Thursday, October 29, 2009

Newsprinter circulation: a vehicle driven to tears

Freedom of the press is limited to those with the ability to run one
- A. J. Liebling

What's black and white and read in the red all over? The newsprinter business apparently. Well, not actually. In fact many newspapers are more profitable than the evil health insurance companies (here + here).

The Audit Bureau of Circulation released newspaper circulation numbers a couple of days ago...the Washington Post and other walking-dead media continue to bemoan the accelerating decline in paid circulation for America's newspapers (here and here for example). For a complete roundup, check Newspaper Death Watch (here)

And while the Newspaper Association of America tries to convince itself of the successful migration of newsprint to digital (here), it would seem that everyone also understands why the economics of the move online are not working in a quid pro quo manner:

"Ads on newspaper Internet sites sell for pennies on the dollar compared with ads in their ink-on-paper cousins."

That's generally what happens when you apply technology to gets cheaper.

So What?

What the decline in the nation's largest newsprint organs means is anyone's guess, but here's mine:

1. Journalism isn't dead: If the NY Times (and other big media) disappears in a sea of red ink, the republic will survive. The issue of newsprint's decline is one of inefficient media...not content. Investigative reporting doesn't really have anything to do with distributing a crossword puzzle, Paul Krugman, or the Yankees. Those are legacies of big media's bygone mass attention monopoly. The economics of the NYT investigative reporting is still built on the presumption that the book reviews matter...and that the newsprint that carries them matters too.

2. Print isn't dead: At least, it isn't if you are relevant.  Like politics, the most relevant news is local. The same ABC statistics show that small dailies seem to be doing ok. Newsprint subscribers seem to find the cost of a printed newspaper reasonable when it covers news that is local. Thinking smaller, though, isn't generally in the nature of an organization that thinks it's already printing all the news that's fit to be printed. And even local news organizations get that print has to be integrated with low cost online outlets.

3. News is a commodity: Newsprinters trade in information and information is a commodity. Analysis and opinion, on the other hand, are the stuff of differentiation. They also tend to engender polarization. The newsprinters who reconcile their ability to draw an audience around their opinion may survive, albeit as smaller enterprises. But smaller is where their headed one way or the other.

4. Economics matter: Advertising is subjected to the same forces of cost efficiency, measurability and effectiveness as every other industry. As long as newsprinters rely on advertising, their cost structures will have to reflect the declining value of advertising. This may mean that those who want print have to assume more of the cost of print. And of course, the major newsprinters aren't losing money just because they aren't selling ads. They sucked from the same debt trough as so many of their readers...buying baseball teams, buildings and trucks with low cost Greenspan dollars for example. The bills have been coming due for quite some time. What the profitable papers are figuring out is that, like everyone else they have to reduce costs or raise prices...or both. How that works out in an era of deflation is anyone's guess.

And let's not even start on the environmental considerations of the meantime, I'll wipe away my crocodile tears and continue looking forward in the new age of news.

Friday, October 23, 2009

Free vs. Paid content: Hulu becomes the next small thing

Not one to usually value unsubstantiated rumors, I will occassionally pass along rumors that seem substantiated. In this case, it's the rumor that the video sharing site Hulu intends to start charging for access to it's content sometime in 2010.

I say substantiated rumor because Hulu owner Newscorp's very own Chase Carey says it thusly:

“It’s time to start getting paid for broadcast content online,”

Full quote via TVWeek here

Of course Hulu isn't the only new-legacy media outlet online attempting to find a way to get paid for what's previously been free. Newspapers, like the NYTimes, have gone free online, tried a paywall, then torn it down, only to reconsider it again.

The long, slow decline of ad revenue at Big Media has driven the best and brightest they have to offer the usual and customary response: raise prices.

So what?

The obvious challenges in charging for broadcast content (or news, or opinion, or entertainment) online include:

  1. How does customer behavior that has been groomed around free access online suddenly change to a paid model?
  2. What value must be provided beyond what is currently available via the free model?

  3. How do you define broadcast content competition online that includes the myriad other channel options people have for spending their time and interacting?

  4. Broadcast content offline is subsidized by advertising...does charging customers for access online presumes that advertising is not required?

Beyond these questions, the reality behind the online subscription model rumblings is this: traditional broadcast models are based on a cost structure that is under duress...because the models are based on big. Big audiences, big production, big ad revenues.

Paper pays for infrastructure (printing presses, distribution, etc.) that is not able to be cost recovered. Broadcast content producers and their network distributors pay more than their audiences are willing to pay to watch (and, increasingly, more than the advertisers are willing to subsidize).

Applying technology to most human endeavours does two things: it decreases the costs associated with doing the same thing the old way and it enables things to be done in a new or different way.

Until broadcast models do something new and different, their only option will be to reduce costs and prices to reflect the long-tail reality of their customer's interests...the challenge is that cost cutting ends at zero. Ultimately, I think this means Big Media will have to think smaller...smaller audiences, smaller segmentation, smaller aggregate, they may become something bigger...but they have to start by thinking smaller.

Ultimately, Hulu will probably deploy a mix of paid and free access...all-you-can-eat and on-demand packages. As with any endeavour that has near commodity status, the challenge will be in setting a price that marks to a market of one--not to what Hulu wishes a market of millions would bear.

With any luck, small thinking might--finally--become the next big thing for Big Media.

Wednesday, October 14, 2009

Doing more for less: Unmasking display ad effectiveness research

A couple of weeks ago, comScore and Starcom released a study showing that display advertising online continues to find fewer and fewer people willing to take the click (here). To boil it down to the essence, a mere 8% of internet users account for 85% of all display ad clicks. So much for the legendary 80-20 rule.

This means that display ad click-thru rates for the other 92% of internet users are actually much lower than the oft-quoted figure of 0.05%. So low, in fact, as to be essentially the same as, well, zero.

Some, perhaps with a vested interest in impression-based online media, react to the comScore report as one might expect. With vague assertions about online branding + awareness. Others quote 'research' about the additive effect of display advertising on the effectiveness of performance-based formats like search (example).

But when one actually reads the research (when it can be found, like this one from Microsoft's Atlas Institute) one gets the distinct impression (so to speak) that these studies are often just marketing POV's dressed up in a mad-scientist Halloween costume: nice white lab coat, institute clipboard...but no research methods. No explanation of controls. And no causal explanation of why 27% of the results were in opposition to the fundamental conclusion of the study: that display ads provide a lift when used with search.

So What?

I'm not trying to trash display ads...or even self-referencing research (though the decline of display ad effectiveness is something predicted in the Themes for 2009 post). Heck, I'm not sure there's really a fundamental difference between an ad vehicle displayed based on the site a user visits and an ad vehicle that is displayed based on words a user types into a search engine.

I'm only suggesting that, as a group, advertising professionals quit fighting losing battles about 'changing client perceptions on the value of an impression online'. Clients understand paying for an action. Shoot, we all should understand that we get paid for doing something, not for the impression of doing something.

We're not serving clients, their brands, or the profession if we quote laughably biased and nonrigorous 'research' findings in support of impression-based buying online. Instead, let's propose online media plans that incorporate at least of few of the following components:

1. Driven by practical and directly measurable audience action on each impression
2. Demand a creative unit that has a call to action for each impression
3. Priced on performance against the action.
4. Prioritized in a media mix based on the action's value to the client (or their customer).

Plans for action online don't require a belief system built around ambiguously demonstrated offline ad concepts or research that helps us see what we already believe. Plans for action online do require a commitment to transparent measurement and to a definition of value that serves all stakeholders' needs...especially the client's.

Tuesday, October 06, 2009

Child, please! Agency compensation and the suspension of disbelief

Any explanation is better than none. - Nietzsche

The 4A's (Amer Assoc of Ad Agencies) have a salary survey out ($350 for members) that, according to Advertising Age, shows top creative 'talent' billing out at $978 per hour [here] with lesser talent averaging $400 and up. I put the word 'talent' in parentheses because it takes quite a bit of talent to convince someone to pay you $978 per hour...for anything.

If you were working 2000 hours per year, that would value your labor at $1.95 million. Of course, it would also mean that 4A's members only have to work for 21 minutes at that rate to pay for a copy of the 4A's confirming survey.

But what is it that makes America's top creative talent worth that much? In the spirit of Nietsche, here's an explanation:

These talented men and women are creating campaigns that, as a directly measurable result of their efforts, sell at least $1.95 million worth of something.

How else to explain these rates? Some people might use terms like 'great' or 'impactful' to describe the work product that warrants this type of agency compensation. Others might throw in 'award-winning' to modify the noun 'work'. But those are not business terms.

One other explanation does come to mind, but that would require something less noble. Maybe these rates aren't justifiable? Maybe they don't actually exist at all except in a world where reality is suspended in favor of imagination? Maybe they are reported, like capitalized billings once were, as a way of creating the impression of importance...of shoring up an industry pricing structure under duress.

Whatever the explanation for the incredi-rates being reported in the 4A's study, the buyers of creative talent can always ask for a measurable explanation of the return on the investment.

There are quite a few highly competent creative talents and agencies who are compensated at a fraction of the 4A's-reported's a few ways to recognize them:

  1. they embrace discussions about campaign measurement + can show you how they've worked with their clients to create measurement at every level of campaign (not just using awareness studies!).
  2. they are able to work with value-based or milestone-driven, fixed fee billing approaches that minimize the financial risk inherent to the client in spending on any campaign.
  3. they can define 'the work' with specificity around deliverables, costs + support for business objectives.
  4. they use the word 'strategy' in the proper context of accomplishing objectives rather than as a separate creative exercise and thus expect client involvement in the creative process.
HT to Chad Ochocinco for inspiring the headline...and for delivering measurable results in the Dog Pound!