Posted on 12/28/2008 8:13:30 AM PST by nwrep
The internet has witnessed the conversion of analog advertising dollars into digital advertising pennies (credit due to Jeff Zucker at NBC (GE) for “coining” that metaphor). Despite the fact that a viewer is always just a “click away” on the internet, online advertisements command only a fraction of the cost of far less measurable media – like print, radio, and television. Consider this: an advertisement on MySpace (NWS) might cost $.25 to show to 1,000 people ($.25 CPM), versus $25 for 1,000 readers of Time (TWX) magazine ($25 CPM).
In the good old days of performance-less advertising, engagement didn’t really matter because you generally couldn’t quantify it. Studies on Reach, Frequency, and Recall aside, General Motors (GM) had no way of measuring the marginal benefit (much less revenue!) of a particular advertisement. But on the internet, it is quite clear that if nobody is clicking on your ad, then nobody is noticing it, much less “connecting” with it. Proctor and Gamble has likely spent millions of dollars on Facebook advertisements that attract a few dozen active “followers” – probably the same hit rate they had in Time magazine 20 years ago, but with one key difference: Now anyone can prove that people don’t engage with the advertisement! If only Facebook (and internet advertising agencies) hid such pitiful data, perhaps the pennies would somehow metastasize back into dollar form. When there’s no way to measure the marginal benefit of an advertising unit, it’s very easy to get ripped off.
Pundits will argue that with increased ad targeting, profiling, and all sorts of other algorithmic alchemy, online ad revenues will be boosted. In my opinion, such talk is nonsense insofar as brand advertising (not direct response) is concerned. Rather, a seismic shift is underway – one that will not only change the nature of advertising, but will also show that the last century of offline advertising witnessed a tremendous amount of money being flushed down the toilet. We are a lot smarter than we were 50 years ago, and those analog dollars really should have been analog pennies all along.
The result of this peculiar wastefulness was (and, for the moment, still is) a “private” consumption tax for the funding of “public” content. If the BBC is funded by the British government (i.e. taxpayers), NBC is funded by Proctor & Gamble (PG) Coca-Cola (KO), General Motors, et al (i.e., consumers of those brands). If you happen to watch your favorite sitcom without transacting with any of those brands, then you are free-riding off of those who do spend – a remarkable corollary to the piracy of paid content. The “free content” system of the past century is no different than forcing people to buy NBC content from iTunes, but instead of the cost being charged to their Visa cards, it is tacked onto the cost of their Tide, Cherry Coke, and Chevy Malibu.
Don’t expect it to last, though. As the brands recognize that they are being bilked – rather, that there is at best a tenuous link between consumption of their goods and consumption of the free content they are sponsoring, they will be less likely to foot the bill. For the beneficiaries of free content, the internet is unraveling this whole ecosystem with unwavering speed.
If you are a media company, or a shareholder in a media company, there is a good reason to worry about what the next ten years hold in store. The enemy is not Google or the internet, but rather increased intelligence and analysis of advertising spend, which will irrevocably change the way advertisers allocate their dollars.
Unless one uses the saturation approach with essentially unlimited funds (like the Obamanation campaign with help from the MSM), the effectiveness of the $$ is limited.
schu
This is wrong. Advertisers buy slots based on the popularity and thus viewership of certain entertainment vehicles. They don’t subsidize those shows, it is the shows that they bid against each other in order to be in front of a mass audience. That audience is guaranteed to at least receive their commercial. The internet is just the opposite. Pop up blockers, and banners that may get you to click on them is different. Blop Blop, Fizz fizz, oh what a relief it is...what this doesn’t take into account is that there is a lot of really crappy advertising and a few really great ads. Even the great ads don’t get us to buy. It does increase awareness.
The internet is best used for searching, not advertising. what you do with it once they find you is the question. put your money on getting found. drive people to your site. this article is off in many ways.
Insightful article. We own a small part of a TV station, glad we got out because I could see (some) of this coming. NBC bought us out for lots more than it was worth.
Good call and I would advise anyone in the outdoor magazine business to jump soon as well. We use to spend 10% of our gross revenue on magazine ads and now spend zero. The Internet when properly used makes the magazines obsolete and allows you to go straight to the customer without a filter. Fishing and outdoor shows as well are headed south because they are nothing but an infomercial. You can Youtube all the outdoor action you want for free and not have to be BS’d about a bunch of crap that in reality does not work.
I agree. Some sites, for a fee, will block ads from appearing when you return to it. Nobody likes intrusive advertising. TV does it in discrete blocs you can’t escape. The internet uses sidebars and banners that are always on but no one really wants to see after the first time. Even with rotations, they get old fast.
Maybe advertising will never be as cheap as the author supposes, but I think he understands that advertising can be done for less. The dinosaur media, if they want to continue, can’t charge high fees forever when folks are turning to other news and entertainment alternatives.
For TV, not since the advent of remote controls. That's why many of the networks are going to TV 'pop up' ads for their own programming. They know that the 30 second ad no longer works.
Well, if the separate ad doesn't work for the network, why should P&G be stupid enough to think that it will work for them.
The best solution for advertisers would probably be to go back to the 1950s model where the company owned, or at least 'presented' the show.
As for print, folks have learned to read around the ads.
I agree that the article is off in many ways. Hell, I saw the ‘’dotcom bust’’ before it happened. Now, that ship has sailed and sunk. My theory was pinned on the ridiculous amount of ad dollars propping up a bubble that would see very little ROI. Google is somewhat of an exception. It’s a popular ‘tool’ used by 100s of millions which targets users on each button click... Targeted audience of millions with limited positions for visibility... like CBS in the mid 70s (except for the ‘targeted’ part).
If you buy into my field sports tv shows as an advertiser, I promise targeted marketing and savvy companies KNOW they will get the exposure they pay for - and I can charge up to $1 CPM for the privelege. Yet, amazingly, I’ve never met a careless Dir of Mktg. They have choices in the oversaturated world of media and the market prices per CPM reflect this. If I’m wrong, then I’d be a millionare. I actually have to work for a living (at least until my tv shows rank #1, which they will (heh-heh!).
My point? There will be no sudden epiphany. Peeps who control the ad dollars are keeping up and when they don’t, they get fired - or they become victims to economic Darwinism.... unless they are bailed out by congress where new Monopoly money is printed up.
WATCH LIP’EM & RIP’EM on the ALTITUDE NETWORK 2009! :-)
There's an impact with TV - and even print media - that the article is widely missing: millions of people remember this or that Budweiser TV commercial but no one has ever stood around the water cooler and talked about a pop-up.
Exactly right about Outdoor TV turning into infommercials! That is exactly why my outdoor show gets good reviews and good ratings - as we abhor that trend and I use my tv creative ‘talents’ to entertain our viewers. Our sponsors understand this so if you still have outdoor marketing needs, we should talk. I have 2 shows in production now and 1 in development. Let’s create it suit your company’s needs and entertain our shared target.
—Sorry that I just selfishly hijacked this thread. We now return you to FreeRepublic.—
>>>>>If you happen to watch your favorite sitcom without transacting with any of those brands, then you are free-riding off of those who do spend – a remarkable corollary to the piracy of paid content.<<<<<
This is where I stopped and said “BS!”
I was in publishing for a decade and learned that the entire basis for media business is not about selling content to the audience, but about selling an audience to the advertiser.
And so the publisher (or producer) must capture your attention for X period of time in order to have a “product” to sell, which is your time and attention. Readers, viewers, and listeners aren’t the “parasites” this yoyo says they are, but in fact are the product being sold to an advertiser.
Reverse that calculus and here’s what we are worth to an advertiser in the Super Bowl. $1 million for an ad, say 50 million viewers = $1 per 50 viewers = 2 cents for 30 seconds (4 cents per minute or $2.40 per hour) of each individual viewer’s time.
Those are pretty darned cheap wages IMO. Most people would want at least $15 per hour to watch Bud and Doritos commercials all afternoon.
And some people might even value their leisure time at $50/hour or $100/hour or even quite a lot more, so any single minute that an advertiser can extract from a consumer’s time-constrained attention is a bonus.
The real corollary mentioned by the author - “piracy of paid content” - is actually the advertiser’s piracy of the reader/listener/viewer’s time and attention.
Google is also nice because it just places the ad there instead of having annoying, flashing graphics and sounds to try to grab your attention. I've started using a Flash blocker because 95% of everything using Flash is advertising. I also block popups and back in dialup I had an ad blocker which blocked animated gifs because they were the most annoying then.
Many advertising supported pages feel like having a screeching, poop flinging monkey leaping out of the newspaper (remember those?) to get your attention for an ad. After the first couple times you would just hit the paper on the porch with a baseball bat before picking it up and shaking out the dead monkey. Google is understated enough where I don't mind their ads.
If ISPs continue their plans to charge per bit transmitted, expect ad blocking to get popular again. I'm not going to pay to download a megabyte of data just so you can tell me I need some Chinese \/!Agera.
You can install Ad Block Plus to the Firefox browser for free and all the popups and ads disappear.
You can add Flashblock to the Firefox browser for free and Flash movies are replaced with an icon you can click if you want to watch the movie.
Wish TV and radio had something like this.
Click through isn’t actually a good measurement. A web ad can “work” (ie generate interest in a product) without you actually clicking, you can see the ad move on with your life then look up the product later. Just like with “traditional” ads, you don’t see a commercial on TV drop everything and go buy, it lodges in your brain and maybe you investigate later. Click through measure instant results, but just like with all the rest of advertising delayed results are at least as useful and unmeasurable. Let’s not even get into all the ways click through can be and IS faked, which is a large part of why internet advertising sells so cheap.
And the idea that people watching a show without patronizing the sponsors are “free riders” just shows this guy doesn’t understand how big media really works. We’re the product they sell. They use shows (articles, music, etc) to lure eyeballs (and ears) which they sell to advertisers. The product can never be a free rider. If my eyeballs saw the ad then the advertiser got what they paid for, if I didn’t go buy it well that’s the chance they take.
I think it was the department store head Wanamaker who said, “I know that half the money I spend on advertising is wasted. The problem is, it’s impossible to know which half.”
Pop up ads aren’t entirely because the standard commercial doesn’t work. A big reason for them is money. Self ads “cost” as much as a commercial, there’s no reason to put a commercial for your own programs in a slot you’d charge $100,000 for when instead you can sell that slot for $100,000. Most self ads wind up in unsold slots, in shows that sell out you use pop up ads.
Yup. Because people are such random creatures there’s just no way to know. They spend a lot of money trying to guess, but it’s just guessing. And internet ads are no more trackable in their effectiveness than anything else.
Absolutely they are trackable. Every page you log onto can see your IP address. pages with sold advertising log you on a server, and sellers log your IP when you look at their site, whether you buy or not. If you don't think there is a program correlating your browsing history with regard to shopping, then you haven't been paying attention.
Some of the cable channels are so bad with the pop-ups that I’ll turn off the show rather than put up with them. I consider pop-up self ads the ultimate in executive stupidity. If I was an exec with a major corp, I’d write into my ad contracts a ‘no-popup’ clause for the shows I was paying for.
I’ve used Flashblock for years. I’m not offended by banners, so I’ve never bothered with AdBlock.
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