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Wednesday, April 27, 2011

Social Media and John Wanamaker

Back in October, I posted an extensive series on mid-sized ad agencies under the heading “Mid-Sized Malaise.” Dozens of people help me put the report together by giving me valuable interviews and insights into what was happening in their troubled space.

In recent weeks, I have gone back to a few of the agency CEO’s who participated in the reports and asked for an update on Social Media, a hot topic today.

Two people’s comments stand out and I post these comments with their permission. One agency chief said the following, “last fall as we were preparing plans for 2011, I was in a client meeting and they kept pressing me to do more than the modest tests that we had done up to then with social media. My young staffers wanted to cut back conventional media (Spot TV and radio) sharply and go with a big Facebook presence and other Social Media approaches. I felt railroaded by the client and my team. Actually, to be honest, I felt like the king in the Hans Christian Andersen tale of “The Emperor’s New Clothes.” (To those of you whose memories are fading or had peculiarly warped childhoods, the story goes like this—Some swindlers posing as weavers got in front of an insecure emperor who cared mostly about his personal appearance. They promised a magnificent set of clothes for him but cautioned him that to a fool or one unfit for his office, the clothes would be invisible. The king’s lackeys not wanting to appear to be fools either said nothing as the swindlers pretended to weave the garments. On the day of an important procession, the “weavers” mimed putting the garments on the emperor and then left town. The king marched out in the procession and people marveled at the new clothes until a four-year-old boy shouted, “look, the emperor is not wearing clothes.”)

My friend did not want to appear foolish or not up to the job so he caved in on the Social Media demands of his client and his staff. A few months’ later sales had dipped and now the client does not want to hear the term Social Media.

Another agency head wrote that he had some modest success with early work in the Social Media arena. Then, one of his staffers had a cousin visit his Middle American town and introduced him to the CEO. The cousin was a digital media expert at a large media service. He agreed to spend a few hours the next day reviewing what the agency was doing.

The digital maven made some suggestions as to new platforms to try, gave some direction on rates without being indiscreet, and suggested that certain areas be killed. My friend's digital media planner was very defensive but had no choice but to go along with it. Now, several months later, response is up 30% according to their admittedly subjective yardsticks and costs are down 20%. The client is delighted and they will continue to ratchet up Internet advertising with a growing dollop of Social Media each year. The young agency planner is now sent to every industry conference on emerging media and speaks with the big city expert each month.

All this leads me back to the great John Wanamaker. He was an early retailing giant with a department store carrying his name in Philadelphia. A brilliant merchant he is said to have invented the price tag and was the first to use full page newspapers ads effectively. He also had a full time copywriter on staff in the 1870’s. Somewhere in that decade, he made the now famous statement—“Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.”

Many of us, if we are honest, know that his 135 year old statement still has some truth in it. Even if you simply use conventional media, what is the interaction of TV and magazine or radio and outdoor? They may work together well but how much of each contributes to results and in what proportion? I wrestle with that issue almost daily and have for the last 37 years.

The same has to be true of Internet advertising and Social Media at the moment. Things are happening quickly and new options pop up weekly. Yes, the measurement metrics today are better than in Wanamaker’s day or even 25 years ago. But there is still a lot of wasted energy and client money.

My one friend made a mistake by diving in to Social Media and savaging his conventional budget in the process. Social Media does not always work overnight. As everyone involved with it will tell you, you are not talking to or at your customers anymore. If done right, you are having a dialogue with them and creating a relationship. We all know that relationships take time and effort.

The agency chief who shifted gears with help from the digital media director took the right tact. He knows that even with the improvements, his execution is not without wasted message units. But, with a disciplined approach he can keep one foot in conventional and the other in some combination of Internet marketing/Social Media. Over time, he and his team will get better at it and measurement of Internet and Social Media results will get sharper.

An old friend and keen observer of the marketplace sees the coming transition this way: “We need to revise the old TV and Direct Mail (DM) formula to one of TV and Social Media that morphs into Digital DM.” Well put.

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

Monday, April 18, 2011

Time Warner and The iPad

Over the last few weeks a low level media brawl erupted when Time Warner cable released an iPad app with a nice lineup of 32 channels. Time Warner said it was within their rights to beam the channels to Apple, Inc. without asking permission. Viacom countered that contractually Time Warner had violated the spirit of the contract.

The issues are complicated and many are below the surface. Will cable companies be able to charge more for new distribution rights such as the iPad tablet? How does this affect the advertising billing? Nielsen, always behind the curve, is now really struggling. It is one thing to try and monitor Hulu.com and Netflix.com TV, but new apps are mushrooming and it could be several years before they can monitor any of them adequately.

By March 31st, Time Warner took a dozen channels off the app but then News Corp. weighed in and wanted theirs removed as well.

A lawsuit has been filed which may sort things out depending on how the judge rules.

All this is great but it ignores the key issue that we as advertisers or agencies need to keep in mind. Things keep changing and they keep changing fast. To my mind, no one at Time Warner was trying to pull a fast one. They wrote a contract in good faith and the channels approved it. No one at the time considered the deal with Apple. All of us know it is exhausting to keep up with the rate of change and the emerging technologies in our business.

Should Time Warner have asked permission? Perhaps. But was the iPad app even considered as a possibility when the deal was cut?

To us in marketing or advertising, this is one more warning bell that fragmentation continues to march. There is no doubt that people will be watching more TV on tablets in the future. And, our jobs will get only more complicated going forward as more new technologies emerge. Don’t forget Apple TV and Google TV. Those two shoes will one day drop.

So, let the networks fight with the cable companies. Keep your eye on the ball. How do we reach people as the fragmentation exceeds our wildest dreams of even a few years ago?

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

Saturday, April 9, 2011

Commodities, Inflation, and Media Spending

Virtually every Saturday morning I visit a local farmers market. It is a wonderful experience. The food is plentiful and inexpensive and often the person selling you the fresh produce or baked goods is the individual who grew it or made it. Much of the food is authentically organic and if you stop and chat for a moment they often will suggest how to prepare it for maximum taste appeal and enjoyment. The crowd is fascinating as well. You see an amazing cross section of Americans from investment bankers, U.S. congressmen, teachers, left wing activists, and urban poor. Every so often a fellow a few years older than I stops me and wants to know if I am interested in reading some literature from the Socialist Workers Alliance. My wife tells me that I need to shave and stop wearing a sweatshirt before going to the market! The fellow acts as if it is still 1970 and I must say that I admire his persistence, purity and total refusal to abandon his 22 year old convictions. Yet, perhaps Disraeli was correct when he said, "If you are 20 years old and a conservative you have no heart, but if you are 60 years old and a liberal you have no brains."

This morning we visited the market and, as usual, we picked up some great bargains relative to grocery store prices. At the same time, monitoring the scene from a consumer behavior stand point it is clear that prices are beginning to move up smartly. Fresh organic eggs had been $3.00 a dozen recently and now weigh in at $3.50. That is a 16.6% increase almost overnight. Our Federal reserve Chairman Ben Bernanke says that inflation is not a real issue in the U.S. today. I would like him to accompany me to a farmers market or a supermarket one day and then do it again a month later.

The Fed does not include food or energy prices in their inflation calculations. Yet they are two areas where all Americans spend money. If they rise at all, the bulk of Americans feel it; some very significantly if they are struggling.

Back in the 1970's, when we last had serious inflation, most producers and food processors could simply pass on their increased costs to consumers. Now, with the economy far more fragile, marketers are getting far more cautious. Some simply cut the amount of product in each package (see Media Realism, "Skippy and Media Prices, June 11, 2010). Others have had to ratchet up prices and if oil stays high, their transportation costs will rise as well forcing them to increase charges at checkout. Wheat, corn and cotton prices are soaring in particular.

I feel and I may be in a tiny minority, that this could hurt media markets, particularly network broadcast. CEO's who see earnings struggling may decide that they can cut marketing expenses for a year or so. This almost always hurts branding long term but props up earnings for 3-9 months as sales stay fairly stable in most categories. So watch this carefully. If you operate in a local marketplace as a broadcaster or cable interconnect, things may continue to improve. But national package goods brands may do some marketing belt tightening. We could have a bit of a softer network marketplace than many expect even if the overall economy continues to expand.

Ignore the soothing comments of the Federal Reserve. If energy and commodity prices keep ramping up, something has to give in the marketing world.

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