Dianne Mermigas is one of the smartest, most pragmatic media columnists I’ve ever read. She never resorts to hyperbole. So it gets your attention when she predicts that “advertisers will spend even less than the worst-case decline forecast” for 2009. She continues:
“Major advertisers such as automotive, financial services, retail and real estate will not return any time soon; they will be diminished and different when they rebound a year from now. That is a disaster for local media, which could easily see more than half their ad revenue base wiped out in 2009.”
Half?!! And there’s this:
“Many individual and group TV and newspaper properties will collapse under the weight of an advertising recession and legacy costs. Their online and other digital revenues will fail to offset double-digit ad losses. Loan covenants and debt payments will be missed. Some will shut down; a few will sell off in a dismal deal market.”
Yikes. 2009 is not cyclical, folks. It’s game-changing.
No related posts.
Verily FUBAR. Assume 50% of all local and a slug of national media properties go down in 2009, how will advertisers advertise? The scale economics of broadcast TV and newspapers don’t work at 1/2 steam. So they won’t come back in a reinvented form. Local internet may get bigger but no where near big enough to fill the need. How will advertisers advertise?
How is local Internet not big enough to fill the need?
A sincere question, not rhetorical.
The current model for local TV surely doesn’t work at 50% revenue, but that doesn’t mean that something similar can’t work at that level.
Big time anchor salaries will have to come down, sales commissions will take a hit, and equipment vendors won’t enjoy huge margins anymore. It isn’t hard to look through the budget of a TV station and find numerous examples of gross inefficiency when compared to other industries.
2009 will be the year that the industry is finally forced to go on a serious diet. Some stations will undoubtedly go out of business, but the ones that survive will come out of it stronger.
Tracy,
There is a kind of hubris at work regarding the “Power of the internet” among the web cognoscenti. It’s naturally assumed that the web will fill all needs, serve all purposes and become the singular medium of choice. I understand this, as you do. We both know this is not true. But it reflects a highly insular kind of thinking. The audience for news and information will go where it get what it wants and for many people advertising IS news (witness the continued success of Sunday newspapers). A certain demographic segment will never spend much time on the internet, won’t use a wireless web browser, won’t look at a Twitter feed, won’t buy things online. This is in transition certainly and those that do these things are growing in number but the audience while growing is also being fractured. Advertising success given current business models is still based on amassing a large enough audience and then offering ‘EFFECTIVE’ advertising to merchants.
The “Serendipity Model” of advertising, still extant, relies on success through association ie; your ad appears adjacent to content that is hopefully compelling. Search based advertising changed the game but relies on people knowing what they need and want.
Open a drugstore preprint in the Sunday paper sometime and tell me how the internet will do what that does. It just won’t ever be very good at showing people that Kleenex is on sale. The advertising structures in place on the vast majority of web sites are not terribly compelling, hence their relatively low value to the advertiser. They are worth at this time about 10% what a print ad is worth. This is precisely why newspapers are not selling (or more accurately making) money from the internet at anywhere near what they make in print.
This is prompting the growth of other advertising models like Cost Per Action and Cost Per Transaction and Cost Per Lead… but local news sites are not likely to be able to leverage these models because they depend on highly vertical subject matter such as real estate or automobiles such as Cars.com.
There is a natural limiting factor to most websites in terms of simple display advertising. The more you have, the less effective each ad becomes. Rotations complicate this further. Ads on blogs often appear adjacent to no content at all…and since tiny ads have little content they carry only a branding message and don’t drive much commerce.
So…to finally answer your question..How is local internet not big enough to fill the need? The natural limiting factors of not enough people, money, resources, and skills are very unlikely to replace the reach, and power of local television. The audience is not going to visit 10 websites, scroll through them, watch cell phone videos, and reports from housewives when they can get something better at an even lower cost. Internet connections cost real money. TV is free for anyone with an antenna.
A sincere answer, not rhetorical.
I think the real point is that advertising’s effectiveness has gone unchallenged and unmeasured for far too long. The disparity between value and cost is the great challenge for the direct response advertiser. No one can gain greater value from the audience provided by the local newspaper. But, until they are willing to adjust rates and add additional new media options at a substantially lower cost or provide ROI to their customers they will continue to see the slump and dropoff of their customer base.
2009 will be a very interesting year indeed.
Maybe our Doppler 8000 can be traded in for a Doppler 4000?
i heard a couple of denver channels are sharing a copter.
Rick,
I agree with you.
What makes people respond to an ad? It varies and can be somewhat complex to answer that question. But it’s a virtual certainty that tiny branding only ads on websites will lose their value to the advertiser over time and be dropped.
The IAB standards now in place are there largely to get placement from the large aggregators… but those agencies are only paying pennies on the dollar for advertisers. This is why you are seeing the level of experimentation being done by a number of media sites. The Flash (or AJAX) driven expand-o-matic ads, the double ads that interact, the banner ads that drop down…none of these are standard.
Advertising effectiveness is easier to calculate on the web on insofar as we can track the click throughs (excluding the pay per transaction market for now). A lot of it will remain ‘Blue Sky’ in nature simply because connecting buyers and sellers through advertising can be nearly impossible to accurately track across all segments. Anecdotal evidence is going to play a part for some time to come.
“i heard a couple of denver channels are sharing a copter.”
Is that because the CW never had one and is now combined with the Fox?
nope, one was an abc affiliate, the other was 9 on the dial.
but the story done disappeared already or i would provide you a linky-do.
I’ve told many friends (read: girls at bars) over the years that I’m working on a my great American novel. Maybe it’s time to actually do it, sell a million copies and then this discussion becomes irrelevant.
Let’s all resolve in the new year to start that one creative project we’ve all been talking about but doing nothing about. I’m not alone, am I?
There was a copter-sharing agreement in Portland — they even painted the two sides with different branding. Copters aren’t really used much here anymore, though. If there’s a real need for one, we’ll rent one.
The car lots who ordinarily advertise are still advertising on my tee-vee and I’m still seeing lots of furniture ads from the usual suspects.
Personally, I think all of this hyperbole about a perceived downturn may have an effect and there are some markets and economic segments more affected than others, but I blelieve all of the doom and gloom permeating the media is a bit premature and we still don’t know the power of “hope” and what that’ll do, when it starts toward the end of the month.
I agree with “discreet chaos” .. this is premature and the doom and gloom doesn’t help anyone. That said, the “game is changing” is mentioned in post. Maybe 2009 will be the pivotal year … but I think it will be many years until we actually see exactly how the new game will work monetarily.
Aaron, you must be a professor teaching theory or a regular subscriber to the Sunday Times.
The truth of the matter is people have been arguing for a long time how the advertising dollar will be spent. It’s not as if this is a new phenomenon. Yes advertising will be more diversified, and will get less expensive, as it should be. Will the advertising dry up? I don’t think so. Will the advertiser go after cheaper venues? Sure.
Terrestrial radio, it seems, has survived the satellite phenomenon. So Who’s battling for the advertising dollar now? Well, the two blue chips – radio and TV – will forever battle even though they don’t attract the same audience. And Online and print. In my opinion. Online will win over print within the next 5 years (the gen x’ers and y’ers are getting more of their info online, it should’ve happened by now for sure), Online and TV will become (and has already started a convergence) co-partners. So who’s the winner? It seems to me online, web-advertising, is the wisest way to spend money. But, the question remains, how much to spend and where to spend it?
PS, advertisers will love the online experience because it is so much easier to track. I’ve always thought Arbitron was full of, you-know-what.
Thanks for the detailed context.
Seems it’s going to be up to all of us out here in online-land, big and small, marketers and content-site operators, then, to keep helping the evolution along – because (to state the obvious) there’s no going back. It’s not just Gen X and Gen Y – I know a slew of my fellow boomers (and no, not people traveling in geeky elite early-adopter circles, either) who haven’t picked up a newspaper in months. If I want to see what’s on sale at the supermarket, I look it up online – right now that’s a clunky option because instead of presenting the prices/items in a searchable format, they just load the newspaper page online with a mouseover feature. But it’s a start.
I do not feel sorry one bit.
I tilted at wind mills at my last company Evening Post Publishing for nearly 2 years.
I wrote a report one time about the newsroom at the largest paper in the group after I spent a week observing all the work that went on the place. Coming in at 5 a.m., watching everyone report, asking tons of questions (which my boss told me not to do), attending every meeting (in which I was not introduced once) and gathering all kinds of information about workflow and attitudes.
My report suggested many changes and made quite obvious observations — there was nothing in the report that anyone who works in the web would think was radical. It was as politely written as one could make it.
Yet it was never to be shared with the newsroom or with any newsroom leadership because — get this — it was deemed “too true” by the Internet Director and the head of the digital division of the company.
I don’t blame the Internet Director — he’s a good guy. But, I do blame my boss for not having a back bone to at least share the report with adults who need to know how to change their company to survive. These people are ADULTS! One of them — the biggest problem in the newsroom — has a grenade and large knife on his desk. This guy should be able to take some observations.
To not share it because it might be “too true” and hurt some feelings is simply incredible. Oh, and if anyone wants to see the said report I will be glad to email it to you. rodneyoverton (at) yahoo dot com
Both TV and newspapers need to use this downturn to make changes.
In this chaos they can NOW hurt some feelings. Think about that: They can NOW choose to do things that are different and make significant course changes under the cover of a crazy and wild economy!
However, all I see are places that continually lay off people and — particularly in newspapers — shift legacy media folks to the web (in the name of change.)
Simply moving the same print (and to a degree TV) folks who got you where you are to an online position is not going to help. More of the same is not more good.
TV is not doing much better. All the places I have had contact are not hiring — at ALL. Even when people leave, they just dont fill jobs…
I sometimes end my posts with “sad” but in this case I will just say that these people have the power to make changes but they won’t. It has taken a new tact to be completely passive. Sad doesnt even describe how these people are not caring….
Indifference is where they are headed. (or may already be)
The fact is and will remain for the forseeable future that different media do different things. There are things that print does that online can’t do and will likely never do. Just as there are things that radio does that print won’t do and round and round we go.
It’s also true that if you actually ask people if they LIKE the newspaper they invariably say (those that do) that they WANT SOMETHING TACTILE and they would sorely miss it if it was gone. There’s nothing unique about people using websites to do reporting whether they are blogs or television websites or what have you. The ONLY difference really is the level of dedication (read content) that is made available. Design, layout, and the rest don’t matter that much really.
As I have said, people will go where they get what they want. If that is supplied by a newspaper or it’s website that is where they will go. If it’s a radio station then the audience will converge there.
But I want all of you reading this to keep something in mind. This focus on Blogs, local TV stations, newspapers and other radio is all temporary. It’s all going to change… It’s the MANAGEMENT of change that really matters and being able to create and sustain a flexible enough and DEEP enough structure to make it work that we should be discussing. We are in a highly challenging time when local ad revenues (the focus of this thread) are going to be sought after ever more fiercely since there will be less to go around. The outlets that will win are those that can offer the best combination of reach, effectiveness, and cost …as always.
I see about as many car ads as before. The goofy ones are gone and talk of being able to get financing, big discounting on ‘08 stock and concentration on higher mileage cars and the basic truck lines have led me to believe that the car makers and dealers have forced closer bonds than before, even as talk of massive numbers of dealer closures looms on the news.
Truck sales did not go in the toilet–it was the stupid SUVs! Those who need real trucks don’t schedule around recessions, they buy what they need.
If anything, this bout of troubles weeded out a bunch of wannabe models that were underperforming, gutless wonders that may have been more expensive than just buying a small truck and adding a shell.
Suzuki is the main culprit, Kia/Hyundai another. Suzuki’s cars make me seriously wonder if I would buy a new motorcycle from them anymore…I would be inclined to get a Honda or Yamaha, used at that.
No, the days of John Minegar in a Batman costume selling Mazdas are probably in a coma.
Most of this discussion is based on ads. Types, method, effectiveness, ….
Ads are the revenue but in all cases they are tag along with content. My wife likes to say that food is just a vehicle for the sauce. Content is the vehicle for the ads.
If the content isn’t being consumed the ads aren’t being delivered, regardless of the media used.
If the person we want to consume the ad isn’t picking up the paper or turning on the TV effectiveness of ads in that media doesn’t much matter.
To Aaron’s points above, there are people that like different media and will stick with it. But I believe we can all agree that the numbers show adoption rates of the well known media is declining. Arguing about how it is better doesn’t much matter if the people are leaving.
I suggest looking at why the people are leaving and working on that part of the business model problem.
No food, no sauce.
The fact is online ads have a very low cpm.
There is no trend driving the rates up.
Hard facts.
I think we’ve crossed a line and will never return. Performance-based-advertising will become the standard.
While it’s nice that a newspaper’s circulation or a radio station’s cume or a TV station’s ratings give agencies an illusion of reach, advertisers no see that the kings have no clothes. Who cares if our station meets the agency’s CPP on a buy. If no one buys the product, it doesn’t matter what the metrics are.
What Google has done through AdWords is to change the advertising model. Food and sauce notwithstanding, in the end it will be about results.
We are headed for a PI/DR world (not that the creative will mimic the worst of that genre) where advertisers will pay and expect and demand a minimum level of payback. There are few industries that can get away with selling hope and not being held accountable for the results.
The internet is giving us a chance to open online malls in which we, as broadcasters, create stores for our viewers to visit and shop. Our airtime will be better used in driving our viewers to our malls where our sponsors (partners) will offer goods and services. Our stations are going to have a dozen malls. Malls based on geographic areas, on products, on demographic interests, etc. We’ll rent space in our online mall to advertisers. Viewers will purchase products and services and our mall will automatically email viewers redeemable certificates which they can take to the local business and exchange for whatever they purchased.
We’ve been doing a lite version of this for years. Now we’re jumping in with both feet.
If advertisers want to buy points…great, we’ll be happy to sell them. If advertisers want to buy results…great, we’ll be happy to provide them.
The internet is our best friend. But it may not generate revenue for us through the sale of banners, pre-rolls or other traditional forms of advertising that have been ported over to the web.
The advertising model is what is really broken. Broadcasters are collateral damage.
ИнтереÑненько, но многовато флуда, а в целом норм.