go away. Someone one told me that advertising was “Art with a message.”
We are not evil people. We serve, survive, and prosper at the mercy of the consumer.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
The gentleman was clearly more left of center than I (not hard!) but I told him that Galbraith’s thesis was flawed and tried to say why. I had not read the book since I was 20 years old so I just reread it and would like to take you through my thinking. Why bother? Since his death at age 97 in 2005 his muddled arguments seem to be getting more traction than they have in a generation.
It all starts with the concept of Consumer Sovereignty. This concept was popularized by the great Austrian economist Ludwig von Mises who said that, in a free market economy, the consumer was king. In his book Bureaucracy (1936), Mises says “The real bosses under capitalism are the consumers. They, by their abstention from buying, decide who should own the capital and run the plants……They determine what should be produced and in what quantity and quality. They make poor men rich and rich men poor…As soon as something is offered to them that they like better or is cheaper, they desert their old provider.”
This idea permeated economic thinking until Galbraith unleashed The Affluent Society.
Galbraith was a fascinating character. Born in Canada, he was a towering six foot eight at a time when the average American was five foot seven. A brilliant scholar, he had a long teaching career at Harvard, served as Ambassador to India under President Kennedy, and was an advisor to many Democratic candidates over the years. He was a prolific writer but was not taken seriously by many other high profile economists as he was hard to categorize. Ken, as he was known, did not appear to belong to any specific economic school (Classical, Austrian, Marxist, Monetarist, and Keynesian). He liked to criticize the mistakes of contemporary economic policy but unlike the giants in economics such as Adam Smith, Marx, Schumpeter, and Keynes he did not provide his own model which anywhere near matched the scope of the Big Four.
He was glib, sarcastic but funny, and a wonderful guest on TV or NPR even into advanced old age. With a wide circle of friends he popped up everywhere and was frequently seen skiing in Switzerland with conservative icon William F. Buckley, Jr.
In The Affluent Society, Galbraith rejects the Misean precept of Consumer Sovereignty. In the post World War II era, Galbraith said that as things gradually got better, businesses must “create” consumer wants via advertising. While this create lots of jobs the artificial affluence through the production of unnecessary good and services forces the public sector to be ignored to a certain degree.
He went further by stating that “advertising mitigates shifts in consumer tastes by controlling tastes. The size of many consumer brand companies allows for product diversification which mitigates the consequences of a shift in tastes.” Galbraith said that a “techno-structure” was developing in the US that “closely controlled consumer demand and market growth through advertising and marketing”.
The idea got a lot of attention in certain political circles and all of us in advertising have probably at one time or another been accused by a relative or new acquaintance of working in a manipulative business.
The world did not accept his comments sitting down. Businesses quietly went about doing their thing and the years 1958-1968 were extremely prosperous in the US. Perhaps his most effective critic was one of my heroes, University of Chicago and Nobel Laureate Professor Milton Friedman. Uncle Miltie said that those who felt they had higher minds wanted to take choice from the American people because they knew better. In a review of The Affluent Society, Friedman said “many reformers, Galbraith is not alone in this—have as their basic objection to a free market that it frustrates them, because it enables people to have what they want, not what the reformers want. Hence, every reformer has a strong tendency to be averse in a free market.” This was brilliant as it crystallized that Galbraith’s criticisms were about his political agenda not economic theory.
Galbraith stated that as things got better, wants are “not real or genuine”. Who are they created by, then? The ad agencies and their wicked clients? That seems to be his drift.
In the early 1970’s I was at a conference where Libertarian lightning rod Dr. Murray Rothbard was asked about Galbraith and advertising. He answered with great vehemence and then later I found a Rothbard essay on the topic. His central theme was “If they buy a product that does not fulfill its claims, the product will soon fade into oblivion. Any advertising claims for products can be and are quickly tested by the consumer”.
Here is where I come out on Galbraith’s thesis. He did appear to foresee the consumer consumption gone wild that has helped to put us into the deep economic hole that we now face. And, if you look at our crumbling infrastructure of roads and bridges and many of our public schools that are an international joke, he makes some points about public sector neglect in recent decades. Remember, however, to do those public improvements would largely come from increasing local property taxes and state income taxes which had nothing to do with advertising spending.
His point of bigness dominating things has some truth as we accelerate in to the fragmented world of communications in this new century. The cost of reaching people will soar although targeting is getting much tighter. Big companies will do line extensions and have the marketing muscle with a few large retailers to effectively keep smaller players out. There will still be strong competition in most major categories even under this scenario.
However, he really never studied advertising closely. By any yardstick, most new products fail. That is, those that are rolled out across a wide piece of geography. Most put the death rate in the 50-55% range. But, there are thousands of products that never make it out of the first two test markets. If all of us in the advertising/marketing game are so powerful and manipulative with our irresistible messages, we should have a success rate far higher than what I have observed. My panel members who worked on rollouts to a person all admitted that most of their new product development introductions were failures.
The simple truth is that freedom works. Ignore your customers’ needs and wants and they will go away. Someone one told me that advertising was “Art with a message.”
We are not evil people. We serve, survive, and prosper at the mercy of the consumer.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Thursday, September 10, 2009
Advice to the Young--Go Big or Small?
As many of you know, I now serve as a part time professor at two universities. Recently, a student who is a senior approached me and asked about where he should apply for a job next spring. We talked about many options and issues such as how far he was willing to move from home. Then he asked about working at a big company vs. a smaller one.
I suppose that I gave the standard arguments. At a big company vs. a smaller one you are given more thorough training, are exposed to broader thinking, and there are far more people to talk to about key issues and developments in the industry. At a small company, you can get involved in fairly major issues rather young and you get to know top management close up.
When I got home, a book was awaiting me. It was Lawrence G. McDonald’s A Colossal Failure of Common Sense, about the collapse of Lehman Brothers last year. By great coincidence, McDonald devoted some very heated copy to the issue of big vs. small companies.
McDonald and his partner, Steve Seefeld, had built a remarkable dot.com up over several years that provided bond analyses on line. It became so successful that they sold it to Lehman and became very rich young men but also Lehman employees. McDonald said they loved their start up venture because they lived by some simple rules—“If you have something to say, say it. If there is something to do, do it. If you’ve screwed up, admit it.”
But both were a bit shocked at the Lehman culture. Seefeld became fed up and left quickly but McDonald stayed on and fulfilled a lifelong ambition to become a trader.
Comparing Lehman to his dot.com he said, “The whole ethos of a major company is different. There are people forever trying to cover their own asses, people who have somehow carved an entire career out of making small but telling criticisms of other people’s work. That’s because in a big corporation, the guy who spots a screw-up is somehow cleverer and more valuable than the guy who wrote the 40 page marketing plan in the first place.”
You would think that he has made his point but turn to page 58 and McDonald really stokes up the heat as follows: “Fear is the key. Fear of being the one person in this whole morass of execs who got it wrong. Fear of being the scapegoat, fear of looking ridiculous, fear of being fired. Thus there develops a whole art form of corporate ducking and diving, staying out of the firing line, writing memorandums that somehow shift the responsibility, not being seen with your head above the parapet, subtly seeking the glory but always dodging the blame, carefully filing that memo that will ultimately exonerate.”
There is no question that all organizations have politics and once you get to a certain size it does get in the way of getting the job done. I clearly do not have as much anger in me as Mr. McDonald but directionally he makes a very good point.
I have observed that of the relative handful of jobs that I had, with each move I went to a smaller company. And, each time my influence on the enterprise and my happiness increased fairly significantly. I also appreciated very much that I was no longer at my first two jobs which were at larger, more bureaucratic places.
The only downside at the smaller places was that there were sometimes, but not always enough people to share your thoughts with or peers or top management who constantly challenged you to sharpen your thinking. But my last three jobs where I spent almost my entire career were places where I could speak by mind and I often did.
I can honestly say that I never had a fear of getting fired as I always thought there would be someone out there desperate enough to hire me. And, I lived fairly modestly so I was never under the gun financially.
So what do I tell my young friend the next time I see him? Probably start at some place fairly large and get some good training and exposure to a much wider world. If you start to chafe at the big company politics or bureaucracy, move down in size but not necessarily in quality. Find something you love and stick with it. I did and I have never regretted it.
By the way, the McDonald book is a very easy to read book about the Lehman collapse.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
I suppose that I gave the standard arguments. At a big company vs. a smaller one you are given more thorough training, are exposed to broader thinking, and there are far more people to talk to about key issues and developments in the industry. At a small company, you can get involved in fairly major issues rather young and you get to know top management close up.
When I got home, a book was awaiting me. It was Lawrence G. McDonald’s A Colossal Failure of Common Sense, about the collapse of Lehman Brothers last year. By great coincidence, McDonald devoted some very heated copy to the issue of big vs. small companies.
McDonald and his partner, Steve Seefeld, had built a remarkable dot.com up over several years that provided bond analyses on line. It became so successful that they sold it to Lehman and became very rich young men but also Lehman employees. McDonald said they loved their start up venture because they lived by some simple rules—“If you have something to say, say it. If there is something to do, do it. If you’ve screwed up, admit it.”
But both were a bit shocked at the Lehman culture. Seefeld became fed up and left quickly but McDonald stayed on and fulfilled a lifelong ambition to become a trader.
Comparing Lehman to his dot.com he said, “The whole ethos of a major company is different. There are people forever trying to cover their own asses, people who have somehow carved an entire career out of making small but telling criticisms of other people’s work. That’s because in a big corporation, the guy who spots a screw-up is somehow cleverer and more valuable than the guy who wrote the 40 page marketing plan in the first place.”
You would think that he has made his point but turn to page 58 and McDonald really stokes up the heat as follows: “Fear is the key. Fear of being the one person in this whole morass of execs who got it wrong. Fear of being the scapegoat, fear of looking ridiculous, fear of being fired. Thus there develops a whole art form of corporate ducking and diving, staying out of the firing line, writing memorandums that somehow shift the responsibility, not being seen with your head above the parapet, subtly seeking the glory but always dodging the blame, carefully filing that memo that will ultimately exonerate.”
There is no question that all organizations have politics and once you get to a certain size it does get in the way of getting the job done. I clearly do not have as much anger in me as Mr. McDonald but directionally he makes a very good point.
I have observed that of the relative handful of jobs that I had, with each move I went to a smaller company. And, each time my influence on the enterprise and my happiness increased fairly significantly. I also appreciated very much that I was no longer at my first two jobs which were at larger, more bureaucratic places.
The only downside at the smaller places was that there were sometimes, but not always enough people to share your thoughts with or peers or top management who constantly challenged you to sharpen your thinking. But my last three jobs where I spent almost my entire career were places where I could speak by mind and I often did.
I can honestly say that I never had a fear of getting fired as I always thought there would be someone out there desperate enough to hire me. And, I lived fairly modestly so I was never under the gun financially.
So what do I tell my young friend the next time I see him? Probably start at some place fairly large and get some good training and exposure to a much wider world. If you start to chafe at the big company politics or bureaucracy, move down in size but not necessarily in quality. Find something you love and stick with it. I did and I have never regretted it.
By the way, the McDonald book is a very easy to read book about the Lehman collapse.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Sunday, September 6, 2009
A Media Bellwether and Then Some
Today, we cover Direct Response Television (DRTV). I know that some of you may already be snickering, because the common perception of DRTV is late night hucksters who belong in the scrap heap of failed advertisers. But please hang on, my friends. The story is a bit more involved and worth a moment of your time.
DRTV is any advertising that asks consumers to respond directly to the advertiser. It almost always involves calling an 800 number or often visiting a web site these days. DRTV has two basis categories—short form and long form. Short form is two minutes and under and long form can go to 28 and1/2 minutes. Since the mid-1980’s when long form hit its stride it has been referred to as infomericals.
Today, the majority of billing for DRTV is done by specialists who only handle the arcane medium. Many conventional agencies dabble in it and some do it very well. DRTV rates are much lower than the conventional rates for package goods or financial institutions because all time purchased is remnant inventory. DRTV thus performs a very useful function for local station operators and for national cable networks and satellite players. Any time that is unsold they can offer to DRTV at fractional rates. If they find some one at the last minute to pay full bodied rates, the DRTV is immediately pre-emptible and does not run. So, by accepting DRTV, a station or cable player can easily find replacement revenue for their enterprise on very short notice. The DRTV advertiser has to be flexible. There are no ironclad etched in stone media efforts for them. Many of us have seen DRTV advertisers run 200 rating points in a market in a single week and then only “clear” or run 50 the following week. But the price concessions they receive cover a multitude of sins.
Historically, over the last 25 years that I have been involved in the medium, DRTV clearances are highest in mid-summer and from December 26-February 1st when stations and cable properties are never sold out. At other times, you can usually tell how tight a station or cable network is by monitoring how heavy the load of DRTV is as a percentage of total advertising. As a result, DRTV is something of a bellwether to tell you the state of the TV marketplace.
This point has been especially clear during this long and painful economic malaise of ours which some are referring to as “The Great Recession.” As the car business went south, a reasonably alert observer could observe that there was more DRTV all over the place. By March of this year, it was everywhere. DRTV has long been famous for keeping minor or new cable TV networks afloat. But early this year it was amazing. A New York cable executive told me that he had weeks where 80% of his advertising was direct response. Why did they take it? Some of the gadgets and cleaning products were not the ideal backdrop for some of the high quality shows that you see on cable. But there is an old Swiss saying from the Latin which sums it up—Pecunia non olet. It translates “Money has no smell.” Things are not going well now but were much worse earlier this year. Broadcasters and cable sales executives took money from those who could pay the bills and who can blame them.
Infomercials are a whole other category. Often, you see them referred to as paid programming. Some are hilarious (remember the real estate guys who promised you a million dollars in equity in 18 months) and you wonder how anyone would purchase. But remember this: if an infomercial is not performing, it gets yanked very quickly. One snowy Saturday morning several years ago, I vividly remember grazing across the cable offerings and counted seven infomercials featuring gadgets that guaranteed, with faithful use, a noticeably trimmer mid-section. Somebody was calling in and ordering the “belly-busters” or they would not keep running week after week and fighting such stiff competition. Mysteriously, when I hit the beach a few months later, the rock hard abs all of the gadgets promised were not in evidence.
The main appeal of the infomercial is that it promises a “magical transformation.” The product will make you beautiful or rich (although the real estate hucksters have largely dried up with the crash in home prices nationwide). In addition to the magical transformation, kitchen gadgets and special golf or fishing equipment often are big sellers. For stations and cable players, the paid programming offered by infomercials can be lucrative. You have no virtually no staff or production charges and often there is a line of people who pay upfront wanting to get on your program list.
A dozen years ago, DRTV never worked on local cable as the pricing was never right and the audience too small. Generally, about 1 in a 1,000 people viewing calls in and responds. So, if a cable channel only had 1,500 viewers in a local TV market, maybe one call would come in, maybe not. Now, larger systems can run short form and make it work. A combination of rational pricing and some bonus units across a wide range of channels can amortize the expense and often make DRTV pay out in many markets. In smaller markets, both on broadcast and local cable, DRTV is usually problematic due to the low number of viewers and 1 in 1,000 response rates.
Nielsen also weighed in recently which may be a straw in the wind regarding the future of DRTV. They have just introduced a new product, Sigma, which allows an agency or buying service to monitor all 210 Nielsen television markets (DMA) daily. So, a DRTV advertiser can get a good read on what has run yesterday. Most shops of any size have proprietary software or subscribe to a service that helps with monitoring. Nielsen’s willingness to enter this marketplace may indicate that demand for DRTV will continue to grow.
In recent months, I have been candid in this blog about the difficult prospects that all forms of TV face over the next few years. Will DRTV suffer the same fate? Clearly, it will be harder to make it work. But, if business is really bad, broadcasters will love the upfront payment from smaller players and paid programming works for them as the risk is taken on by the advertiser. I have always felt that the infomercial viewer was just a bit different demographically and psychologically that the rest of us. They catch people who are bored. Keep in mind no one turns on the TV set with the purpose of watching an infomercial. You stumble on to them by accident. So, it is likely that infomercials may always be with us. And, if TV and cable really do lose as DVR, Hulu.com, and You Tube and a dozen other options get even more traction, short form may have a renaissance for a few years. This could happen if bootstrap entrepreneurs with a new gadget step up to the TV plate as major players cut back sharply or even abandon it.
Meanwhile, track the short form closely. It is a fine bellwether for what is happening out there. And, some of it is just plain fun and a wonderful example of American Pop Culture at work.
If you would like to contact Don Cole directly, you may do so at doncolemedia@gmail.com
DRTV is any advertising that asks consumers to respond directly to the advertiser. It almost always involves calling an 800 number or often visiting a web site these days. DRTV has two basis categories—short form and long form. Short form is two minutes and under and long form can go to 28 and1/2 minutes. Since the mid-1980’s when long form hit its stride it has been referred to as infomericals.
Today, the majority of billing for DRTV is done by specialists who only handle the arcane medium. Many conventional agencies dabble in it and some do it very well. DRTV rates are much lower than the conventional rates for package goods or financial institutions because all time purchased is remnant inventory. DRTV thus performs a very useful function for local station operators and for national cable networks and satellite players. Any time that is unsold they can offer to DRTV at fractional rates. If they find some one at the last minute to pay full bodied rates, the DRTV is immediately pre-emptible and does not run. So, by accepting DRTV, a station or cable player can easily find replacement revenue for their enterprise on very short notice. The DRTV advertiser has to be flexible. There are no ironclad etched in stone media efforts for them. Many of us have seen DRTV advertisers run 200 rating points in a market in a single week and then only “clear” or run 50 the following week. But the price concessions they receive cover a multitude of sins.
Historically, over the last 25 years that I have been involved in the medium, DRTV clearances are highest in mid-summer and from December 26-February 1st when stations and cable properties are never sold out. At other times, you can usually tell how tight a station or cable network is by monitoring how heavy the load of DRTV is as a percentage of total advertising. As a result, DRTV is something of a bellwether to tell you the state of the TV marketplace.
This point has been especially clear during this long and painful economic malaise of ours which some are referring to as “The Great Recession.” As the car business went south, a reasonably alert observer could observe that there was more DRTV all over the place. By March of this year, it was everywhere. DRTV has long been famous for keeping minor or new cable TV networks afloat. But early this year it was amazing. A New York cable executive told me that he had weeks where 80% of his advertising was direct response. Why did they take it? Some of the gadgets and cleaning products were not the ideal backdrop for some of the high quality shows that you see on cable. But there is an old Swiss saying from the Latin which sums it up—Pecunia non olet. It translates “Money has no smell.” Things are not going well now but were much worse earlier this year. Broadcasters and cable sales executives took money from those who could pay the bills and who can blame them.
Infomercials are a whole other category. Often, you see them referred to as paid programming. Some are hilarious (remember the real estate guys who promised you a million dollars in equity in 18 months) and you wonder how anyone would purchase. But remember this: if an infomercial is not performing, it gets yanked very quickly. One snowy Saturday morning several years ago, I vividly remember grazing across the cable offerings and counted seven infomercials featuring gadgets that guaranteed, with faithful use, a noticeably trimmer mid-section. Somebody was calling in and ordering the “belly-busters” or they would not keep running week after week and fighting such stiff competition. Mysteriously, when I hit the beach a few months later, the rock hard abs all of the gadgets promised were not in evidence.
The main appeal of the infomercial is that it promises a “magical transformation.” The product will make you beautiful or rich (although the real estate hucksters have largely dried up with the crash in home prices nationwide). In addition to the magical transformation, kitchen gadgets and special golf or fishing equipment often are big sellers. For stations and cable players, the paid programming offered by infomercials can be lucrative. You have no virtually no staff or production charges and often there is a line of people who pay upfront wanting to get on your program list.
A dozen years ago, DRTV never worked on local cable as the pricing was never right and the audience too small. Generally, about 1 in a 1,000 people viewing calls in and responds. So, if a cable channel only had 1,500 viewers in a local TV market, maybe one call would come in, maybe not. Now, larger systems can run short form and make it work. A combination of rational pricing and some bonus units across a wide range of channels can amortize the expense and often make DRTV pay out in many markets. In smaller markets, both on broadcast and local cable, DRTV is usually problematic due to the low number of viewers and 1 in 1,000 response rates.
Nielsen also weighed in recently which may be a straw in the wind regarding the future of DRTV. They have just introduced a new product, Sigma, which allows an agency or buying service to monitor all 210 Nielsen television markets (DMA) daily. So, a DRTV advertiser can get a good read on what has run yesterday. Most shops of any size have proprietary software or subscribe to a service that helps with monitoring. Nielsen’s willingness to enter this marketplace may indicate that demand for DRTV will continue to grow.
In recent months, I have been candid in this blog about the difficult prospects that all forms of TV face over the next few years. Will DRTV suffer the same fate? Clearly, it will be harder to make it work. But, if business is really bad, broadcasters will love the upfront payment from smaller players and paid programming works for them as the risk is taken on by the advertiser. I have always felt that the infomercial viewer was just a bit different demographically and psychologically that the rest of us. They catch people who are bored. Keep in mind no one turns on the TV set with the purpose of watching an infomercial. You stumble on to them by accident. So, it is likely that infomercials may always be with us. And, if TV and cable really do lose as DVR, Hulu.com, and You Tube and a dozen other options get even more traction, short form may have a renaissance for a few years. This could happen if bootstrap entrepreneurs with a new gadget step up to the TV plate as major players cut back sharply or even abandon it.
Meanwhile, track the short form closely. It is a fine bellwether for what is happening out there. And, some of it is just plain fun and a wonderful example of American Pop Culture at work.
If you would like to contact Don Cole directly, you may do so at doncolemedia@gmail.com
Wednesday, September 2, 2009
Follow-up--the Tar Sands
In my post last week, I departed from the usual media commentary and focused on what I believe is the dangerous position that the US is in regarding energy. We are less than 5% of the world's population yet we use 25% of the world's oil.
Yesterday, a brief blurb was in some publications regarding a Chinese based purchase of a substanial interest in a private company in Canada's Athabasca Tar Sands. Petro-China invested $1.7 billion in Athabasca Oil Sands Corporation's MacKay River and Dover Oil Sands. So what, you might ask.
Well, most of us assume that our major single supplier of oil is Saudi Arabia. Think again, it is Canada! And you can be sure that future oil from these areas will largely be sent to China.
If you want to grow and maintain an industrial economy you need many things but at the top of the list you find oil, steel, and cement. China will get what they need because they have a policy. We do not. Think about it.
If you wish to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Yesterday, a brief blurb was in some publications regarding a Chinese based purchase of a substanial interest in a private company in Canada's Athabasca Tar Sands. Petro-China invested $1.7 billion in Athabasca Oil Sands Corporation's MacKay River and Dover Oil Sands. So what, you might ask.
Well, most of us assume that our major single supplier of oil is Saudi Arabia. Think again, it is Canada! And you can be sure that future oil from these areas will largely be sent to China.
If you want to grow and maintain an industrial economy you need many things but at the top of the list you find oil, steel, and cement. China will get what they need because they have a policy. We do not. Think about it.
If you wish to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Tuesday, August 25, 2009
The Biggest Game Changer of Them All
These days, the news is all abuzz about the proposed health care bill. Others say we should really be concerned about our huge budget deficits or our weak economy. The shrewd talk about the future or lack there of for the US dollar and, many kind people worry about the survival of the Social Security and Medicare systems.
All of them are serious challenges for our country and, to our industry. But to me, the biggest issue facing us over the next few years is not mentioned much these days. It is energy.
When gasoline briefly touched $4.00 per gallon at the pump last year it was THE headline news item in America. Then suddenly, oil fell from $147 a barrel back to $35 and people ignored it. You may not have noticed with all the collateral noise about, but a barrel of oil is now hovering at around $75 right now; more than double what it was some months ago.
Most analysts agree that the price of oil over the next several years is headed much, much higher. The most articulate proponents of this forecast are a group known as “Peak Oil” theorists. Their argument, in a nutshell, is that virtually every oil field in the world is now in irreversible decline. The PEAK means that the 85 million barrel that we produce each day now is close to the maximum that the world with current technologies can handle. Demand is a bit quieter now with the world wide economic struggles but, once we snap back into prosperity, hungry consumers across the world will satisfy their unquenchable thirst for oil at higher prices.
Critics of Peak Oil try to paint them as a motley bunch of wild eyed embarrassments who say that the world is running out of oil tomorrow. If you read them, you find that they really just say that we have reached the pinnacle of production. Over the next few years production will decline maybe by as little as 1-2 million barrels of oil per day each year. They never say that the world will run out of oil. I would say that it is a good bet that my grandchildren’s grandchildren will be using oil based products. It will, however, be hard to find and incredibly expensive compared to what we pay today.
And, remember, we do not control world demand anymore. In 1973, during the infamous gas lines in the US, most oil was consumed by the US, Canada, Japan, the then USSR, and Western Europe. Now, China and India, the Middle East, South America, even parts of Africa, are displaying a rapidly growing desire for oil. Can you blame them? They want to live as we have the past hundred years.
The western world’s economic growth and the 20th century was largely built on the back of cheap oil. That era is coming to a close. If it comes very gradually, we will be okay. Should it come quickly, with an oil shock like last year that then stays permanently high, we will be in for some serious dislocations.
What will happen if the spike is swift and semi-permanent? A few things that you do not see written up in the popular press including:
1) At $6 per gallon gasoline, your major legacy airlines (US Airways, Delta, and United) will go bankrupt. When gas prices were benign, fuel costs were 13% of an airline’s expenses. Now they are about 30%. If we go to $6 at the pump, it will be over 60% of an airline’s expense. They cannot do that and survive. How about a government bailout for the big airlines? It is possible, of course, but I don’t know how many more bailouts our country and taxpayers can stand. US Airways would appear to be toast fairly soon.
2) Many people drive SUV’s because they claim that they have to. They are transporting kids to sports programs or their own comfort level requires lots of room. Well, if you have a long commute, can you afford to triple your expenditure for gasoline? A few can but most of America cannot.
3) Cities will rebound as people will have to live nearer work than now. This, long term, is a big positive for America.
4) With major airlines down, trains should make a big comeback. If we build some of the high speed trains currently in place in Europe and Japan that go over 200 miles per hour, we can solve some of the transportation problems. And, it may be faster than some current trips. When you fly now, you have to arrive at the airport early, park your car, go through security, and then you may sit on the runway for a long time or suffer a significant delay. (As someone who logged 200,000+ miles per year for a long time, I know of what I write!). On the train, you arrive at the station, get on board, take off close to on time most often, and arrive in center city at your destination.
5) School buses currently get anywhere from 6-9 miles per gallon. Municipalities are financially strained right now. If gasoline soars, many more kids may walk to school. Some school systems may opt for a 4 day week or a shorter school year. Big mistake—we need a longer school year if our children are to be able to stay globally competitive.
6) I love to buy internationally. It is wonderful to eat some orange roughy that was caught and flash-frozen in the trawler off the coast of New Zealand and wash it down with a glass of an incomparable New Zealand Sauvignon Blanc. I do it now because, as the cost of transport rises, I may not be able to afford or willing to spend what it will cost to consume that way in a few years.
If any of this sounds alarmist, remember I am not saying that it will happen overnight or next year. But, it seems inevitable when you look at the data carefully. When I talk with thoughtful people about this issue, they are largely in denial. Here are a few real life comments to me:
a) “Someone will do something.” Who? Dick Nixon talked about energy independence in his 1973 State of the Union Address! Not much has been done since and nations hostile to us control much of the world’s supply. Al Gore, Mr. Green himself, was Vice President of the US for eight years. Nothing much happened even in 1993-1994 when the Democrats controlled both houses of congress. Perhaps the fact that oil prices fell for most of the 1990’s is the reason.
b) “The Canadian oil sands will bail us out”. Canada does have vast amounts of bitumen, a thick, goopy tar like substance that, at great expense, can be converted into low quality crude oil. But, to generate a barrel of oil out of the Athabasca tar sands (their real name) requires a use of natural gas and water that is about the energy equivalent of 2/3 of a barrel of oil. And their best hope is to be producing 5 millions barrels a day by 2020. If the rest of the world is in decline, that will help but not come close to solving the problem.
c) “The Saudis will merely turn on the faucet.” Saudi Arabia is not a stable nation so there is a geo-political problem. Many observers note that they cannot ramp up production as they once did. Some say that they are injecting water into their wells daily which indicates that the well is starting to play out and the water helps them extract some hard to get crude.
d) “People will just get smaller cars.” A great idea but it takes about 10 years to turn over the US car fleet. If you buy a car soon, make sure you get one with good mileage. I drive a Prius and gasoline prices are something I do not fear because I get 50 Miles per Gallon and sometimes more.
e) A brilliant executive whom I have tremendous respect for agrees with me but said “Necessity is the mother of invention. When prices spike and stay there, the US will get mobilized.” I agree that windmills and solar panels will be sprouting up all over the place as people see energy as a threat to their lifestyles. But it will take many years to implement a conversion to other energy uses. In the meantime, things could get very uncomfortable. I was speaking to an old acquaintance that lives in a swanky home outside Phoenix. He is fairly well off and mentioned that his air-conditioning bill was $800 last month. What does he do if it goes to $2,400? Would anyone buy his white elephant of a house? Can he turn the thermostat to 92 degrees to save money?
f) “Drill, baby, drill. All we need to do is open up the Alaskan National Wildlife Reserve know as ANWAR” Well, there may be huge oil deposits there; maybe not. Environmentalists have a problem with opening up the ANWAR but set that aside for a moment. If we started drilling tomorrow, we might not see a single barrel from the ANWAR until 2016 or 2017. In the meantime, we should be in a real crunch by then. Hope is truly not a strategy.
g) “You worry too much. We can just plant all of the Midwest with corn and ethanol will come to the rescue as it did in Brazil.” This is a favorite of congressman and Senators in farm states. The truth is that most scientists say that to produce a barrel of oil from ethanol takes approximately a barrel of refined oil or natural gas equivalent. Many see ethanol as an agricultural subsidy. How did it work in Brazil? That is sugar cane based ethanol that only needs one third the energy that corn based ethanol does for production. Also, if we divert too much acreage to corn, the prices of other agricultural products will rise.
Our media world would be affected as well. TV would probably still be in decline as would newspapers who have not gone digital. Remember, if people are spending a lot more on energy they cannot spend as they do now on discretionary items. So there will be fewer advertisers to prop up TV stations. Small town papers would probably get an up tick as many more would work closer to home. Radio could be a sleeper. If the big conglomerates sell off properties to locals, stations could have a comeback especially if they feature more local artists or music. Magazines will struggle mightily and outdoor will get a lot more local and remain the last mass medium. Digital will continue to grow but more slowly than today.
Ad agencies and media sales organizations will have a problem. If airfares soar you cannot see clients nearly as often as you do now. Some agencies have built their service model on relying on cheap airfares (relax, Southwest will survive!). Video conferencing will finally hits its stride as a business tool but stubborn older clients may go with local agencies whose team they can see regularly in person. Sales reps will not be able to try to work their magic on media buyers and planners. The business will be a lot less fun, for sure.
There will be positives. If people drive less and the driving they do is in far more efficient vehicles, our air will get cleaner. The cost of transport will force us to eat a lot more locally grown produce which will be fresher and far more nutricious. Neighborhoods may thrive as people will see each other more often and connect as their grandparents once did. And here is a shocker. The American industrial base may have something of a comeback as the cost of transporting something from the Philippines may negate the labor cost saving by producing off shore. So, some factories may re-open here at home!
If we walk more and drive less, we will look and feel better and maybe even drop a few pounds. That will lower the cost of health care.
All I ask is that you think about this issue for the long term and maybe position your life accordingly. If you live in a McMansion, 20-40 miles from a major city, you might want to consider selling it as soon housing snaps back. Make sure your next car is a gas miser. Install energy saving devices at home. Consider moving closer to work (I know this is not easy as schools may be poor there).
Finally, fulfill a dream or two now. Like many of my generation, I have a “bucket list” of places that I want to visit across the world. Until last year, I always thought that I would methodically knock one off each year. Now, my list has more urgency. If I want to go to let us say, Singapore, I should do it soon. If I wait 5-6 years, the airfare might be $4,000 and the US dollar might not buy much by then relative to the Singapore dollar.
Will all of this happen? I think that it could and the longer policymakers do not act, the worse it will be. It will not occur all at once and prices will not go straight up, but we are facing a problem bigger than all others out there.
Our life is about to change. But, if we handle it right, perhaps our satisfactions might actually increase.
If you would like to contact Don Cole directly, you may reach him at dcolemedia@gmail.com
All of them are serious challenges for our country and, to our industry. But to me, the biggest issue facing us over the next few years is not mentioned much these days. It is energy.
When gasoline briefly touched $4.00 per gallon at the pump last year it was THE headline news item in America. Then suddenly, oil fell from $147 a barrel back to $35 and people ignored it. You may not have noticed with all the collateral noise about, but a barrel of oil is now hovering at around $75 right now; more than double what it was some months ago.
Most analysts agree that the price of oil over the next several years is headed much, much higher. The most articulate proponents of this forecast are a group known as “Peak Oil” theorists. Their argument, in a nutshell, is that virtually every oil field in the world is now in irreversible decline. The PEAK means that the 85 million barrel that we produce each day now is close to the maximum that the world with current technologies can handle. Demand is a bit quieter now with the world wide economic struggles but, once we snap back into prosperity, hungry consumers across the world will satisfy their unquenchable thirst for oil at higher prices.
Critics of Peak Oil try to paint them as a motley bunch of wild eyed embarrassments who say that the world is running out of oil tomorrow. If you read them, you find that they really just say that we have reached the pinnacle of production. Over the next few years production will decline maybe by as little as 1-2 million barrels of oil per day each year. They never say that the world will run out of oil. I would say that it is a good bet that my grandchildren’s grandchildren will be using oil based products. It will, however, be hard to find and incredibly expensive compared to what we pay today.
And, remember, we do not control world demand anymore. In 1973, during the infamous gas lines in the US, most oil was consumed by the US, Canada, Japan, the then USSR, and Western Europe. Now, China and India, the Middle East, South America, even parts of Africa, are displaying a rapidly growing desire for oil. Can you blame them? They want to live as we have the past hundred years.
The western world’s economic growth and the 20th century was largely built on the back of cheap oil. That era is coming to a close. If it comes very gradually, we will be okay. Should it come quickly, with an oil shock like last year that then stays permanently high, we will be in for some serious dislocations.
What will happen if the spike is swift and semi-permanent? A few things that you do not see written up in the popular press including:
1) At $6 per gallon gasoline, your major legacy airlines (US Airways, Delta, and United) will go bankrupt. When gas prices were benign, fuel costs were 13% of an airline’s expenses. Now they are about 30%. If we go to $6 at the pump, it will be over 60% of an airline’s expense. They cannot do that and survive. How about a government bailout for the big airlines? It is possible, of course, but I don’t know how many more bailouts our country and taxpayers can stand. US Airways would appear to be toast fairly soon.
2) Many people drive SUV’s because they claim that they have to. They are transporting kids to sports programs or their own comfort level requires lots of room. Well, if you have a long commute, can you afford to triple your expenditure for gasoline? A few can but most of America cannot.
3) Cities will rebound as people will have to live nearer work than now. This, long term, is a big positive for America.
4) With major airlines down, trains should make a big comeback. If we build some of the high speed trains currently in place in Europe and Japan that go over 200 miles per hour, we can solve some of the transportation problems. And, it may be faster than some current trips. When you fly now, you have to arrive at the airport early, park your car, go through security, and then you may sit on the runway for a long time or suffer a significant delay. (As someone who logged 200,000+ miles per year for a long time, I know of what I write!). On the train, you arrive at the station, get on board, take off close to on time most often, and arrive in center city at your destination.
5) School buses currently get anywhere from 6-9 miles per gallon. Municipalities are financially strained right now. If gasoline soars, many more kids may walk to school. Some school systems may opt for a 4 day week or a shorter school year. Big mistake—we need a longer school year if our children are to be able to stay globally competitive.
6) I love to buy internationally. It is wonderful to eat some orange roughy that was caught and flash-frozen in the trawler off the coast of New Zealand and wash it down with a glass of an incomparable New Zealand Sauvignon Blanc. I do it now because, as the cost of transport rises, I may not be able to afford or willing to spend what it will cost to consume that way in a few years.
If any of this sounds alarmist, remember I am not saying that it will happen overnight or next year. But, it seems inevitable when you look at the data carefully. When I talk with thoughtful people about this issue, they are largely in denial. Here are a few real life comments to me:
a) “Someone will do something.” Who? Dick Nixon talked about energy independence in his 1973 State of the Union Address! Not much has been done since and nations hostile to us control much of the world’s supply. Al Gore, Mr. Green himself, was Vice President of the US for eight years. Nothing much happened even in 1993-1994 when the Democrats controlled both houses of congress. Perhaps the fact that oil prices fell for most of the 1990’s is the reason.
b) “The Canadian oil sands will bail us out”. Canada does have vast amounts of bitumen, a thick, goopy tar like substance that, at great expense, can be converted into low quality crude oil. But, to generate a barrel of oil out of the Athabasca tar sands (their real name) requires a use of natural gas and water that is about the energy equivalent of 2/3 of a barrel of oil. And their best hope is to be producing 5 millions barrels a day by 2020. If the rest of the world is in decline, that will help but not come close to solving the problem.
c) “The Saudis will merely turn on the faucet.” Saudi Arabia is not a stable nation so there is a geo-political problem. Many observers note that they cannot ramp up production as they once did. Some say that they are injecting water into their wells daily which indicates that the well is starting to play out and the water helps them extract some hard to get crude.
d) “People will just get smaller cars.” A great idea but it takes about 10 years to turn over the US car fleet. If you buy a car soon, make sure you get one with good mileage. I drive a Prius and gasoline prices are something I do not fear because I get 50 Miles per Gallon and sometimes more.
e) A brilliant executive whom I have tremendous respect for agrees with me but said “Necessity is the mother of invention. When prices spike and stay there, the US will get mobilized.” I agree that windmills and solar panels will be sprouting up all over the place as people see energy as a threat to their lifestyles. But it will take many years to implement a conversion to other energy uses. In the meantime, things could get very uncomfortable. I was speaking to an old acquaintance that lives in a swanky home outside Phoenix. He is fairly well off and mentioned that his air-conditioning bill was $800 last month. What does he do if it goes to $2,400? Would anyone buy his white elephant of a house? Can he turn the thermostat to 92 degrees to save money?
f) “Drill, baby, drill. All we need to do is open up the Alaskan National Wildlife Reserve know as ANWAR” Well, there may be huge oil deposits there; maybe not. Environmentalists have a problem with opening up the ANWAR but set that aside for a moment. If we started drilling tomorrow, we might not see a single barrel from the ANWAR until 2016 or 2017. In the meantime, we should be in a real crunch by then. Hope is truly not a strategy.
g) “You worry too much. We can just plant all of the Midwest with corn and ethanol will come to the rescue as it did in Brazil.” This is a favorite of congressman and Senators in farm states. The truth is that most scientists say that to produce a barrel of oil from ethanol takes approximately a barrel of refined oil or natural gas equivalent. Many see ethanol as an agricultural subsidy. How did it work in Brazil? That is sugar cane based ethanol that only needs one third the energy that corn based ethanol does for production. Also, if we divert too much acreage to corn, the prices of other agricultural products will rise.
Our media world would be affected as well. TV would probably still be in decline as would newspapers who have not gone digital. Remember, if people are spending a lot more on energy they cannot spend as they do now on discretionary items. So there will be fewer advertisers to prop up TV stations. Small town papers would probably get an up tick as many more would work closer to home. Radio could be a sleeper. If the big conglomerates sell off properties to locals, stations could have a comeback especially if they feature more local artists or music. Magazines will struggle mightily and outdoor will get a lot more local and remain the last mass medium. Digital will continue to grow but more slowly than today.
Ad agencies and media sales organizations will have a problem. If airfares soar you cannot see clients nearly as often as you do now. Some agencies have built their service model on relying on cheap airfares (relax, Southwest will survive!). Video conferencing will finally hits its stride as a business tool but stubborn older clients may go with local agencies whose team they can see regularly in person. Sales reps will not be able to try to work their magic on media buyers and planners. The business will be a lot less fun, for sure.
There will be positives. If people drive less and the driving they do is in far more efficient vehicles, our air will get cleaner. The cost of transport will force us to eat a lot more locally grown produce which will be fresher and far more nutricious. Neighborhoods may thrive as people will see each other more often and connect as their grandparents once did. And here is a shocker. The American industrial base may have something of a comeback as the cost of transporting something from the Philippines may negate the labor cost saving by producing off shore. So, some factories may re-open here at home!
If we walk more and drive less, we will look and feel better and maybe even drop a few pounds. That will lower the cost of health care.
All I ask is that you think about this issue for the long term and maybe position your life accordingly. If you live in a McMansion, 20-40 miles from a major city, you might want to consider selling it as soon housing snaps back. Make sure your next car is a gas miser. Install energy saving devices at home. Consider moving closer to work (I know this is not easy as schools may be poor there).
Finally, fulfill a dream or two now. Like many of my generation, I have a “bucket list” of places that I want to visit across the world. Until last year, I always thought that I would methodically knock one off each year. Now, my list has more urgency. If I want to go to let us say, Singapore, I should do it soon. If I wait 5-6 years, the airfare might be $4,000 and the US dollar might not buy much by then relative to the Singapore dollar.
Will all of this happen? I think that it could and the longer policymakers do not act, the worse it will be. It will not occur all at once and prices will not go straight up, but we are facing a problem bigger than all others out there.
Our life is about to change. But, if we handle it right, perhaps our satisfactions might actually increase.
If you would like to contact Don Cole directly, you may reach him at dcolemedia@gmail.com
Tuesday, August 18, 2009
Walter Cronkite and The Death of News?
On July 17th I was traveling far from home in a remote area. I saw a newspaper headline that said that Walter Cronkite had died at age 92. It was over a week before I was home and had internet access and could read the tributes and summaries of his long and illustrious life. In recent weeks, I have thought about him a great deal. He represented something in the media world which is long gone and will never return. In one sense, Cronkite’s death is almost synonymous with the death of news as we have known it.
Walter Cronkite was the predominant news voice in America for more than a generation. He anchored the then mighty CBS Evening News from 1962-1981. (I remember being so proud to place network TV spots in the evening news one month prior to Cronkite’s retirement). A poll in the mid-1960’s found that he was the most trusted man in America. When in February, 1968 Cronkite gave an editorial questioning President Johnson’s handling of the Vietnam War; Johnson said in the Oval Office, “if I have lost Cronkite, I have lost Middle America.” Several weeks later Senator Gene McCarthy won more delegates than Johnson in the New Hampshire Democratic primary and Johnson stunningly withdrew from the 1968 race.
In his heyday, Cronkite packed a serious Nielsen wallop. He garnered a 13-15 household rating (hard to believe in 2009) for his 6:30 pm broadcast. Some of his specials in primetime delivered double that. He was authoritative and people in large numbers were informed. His main competition, Chet Huntley and David Brinkley at NBC were also first rate and between the two networks covered a large cross section of the American public each evening.
Today, we find that all journalism and broadcast journalism entities are either dying or struggling. News as we knew it still exists but it only reaches small numbers of the population due to fragmentation and people seemingly interested in far lighter fare. What passes for news is many programs that are almost salacious in content and the focus is on celebrities or macabre crimes.
People say that the digital world will bail us out. Yet, as of now, no clear business model has emerged that makes online reporting financially viable. And, we all know that there is no substitute for field reporting. Bloggers, and I love being one and appreciate your readership, cannot totally bail us out. As I wrote back in February about newspapers, there is no publisher left in the US who can afford to allow a 21st century Woodward & Bernstein to investigate a Watergate style scandal.
So much is left unexplored. Some people tell me that Americans want the celebrity news and their football as well and are oblivious about what is happening these days. College students watch the entertaining satire of Jon Stewart and Stephen Colbert in lieu of news. Most Americans, I am told, just do not care about what is really going on. I am not so sure. If Cronkite at his zenith reported about last year’s financial crisis and our ongoing struggles today, a lot more Americans would realize that they are paying for the big mistakes of commercial and investment bankers in recent years. And, if Cronkite mentioned the seven figure bonuses that some of these individuals still get, while we taxpayers pick up the tab for their transgressions, people would be marching in the streets.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Walter Cronkite was the predominant news voice in America for more than a generation. He anchored the then mighty CBS Evening News from 1962-1981. (I remember being so proud to place network TV spots in the evening news one month prior to Cronkite’s retirement). A poll in the mid-1960’s found that he was the most trusted man in America. When in February, 1968 Cronkite gave an editorial questioning President Johnson’s handling of the Vietnam War; Johnson said in the Oval Office, “if I have lost Cronkite, I have lost Middle America.” Several weeks later Senator Gene McCarthy won more delegates than Johnson in the New Hampshire Democratic primary and Johnson stunningly withdrew from the 1968 race.
In his heyday, Cronkite packed a serious Nielsen wallop. He garnered a 13-15 household rating (hard to believe in 2009) for his 6:30 pm broadcast. Some of his specials in primetime delivered double that. He was authoritative and people in large numbers were informed. His main competition, Chet Huntley and David Brinkley at NBC were also first rate and between the two networks covered a large cross section of the American public each evening.
Today, we find that all journalism and broadcast journalism entities are either dying or struggling. News as we knew it still exists but it only reaches small numbers of the population due to fragmentation and people seemingly interested in far lighter fare. What passes for news is many programs that are almost salacious in content and the focus is on celebrities or macabre crimes.
People say that the digital world will bail us out. Yet, as of now, no clear business model has emerged that makes online reporting financially viable. And, we all know that there is no substitute for field reporting. Bloggers, and I love being one and appreciate your readership, cannot totally bail us out. As I wrote back in February about newspapers, there is no publisher left in the US who can afford to allow a 21st century Woodward & Bernstein to investigate a Watergate style scandal.
So much is left unexplored. Some people tell me that Americans want the celebrity news and their football as well and are oblivious about what is happening these days. College students watch the entertaining satire of Jon Stewart and Stephen Colbert in lieu of news. Most Americans, I am told, just do not care about what is really going on. I am not so sure. If Cronkite at his zenith reported about last year’s financial crisis and our ongoing struggles today, a lot more Americans would realize that they are paying for the big mistakes of commercial and investment bankers in recent years. And, if Cronkite mentioned the seven figure bonuses that some of these individuals still get, while we taxpayers pick up the tab for their transgressions, people would be marching in the streets.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Tuesday, August 11, 2009
Hooked on Hulu
About 18 months ago, HULU emerged as an advertising medium. I was a very early adapter as a user and sung its praises to anyone who would listen. Some friends and colleagues accused me of having Hulu on the brain. I was stunned because it was easier to navigate than any other on-line site and gave me a defacto DVD player wherever I had a laptop. It has all but eliminated my TV viewing other than a very occasional live sporting event.
What is Hulu.com? It is a very rare marriage of Fox, NBC, ABC, and private investor Providence Capital which put up $100 million as seed money. Hulu.com runs current TV shows on the above networks, many vintage TV series and a few hundred full run movies. There is advertising but it is about one fourth of what you see on network TV or cable. You can watch what you want when you want. And, it is currently free to users.
Interestingly, Hulu is making money where other groups such as You Tube, Joost, and Veoh appear to be hemorrhaging cash. Why have they succeeded? Well, as mentioned above the ease of use is extraordinary. Also, their content, largely network TV and films, is in the sweet spot of interest for most people. And, the advertising, while there, is not much of a bother as all breaks are very brief (no more than 30 seconds).
A very interesting phenomenon is taking place with Hulu.com ad rates. It has been reported that Hulu.com CPM’s are actually higher than that of what the networks get for the same shows on air. Traditionally, you paid high rates for top rated shows because they were said to be huge reach builders. “You pay more to get more” was the creed we all lived by. But now, while some branding power exists with Hulu.com, the reach is simply not there. The rationale for the premium for Hulu.com commercials is driven by supply and demand (far less supply for Hulu.com than on air) and also a better chance of your spot being seen. People are saying that Hulu.com is a captive audience. As a noted media researcher recently said about Hulu.com, “you know you have eyes on the screen.” Well, young people often keep several screens open when viewing video and could shift to another when a spot comes up. But most of us will probably watch the brief break.
Now, if you think this post is all about Hulu.com, you will miss my point. Hulu is one example, maybe the best, of what is eroding advertiser supported TV right now. It is something of a hybrid as it offers traditional TV and cable fare but still has a foot in advertising as well. But, because it seems to be holding its audience during commercials, it is getting a premium price for what presently are small audiences.
Stepping back a bit from Hulu, clearly, something is happening out there. Here are a few anecdotal examples:
An advertiser from the mountain states told me that he subscribed to a satellite service that threw in a time shifting device as part of the package. “My wife and I have not seen a commercial in four months.” He is a millionaire several times over and would be a wonderful prospect for a wide variety of products and services. How do you reach him now?
A very nice lady pushing 70 tells me that she now gets entire seasons of TV series from Blockbuster. She watches two episodes a night and sometimes more on weekends. Over the last year, she has worked her way through several series and often does not turn her television on for weeks on end. For someone in traditionally the heaviest viewing demographic, she is now virtually impossible to reach.
Book sales are down in this recession but library usage is up over the last 12 months by 18%. Think about that for a moment. Is your salary up 18%? Has your business billing increased 18% in the same time frame? More damning, is the value of your home up 18% year to year?
Libraries are now carrying a wide range of videos. You can get TV series in most locales for free. Some give you classic movies for free as well and a few provide first run films for a rate about half that of Blockbuster. Still others have no charge for films if returned on time. More people are using libraries to obtain free or inexpensive videos. It hurts ad supported TV.
Personally, I was stuck this past January at home during a snowstorm. I went on Netflix and watched Casablanca, one of my all time favorites, instantly. Normally, a snowstorm would be a good time to catch a light viewer like me spending some time in front of the television. Not in the media world of 2009.
This is heady, almost radical stuff. In the heart of hometown America, many mature people have decided to secede from much of advertiser supported television. These are not the young trendsetters or early adapters to new offerings. They are the people the networks always assumed would watch anything. But choice, easy to use technologies and maybe some education from their children is changing the game and rapidly.
With every passing day, thousands of people of all ages in the US join the “leakage” and escape from behind the once Iron Curtain of advertiser supported television.
You may not be hooked on Hulu yet and maybe you never will be. Many millions are and millions more are finding alternative ways to see video. The tidal wave cannot be stopped.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
What is Hulu.com? It is a very rare marriage of Fox, NBC, ABC, and private investor Providence Capital which put up $100 million as seed money. Hulu.com runs current TV shows on the above networks, many vintage TV series and a few hundred full run movies. There is advertising but it is about one fourth of what you see on network TV or cable. You can watch what you want when you want. And, it is currently free to users.
Interestingly, Hulu is making money where other groups such as You Tube, Joost, and Veoh appear to be hemorrhaging cash. Why have they succeeded? Well, as mentioned above the ease of use is extraordinary. Also, their content, largely network TV and films, is in the sweet spot of interest for most people. And, the advertising, while there, is not much of a bother as all breaks are very brief (no more than 30 seconds).
A very interesting phenomenon is taking place with Hulu.com ad rates. It has been reported that Hulu.com CPM’s are actually higher than that of what the networks get for the same shows on air. Traditionally, you paid high rates for top rated shows because they were said to be huge reach builders. “You pay more to get more” was the creed we all lived by. But now, while some branding power exists with Hulu.com, the reach is simply not there. The rationale for the premium for Hulu.com commercials is driven by supply and demand (far less supply for Hulu.com than on air) and also a better chance of your spot being seen. People are saying that Hulu.com is a captive audience. As a noted media researcher recently said about Hulu.com, “you know you have eyes on the screen.” Well, young people often keep several screens open when viewing video and could shift to another when a spot comes up. But most of us will probably watch the brief break.
Now, if you think this post is all about Hulu.com, you will miss my point. Hulu is one example, maybe the best, of what is eroding advertiser supported TV right now. It is something of a hybrid as it offers traditional TV and cable fare but still has a foot in advertising as well. But, because it seems to be holding its audience during commercials, it is getting a premium price for what presently are small audiences.
Stepping back a bit from Hulu, clearly, something is happening out there. Here are a few anecdotal examples:
An advertiser from the mountain states told me that he subscribed to a satellite service that threw in a time shifting device as part of the package. “My wife and I have not seen a commercial in four months.” He is a millionaire several times over and would be a wonderful prospect for a wide variety of products and services. How do you reach him now?
A very nice lady pushing 70 tells me that she now gets entire seasons of TV series from Blockbuster. She watches two episodes a night and sometimes more on weekends. Over the last year, she has worked her way through several series and often does not turn her television on for weeks on end. For someone in traditionally the heaviest viewing demographic, she is now virtually impossible to reach.
Book sales are down in this recession but library usage is up over the last 12 months by 18%. Think about that for a moment. Is your salary up 18%? Has your business billing increased 18% in the same time frame? More damning, is the value of your home up 18% year to year?
Libraries are now carrying a wide range of videos. You can get TV series in most locales for free. Some give you classic movies for free as well and a few provide first run films for a rate about half that of Blockbuster. Still others have no charge for films if returned on time. More people are using libraries to obtain free or inexpensive videos. It hurts ad supported TV.
Personally, I was stuck this past January at home during a snowstorm. I went on Netflix and watched Casablanca, one of my all time favorites, instantly. Normally, a snowstorm would be a good time to catch a light viewer like me spending some time in front of the television. Not in the media world of 2009.
This is heady, almost radical stuff. In the heart of hometown America, many mature people have decided to secede from much of advertiser supported television. These are not the young trendsetters or early adapters to new offerings. They are the people the networks always assumed would watch anything. But choice, easy to use technologies and maybe some education from their children is changing the game and rapidly.
With every passing day, thousands of people of all ages in the US join the “leakage” and escape from behind the once Iron Curtain of advertiser supported television.
You may not be hooked on Hulu yet and maybe you never will be. Many millions are and millions more are finding alternative ways to see video. The tidal wave cannot be stopped.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Wednesday, August 5, 2009
The Great Interregnum
In European history, there were a number of instances where a country was said to be going through an Interregnum. It is basically a fancy word for two Latin terms meaning “between kings.” Sometimes a king died without children and other times there was a civil war or a young child was not ready to succeed his or her father. The longest period happened in the German Empire from 1254-1273 and was known as The Great Interregnum.
This 19 year period was one of disorder and civil war. No single claimant could rally enough support to secure the endorsement of the nobility. Finally, they settled on Rudolph of Hapsburg, a minor noble who was something of a compromise candidate whom the many princes in the far flung empire thought would not make waves.
Rudolph was not a scholar and little was expected of him. But, he turned out to be shrewd. By marrying off four of his daughters to key princes across the region he consolidated his power. From a shaky start in 1273 a Hapsburg reigned in either Germany or Austria right through 1918. Quite a run for a family of minor nobles!
I believe that we will soon face a form of interregnum in the US media world. King TV is old and will soon die having been an almost autocratic advertising medium. What will happen to our world when TV as we know it ceases to work for our clients?
Talk to any experienced media professional in confidence. All of them will tell you that TV does not work as well as it did even five years ago. Most will admit that it will continue to get worse; others will say it will just be different. For the record and to clients or top management they may keep to the party line about TV’s effectiveness, but most know in their hearts that the game as we have experienced it is rapidly coming to an end.
Now, I stress that TV is not going to dry up and blow away. The decline will be continual and gradual. It will be similar to the fragmentation in viewing that has taken place over the last few decades. But one day, not that far away, advertisers are going to wake up and discover that TV no longer pays out for them.
It will come down to an issue that we have mentioned a great deal in this blog in recent months—many people will no longer be seeing the commercials. TiVo and other time shifting devices will continue to grow. Hulu, You Tube and a dozen other video options will continue to grow and take time away from traditionally commercially supported television. Make no mistake. Viewing of video may actually increase over the next few years. But viewing of commercials, as we know them, will definitely decline perhaps by 25-35%. That will put a great stress on whether an investment in conventional broadcast TV can pay out profitably for an advertiser.
Some players, local cable in particular, have some interesting new products which can help them blunt these inevitable changes. And, alternative means of viewing TV such as Hulu and some emerging Hulu clones may likely prosper in this new environment (we will discuss Hulu.com at length in an upcoming post).
All this adds up to a growing sense of urgency. Advertisers and their agencies must start to branch out and test multiple forms of new video opportunities. Experiment with copy lengths and use new turbo charged targeting techniques to reach prospects with video. Many people are using the current severe economic downturn as an excuse not to broaden their horizons. But if they wait much longer they may find themselves in two years time jumping on to a moving train which is an unpleasant and often dangerous experience.
When will the great media interregnum come? Many say when the upfront network marketplace dissolves. My opinion is that it will be like a stealth bomber and sneak up on us. It could be as soon as three years and as long as seven. But it is surely coming. Make your plans now.
Finally, some who agree with me say that they are afraid what will happen to them both professionally and financially when TV no longer is the silver advertising bullet. True, the commercial persuasion industry that we have all known, loved, and been rewarded by is soon to go out of business. But, please, my friends remember this. You may lose your job during this upheaval and some of your savings. But one thing I know for sure--true financial wealth is completely portable and rests on your shoulders. You have knowledge and experience and can thrive no matter how our world evolves.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
This 19 year period was one of disorder and civil war. No single claimant could rally enough support to secure the endorsement of the nobility. Finally, they settled on Rudolph of Hapsburg, a minor noble who was something of a compromise candidate whom the many princes in the far flung empire thought would not make waves.
Rudolph was not a scholar and little was expected of him. But, he turned out to be shrewd. By marrying off four of his daughters to key princes across the region he consolidated his power. From a shaky start in 1273 a Hapsburg reigned in either Germany or Austria right through 1918. Quite a run for a family of minor nobles!
I believe that we will soon face a form of interregnum in the US media world. King TV is old and will soon die having been an almost autocratic advertising medium. What will happen to our world when TV as we know it ceases to work for our clients?
Talk to any experienced media professional in confidence. All of them will tell you that TV does not work as well as it did even five years ago. Most will admit that it will continue to get worse; others will say it will just be different. For the record and to clients or top management they may keep to the party line about TV’s effectiveness, but most know in their hearts that the game as we have experienced it is rapidly coming to an end.
Now, I stress that TV is not going to dry up and blow away. The decline will be continual and gradual. It will be similar to the fragmentation in viewing that has taken place over the last few decades. But one day, not that far away, advertisers are going to wake up and discover that TV no longer pays out for them.
It will come down to an issue that we have mentioned a great deal in this blog in recent months—many people will no longer be seeing the commercials. TiVo and other time shifting devices will continue to grow. Hulu, You Tube and a dozen other video options will continue to grow and take time away from traditionally commercially supported television. Make no mistake. Viewing of video may actually increase over the next few years. But viewing of commercials, as we know them, will definitely decline perhaps by 25-35%. That will put a great stress on whether an investment in conventional broadcast TV can pay out profitably for an advertiser.
Some players, local cable in particular, have some interesting new products which can help them blunt these inevitable changes. And, alternative means of viewing TV such as Hulu and some emerging Hulu clones may likely prosper in this new environment (we will discuss Hulu.com at length in an upcoming post).
All this adds up to a growing sense of urgency. Advertisers and their agencies must start to branch out and test multiple forms of new video opportunities. Experiment with copy lengths and use new turbo charged targeting techniques to reach prospects with video. Many people are using the current severe economic downturn as an excuse not to broaden their horizons. But if they wait much longer they may find themselves in two years time jumping on to a moving train which is an unpleasant and often dangerous experience.
When will the great media interregnum come? Many say when the upfront network marketplace dissolves. My opinion is that it will be like a stealth bomber and sneak up on us. It could be as soon as three years and as long as seven. But it is surely coming. Make your plans now.
Finally, some who agree with me say that they are afraid what will happen to them both professionally and financially when TV no longer is the silver advertising bullet. True, the commercial persuasion industry that we have all known, loved, and been rewarded by is soon to go out of business. But, please, my friends remember this. You may lose your job during this upheaval and some of your savings. But one thing I know for sure--true financial wealth is completely portable and rests on your shoulders. You have knowledge and experience and can thrive no matter how our world evolves.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Saturday, July 25, 2009
Local TV Copy Lengths--Is There a :05 in Your Future?
The thirty second television commercial or :30 is still the dominant player in U.S. advertising world. But, some recent events increasingly indicate that its reign may be a bit shaky.
One of the problems, not surprisingly in 2009, is the continued growth of time shifting devices which we will collectively refer to as TiVo. As TiVo grows, fewer and fewer people see commercials. So, television becomes less and less effective although it still remains a powerful selling medium.
Months ago, in this blog, I mentioned how what took 1100 rating points in a certain TV daypart mix seven years ago to move the sales needle for a client of mine required 1400 points for similar results two years ago. It is hard to get precise today with the very weak economy but I would bet that there is a fairly direct causal link between TiVo penetration in a Designated Market Area (DMA) and local TV effectiveness. A recent study indicates that TiVo penetration, now at 33% nationally, but higher in some markets, could hit over 50% in 36 months. If that happens, the TV model that has sustained so many of us for so long will start to fall apart. When the Wal-Mart shopper and people of similar demographics starts editing out commercials in a big time fashion, our game is in the late innings.
What does this have to do with :30’s? I would say quite a lot, actually. Video games are not my favorite thing. But, they have trained an entire generation or two of young Americans to focus and react with lightning speed. People seem to be able to absorb things a bit faster which lends itself to shorter copy lengths such as 10 or 15 second commercials. Couple that growing facility with the remote, which most of us can use quite well to graze across the cable or satellite landscape in a two minute commercial break. Finally, add a TiVo which allows you to zip through commercials in a program that you have taped. Speed is the thing these days. Increasingly, many many people are getting very hard to reach with a standard 30 second commercial especially if it is embedded in the middle of a two minute break.
When TiVo was beginning to make some headway about 7-8 years ago Honda developed five second spots that were said to be “Tivo proof”. The :05’s played at the end of breaks so when TiVo snapped back after you jumped the commercials you would usually see the entire :05. If you look closely and ask around a bit as I have, you will find that shorter length spots are beginning to find their way all over the broadcast landscape.
Polling stations around the country yielded some interesting things. In smaller markets (under DMA rank #50) broadcasters said that they do not get many requests but are formatted to handle :10’s, of course, and many will do :07’s. In larger markets, people have been running :05’s for several years. A few run :01’s, :02’s, or :03’s as well although most describe that as a branding or reminder message. For some like Coca-Cola a :03 or a :05 might make sense as everyone knows who and what they are.
Many see the :05’s as a way for cash strapped advertisers to slip into Primetime that they could not normally afford. But others say they are hearing rumblings about the “TiVo effect” from some local players who want their spot to be seen. One broadcaster in a surprisingly small market told me “First quarter, 2009 was a disaster. A couple of people asked to do :05’s and one guy wanted to do a :02. I grabbed some of our station promotional time and did whatever they wanted. I was still way below budget for the quarter but they helped me pick up some ground. And, the clients were happy and thought that the brief spots worked.”
I also heard from a production house chief who produces hundreds of spots per year for a stable roster of clients. Our paths crossed 30 years ago and we have become reacquainted as he reads Media Realism.:) The guy has deep experience and is irascible, imaginative, has great passion and a superb work ethic. He also has a boatload of common sense. His take is “you have to accept that TV is now a billboard and place your logo and image so that it repeats or stays constant when “Tivoed”. We use close to all :15’s these days which increases our Reach & Frequency without raising expenditures. Smart stations will start selling 2-3-4-5 second spots in their promo breaks. We use :05’s sometimes and they work! TV is not going away; it is simply getting quicker.”
Now, please understand that we are not saying that in two years a two minute break will consist of 24 five second spots. But, it appears that something is happening. This leaves some local cable players in a bad spot as they get two minutes an hour from New York on most channels and have little leeway for unorthodox or imaginative lengths. Conversely, two distinct Regional Sports Networks (RSN) have told me that they are experimenting with :05’s which is relatively easy for them as they control their own programming.
Also, if we do move to shorter copy more of the time, it seems to play into another theme that Media Realism has been talking about in recent months. Entrenched players have a big advantage over newcomers to a field as they have high name recognition. If brief spots have a higher likelihood of being seen they are using their money better than new players who have to explain who they are in a conventional :30 which will not always be seen in its entirety.
When a newspaper once falsely published that Mark Twain was dead, he responded by saying that “the news of my death is a bit premature.” Don’t write off the :30 completely yet, but it days appear to be numbered. If you buy spot TV, experiment with other copy lengths now!
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
One of the problems, not surprisingly in 2009, is the continued growth of time shifting devices which we will collectively refer to as TiVo. As TiVo grows, fewer and fewer people see commercials. So, television becomes less and less effective although it still remains a powerful selling medium.
Months ago, in this blog, I mentioned how what took 1100 rating points in a certain TV daypart mix seven years ago to move the sales needle for a client of mine required 1400 points for similar results two years ago. It is hard to get precise today with the very weak economy but I would bet that there is a fairly direct causal link between TiVo penetration in a Designated Market Area (DMA) and local TV effectiveness. A recent study indicates that TiVo penetration, now at 33% nationally, but higher in some markets, could hit over 50% in 36 months. If that happens, the TV model that has sustained so many of us for so long will start to fall apart. When the Wal-Mart shopper and people of similar demographics starts editing out commercials in a big time fashion, our game is in the late innings.
What does this have to do with :30’s? I would say quite a lot, actually. Video games are not my favorite thing. But, they have trained an entire generation or two of young Americans to focus and react with lightning speed. People seem to be able to absorb things a bit faster which lends itself to shorter copy lengths such as 10 or 15 second commercials. Couple that growing facility with the remote, which most of us can use quite well to graze across the cable or satellite landscape in a two minute commercial break. Finally, add a TiVo which allows you to zip through commercials in a program that you have taped. Speed is the thing these days. Increasingly, many many people are getting very hard to reach with a standard 30 second commercial especially if it is embedded in the middle of a two minute break.
When TiVo was beginning to make some headway about 7-8 years ago Honda developed five second spots that were said to be “Tivo proof”. The :05’s played at the end of breaks so when TiVo snapped back after you jumped the commercials you would usually see the entire :05. If you look closely and ask around a bit as I have, you will find that shorter length spots are beginning to find their way all over the broadcast landscape.
Polling stations around the country yielded some interesting things. In smaller markets (under DMA rank #50) broadcasters said that they do not get many requests but are formatted to handle :10’s, of course, and many will do :07’s. In larger markets, people have been running :05’s for several years. A few run :01’s, :02’s, or :03’s as well although most describe that as a branding or reminder message. For some like Coca-Cola a :03 or a :05 might make sense as everyone knows who and what they are.
Many see the :05’s as a way for cash strapped advertisers to slip into Primetime that they could not normally afford. But others say they are hearing rumblings about the “TiVo effect” from some local players who want their spot to be seen. One broadcaster in a surprisingly small market told me “First quarter, 2009 was a disaster. A couple of people asked to do :05’s and one guy wanted to do a :02. I grabbed some of our station promotional time and did whatever they wanted. I was still way below budget for the quarter but they helped me pick up some ground. And, the clients were happy and thought that the brief spots worked.”
I also heard from a production house chief who produces hundreds of spots per year for a stable roster of clients. Our paths crossed 30 years ago and we have become reacquainted as he reads Media Realism.:) The guy has deep experience and is irascible, imaginative, has great passion and a superb work ethic. He also has a boatload of common sense. His take is “you have to accept that TV is now a billboard and place your logo and image so that it repeats or stays constant when “Tivoed”. We use close to all :15’s these days which increases our Reach & Frequency without raising expenditures. Smart stations will start selling 2-3-4-5 second spots in their promo breaks. We use :05’s sometimes and they work! TV is not going away; it is simply getting quicker.”
Now, please understand that we are not saying that in two years a two minute break will consist of 24 five second spots. But, it appears that something is happening. This leaves some local cable players in a bad spot as they get two minutes an hour from New York on most channels and have little leeway for unorthodox or imaginative lengths. Conversely, two distinct Regional Sports Networks (RSN) have told me that they are experimenting with :05’s which is relatively easy for them as they control their own programming.
Also, if we do move to shorter copy more of the time, it seems to play into another theme that Media Realism has been talking about in recent months. Entrenched players have a big advantage over newcomers to a field as they have high name recognition. If brief spots have a higher likelihood of being seen they are using their money better than new players who have to explain who they are in a conventional :30 which will not always be seen in its entirety.
When a newspaper once falsely published that Mark Twain was dead, he responded by saying that “the news of my death is a bit premature.” Don’t write off the :30 completely yet, but it days appear to be numbered. If you buy spot TV, experiment with other copy lengths now!
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
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