Borrell: Strong to get stronger, weak will disappear

We’re hearing a lot of prognosticating about what will or might occur next year. Experts at the UBS’ annual “Media Week” conference in New York this week, for example, are thinking that 2009 will still be a growth year online, despite the recession. Joe Mandese wrote for Online Media Daily that online is seen as a shelter from the storm.

…online advertising growth is slowing down, but it still is poised to grow at rates that would be considered healthy by any other established medium, even in good times. And during the kind of advertising recession that the analysts now say we are heading into, online actually looks like a pretty safe haven.

…Bob Coen, senior vice president-director of industry forecasting at Interpublic’s Magna unit, and the dean of Madison Avenue economists…has consistently been the most bearish for online media, but he nonetheless predicted it would grow 5% in the U.S. in 2009.

As other forms of advertising shrink, online will dramatically increase in the share of overall advertising and will account for 16.1 percent of all advertising by 2011. Coen predicts online will rise more than twice the rate of the next fastest growing media during the recession of 2009.

projections according to Bob Coen

Meanwhile, the situation is a little different with local online advertising, where Gordon Borrell wrote in an email exchange with AR&D that “flat is the new up.”

Gordon Borrell“Online advertising will be the civil war battleground,” Borrell wrote, “where everybody tries to burn each other’s towns. We’ve already seen budgets and strategic plans for dozens of companies for 2009, and they appear to pretty much look the same: Ratchet up online sales by targeting our competitors. TV stations are going after newspaper classifieds, newspapers are going after Yellow Pages advertisers, and the radio guys are pretty much using the Web to go after everybody.”

Media companies continue to see each other as “the competition,” when we need to be looking at outside pureplay companies. The name of the game today is “enabling commerce” at the local level, and copying what others in traditional media have always done, sadly, doesn’t address that mission.

The economy is on Borrell’s mind, as it is with most others, and his view of 2009 for local media companies as a whole reflects this week’s news of bankruptcies and layoffs throughout the industries of newspapers and television.

“I think you’ll see a natural thinning of the weaker companies that made bad decisions in the past decade,” he wrote, “like investing in brand-new printing presses or expanding newsrooms and newscasts into weak audience segments.

“There’s likely to be a spate of bankruptcies and shut-downs, though the bankruptcies will be few and the shut-downs will affect only the weakest performers — a few large, second-place newspapers and quite few small fringe ones; a lot of niche-audience radio stations; the weakest TV stations that will be forced to either shut down or abandon local news programming.”

He’s also predicting consolidation among phone directories, with some big books disappearing along with a lot of little community directories.

“I’m actually more bullish on TV and newspapers, and I have history on my side,” he added “These are strong products with unique attributes that, if invented today, would be all the rage. You don’t have to plug in or recharge or wait for a newspaper to power up, it’s less than a pound, and when they say ‘please turn off all your electronic devices,’ you can keep reading. And if you’ve absolutely got to move inventory this weekend, what other medium can deliver the news about this weekend’s big liquidation sale to 80% of the market’s households?”

“Unfortunately,” he continued. “most legacy media have been oversold over the years, so we’re seeing a natural adjustment. A lot of what we’re seeing in newspaper downturn today is due to the economic cycle. Newspapers have hit their nadir. Yellow Pages and Direct Mail have only just begun their nosedive. Local broadcast TV’s losses will come mainly in the form of the weaker ones disappearing, leaving the bigger stations in an even stronger position.”

Borrell told of an ad he’d seen for a company urging its customers to “Don’t think. Know” adding that it’s a great theme for these troubling times. “don’t think about what’s going on in your local market.” he added. “Know. Companies that make informed decisions are far more likely to come out on top than those that just react. It’s a great time to be smart.”

The conundrum for local media companies is how to define “smart” in a time of extreme bottom-line pressure, because the need to serve the future is overwhelmed by the need to stay afloat. This is a very tough decision in a season of bailouts and bankruptcies.

(Originally published in AR&D’s Media 2.0 Intel newsletter)

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