Advertising, not content, is our business

it's all about commerceOne of the themes often expressed here is that media companies are not in the content or information business; we’re in the advertising business. This rankles media company executives who often respond, “You’re not going to get very far with that around here, Terry.” I appreciate that and realize it’s not popular, but it is, however, the truth. That which generates revenue for media is advertising, not content, and efforts to reform media without this fundamental understanding will go nowhere. When observers shout the need for a new business model, what they’re really referencing is a different way to do advertising, because that is the business of media.

Newspapers may not have invented advertising, but they played an enormous role in its development over the years. The local papers were the source of knowledge and information about commerce-related matters, and the Sunday paper remains popular, in part, because it contains the sales inserts. Radio and television followed, and their business models are likewise advertising-based.

So the issue to me isn’t so much one of reinventing ways to provide content — or the essence of that content itself — as much as it is getting in sync with what’s happening in the world of advertising, for that is our real business. Even if media companies innovated new types of tantalizing and compelling content, the business model of putting advertising adjacent to that content remains disrupted and evolved. It will produce the same results of all the other content models, because it isn’t the disruption to content that’s the real business problem for media. It’s what’s happening in the world of advertising that matters.

And specifically what’s changing is advertising models based on reach and frequency alone, the very ad models that media companies use.

Ben BolesIn our newsletter this week, auto industry outlier Ben Boles wrote a guest item that most likely missed. Titled “National guys are after your local car dealers – it’s worse than you think,” it contained this gem for local media. Remember as you read this that automotive is the largest ad category for media.

Auto dealers have numerous sources that sell “leads.”  They range in price anywhere from $9 to $75 per lead.  Armed with this information, what is your incremental pitch of $3000/month going to yield?  Using the $75/lead model, you are effectively saying you are going to provide an additional 40 leads per month to the auto dealer.  Presuming the car dealership can close 10% of those leads, that means the incremental increase of $3000 they gave to you… is going to generate 4 sales.  At $2000 per car (After commissions, selling the loan, after market accessories and dealer holdbacks) that means you generated $8000 in additional income.  With your $3000 incremental bill, you netted the car dealership $5000 profit.  Did you follow that math?

Now the $64 question.  Can you, off of television advertising, positively identify which 40 leads you provided? The answer is NO if you sold them television.  If you sell them web advertising, your chances of identifying your 40 leads increase dramatically thru custom analytical tags.  And of course, through selling them banners and placement on your website, you are building link juice too, and that’s where the real value of your media company domain is.  Only savvy car dealers are going to know this, though.  So, your real goal is to educate.

So here you have a brilliant thinker in the auto industry saying that mass media sales efforts need to shift from selling “Cost Per Thousand (CPMs) or Gross Rating Points (GRPs) to selling leads, because that’s what’s being sold by powerful outsiders after the same money that we’ve taken for granted in selling reach and frequency. This is what we mean by suggesting that media companies recognize that they’re in the advertising business, because this is what demands our attention, not the content that we create. We can and do sell cars, and if we believe that, then we’ve got to find ways to state it to potential customers (advertisers).

And this is just one example. If we were to fully immerse ourselves in the reality that our “business” is advertising, we’d stand a better chance of overcoming revenue declines than if we experiment with new content concepts that emphasize the old advertising models.

If newspapers are dead, it’s because the methods of making money have changed while we haven’t. Advertising is the disruption that demands our attention. Selling leads to car dealers is a great example of how a simple shift in thinking about the real business of media can make a big difference in arming our account executives with something new to sell.

Comments

  1. So who is in the content business?

  2. I agree with you here, but think it is a bit more about semantics in this example.
    Content is advertising and advertising is content when used that way.
    I get what you are saying though.

    Would love your thoughts on the impact social media has on social activity outside of the digital medium.

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