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Sunday, January 2, 2011

2011 Media Forecasts

Happy 2011! This promises to be an interesting, even watershed year in several media types so I decided to publish an annual forecast. Here goes:

The Economy

American consumers appear to be making a sincere effort to clean up their personal balance sheets. Christmas sales were surprisingly good but interestingly credit card balances did not soar. Few people seemed to be spending what they did not have. So it appears that our tepid and very fragile economic recovery will continue. Autos and finance seem to be recovering some which will help advertising. Housing remains quite sick and six major markets hit new lows Vis a Vis the 2006 high water mark for home values. Foreclosures continue to rise and may continue throughout the year.

What can go wrong? Inflation! Insanely, the U.S. government Consumer Price Index no longer includes food and fuel as components. With oil at $91 as we write $100+ plus per barrel is definitely in sight for 2011. If gas at the pump jumps to $4 per gallon, the economy could tank quickly. Grain and beef prices are rising as well. So, if food and fuel rise, other parts of the economy will suffer. We won’t stop going to work if gasoline is $4 per gallon and Americans surely will not stop eating. Every dollar that goes to those two items will be diverted from much retail activity and, sadly, much of the gasoline money will go overseas. So, while it looks positive, the 2011 economy may not grow as much as we hope.

Network TV

Each year, some pundit or two says that “this will be the last year of the obsolete network TV upfront marketplace.” And, each year, the upfront sets a new record (the upfront is when major advertisers buy up to 80-85% of the available network TV inventory in spring for the season that begins in September). Last year, I believe it was about $8.3 billion. Well, 2011 will be no exception. Expect a 5-6% increase even though the audiences are getting smaller, commercial avoidance is growing, and new alternatives abound. Why? The big players need it as a security blanket. They honestly do not know where to deploy the funds. Importantly, for all the attacks that it gets, network TV still raises awareness and pulls through sales better than anything else for many advertisers.

Cable TV

Should do even better than network TV! The choices are huge and a clever media team can put together a package of cable channels that can deliver excellent reach and minimize target waste. The promotional aspects of cable remain strong as well.



Spot TV

This local medium should have their best showing in several years even with virtually no political advertising. Auto and financials will lead the way in many markets. In 2008, many people postponed buying a new car due to job loss or fear of job loss. Now, the old clunker just has to be replaced. Local TV stations will benefit mightily here. Do not be surprised if billing is up 6% nationally.

The up trend will not be consistent, however. Some states and many municipalities are broke. Politicians are out of smoke and mirrors in some areas. They will have to fire government workers. California will be the place to watch. Once again, the inimitable Jerry Brown is governor of our most populous state. He was governor way back in 1975-83. Despite his quirky reputation in the press, he was an authentic fiscal hawk. When he left office California had a $5 billion surplus. Today, he inherits a mess. At 72, Brown knows this is his last hurrah. I think that he will do the right thing. To right the ship, he is going to have to cut the size of government in California significantly and, to do that, he will have to lay off thousands of state employees and have some kind of serious pension reform (translation=lowering benefits). The Sacramento TV market could suffer while a San Diego may not be affected much under this scenario. Watch the states, carefully. New York, Illinois, Rhode Island, and Arizona face similar challenges but I bet that Brown will be the most candid and act the fastest.

Local Cable

This medium has even better prospects than spot TV. Selling by zone, new networks, plus nice promotional support add up to a fine year as long as gasoline prices does not upset the applecart and hurt local retailer spending.

Spot Radio

This aging medium will have a decent year (+4%). Some markets will do better than others due to the local economy and aggressiveness of the sales teams. I must say that I admire the many local stations that have brought in many new advertisers to radio over the last two and a half years. They knew they had to scramble and many did.

Outdoor

The last mass medium should have a banner year. We would not be surprised if advertisers bid up the price 7-8% here nationally. Many traditional players who cut back some on TV may move to outdoor this year rather than on line options.

Magazines

This will be another year of challenge for many titles. Ad revenue will likely not increase for many so they will have to raise subscription prices some or go to non traditional sources of income with new applications. Some will succeed; many will not.

Newspaper

The last two years have been horrible for this industry. Double digit billing declines and sharp circulation losses were in evidence for many papers. Incredibly, in 1999, ad revenues for the industry were over $46 billion. Now they are roughly half that if 2011 projections hold.

All eyes are on the New York Times. Sometime early this year, they will launch their “metered pay wall” where they will charge on line readers for their product. That is not where my attention will be. The Times is an iconic institution and many readers (some in my own household!) will cheerfully pay something for it. What I will be hovering over are the dozens of other papers across the country that are also going to be experimenting with pay walls in 2011. Can pay walls work in Dayton or Missoula? To me, that will be the test. Also, can micro-payments be worked out from those who want to only read a columnist or two? Monetization of online readership may take many forms.

Others say the future of newspapers lie with the Kindle, IPad or other devices. Time will tell. This year we will learn a great deal. Also, can they ever get young adults back? Few that I survey have any interest in newspapers.

Mobile

This area should have the most explosive growth but it is starting from a very low base. Mobile advertising is much bigger in Europe and Asia than it is here in the U.S. Applications are growing and are increasingly sophisticated. There will be lots of testing here but percents of budgets will likely remain under 2% for most advertisers. This is a great long term play. Agencies need to learn all they can about mobile now.

Internet

Continued solid double digit growth here is a slam dunk. Google will keep expanding and search dollars should grow nicely.

Social Media

This area has all the sizzle and some of it is deserved. Facebook had a stunning 151 million unique visitors in October. And, nearly one in four page views took place on Facebook.com. This was nearly 4 times what You Tube delivered over the same period. So, Facebook is primed for another explosive year of growth.

This may be only a straw in the wind but I see a possible shakeout coming across social media that could hit this year. My reasons are pretty straightforward:

1) A lot of people are there only because they think it is the thing to do. Mid-sized agencies are often on Facebook because they want to appear sophisticated to their clients and the clients, not wanting to appear out of it, invariably go along.
2) In many cases, the wrong people are doing it. All too many set up a Facebook account for a client and then ignore it. This is deadly. Set it and forget it cannot work in social media. Experienced hands need to monitor activity, answer complaints, and keep the material fresh. It stuns me how many obsolete coupons are still up on sites. Or weeks go by with no commentary on consumer actions.
3) Facebook is almost in a bubble. It reminds me of the dot.com craze in the stock market in late 1999 and early 2000. Expectations are so juiced up that it almost has to end badly for some people. I have heard more than one alleged professional say “forget TV and database management. Facebook will bail you out.” We are heading for a train wreck which is sad as social media has a brilliant future for brands and also in B to B action. Lots of people are going to get burned here. Make sure that you are in experienced hands and that you work the social media of all types very aggressively. If you are not going to be hands on, don’t do it!
4) Some candid friends at agencies have told me that they cannot prove that social media is working at all for their clients. Others say that they have no idea how much it contributes to sales. The whole concept of creating a relationship rather than direct selling is confusing to mature marketers. Some may pull the plug unless a direct link between their social media activity and sales can be determined.

Ad Agencies

For the first time in several years, agencies should have a decent year if the economy holds together reasonably well. The big international holding companies should have a nice year as global billing should be up at least 6%. And, if autos and finance rebound domestically the mid-sized players and small fry should see some daylight as well. Raising fees will still be dicey and if you work at an agency, don’t expect much of a raise (again). One bright spot is that some larger companies are unbundling projects and new media to smaller specialty firms rather than getting the slow service and high costs of their major agencies. If you TRULY have a specialty here, you may do well.

On balance, 2011 will be a pretty good year if the economy keeps creeping along.

I wish all of you a prosperous 2011.

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

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