Local advertisers to increase online spending this year

In what is clearly yet another threat to the health of the traditional local media business, a new survey from Borrell Associates reveals that advertising’s shifting sands have made their way to the local level. In preliminary results (1,800 participants) from an ongoing survey of thousands of small and mid-sized businesses (SMBs) around the country, the largest number — 57% — say they plan to increase online spending this year. That number is significantly higher than any other form of media in terms of increasing ad spending. According to Gordon Borrell, “If overall local ad budgets are increasing only about 10% in 2015, the high growth in digital is coming at the expense of other media choices – notably print.” Yellow Pages, newspapers, and magazines are the hardest hit media categories, with each being targeted for spending decreases of over 20% or more.

Click to Embiggen

Click to Embiggen

The most interesting aspect of this new Borrell’s survey is that the majority of those who advertise in traditional media channels say they’re in a holding pattern on those expenditures this year.  That is, 51% to 65% of them said their print, broadcast or outdoor ad budgets would probably remain the same in 2015.  

(NOTE:  These results come from surveying active advertisers in more than 100 markets across the U.S.  If you’d like to know how YOUR local advertisers compare with these results, the Borrell survey will remain open until April 15th.  To participate in Borrell’s massive SMB survey, contact Greg Harmon at gharmon@borrellassociates.com.)

Another new essay: the collapsing mass market

Here’s the latest in my ongoing series of essays, Local Media in a Postmodern World.

The Slow but Certain Collapse of the Mass Market

Television is all agog over “programmatic,” a web advertising method where advertisers bid — the ideal being in real time — on inventory for their ads. This usually results in higher rates, and everybody wins. But programmatic on TV is really just another form of mass marketing, so I have little faith in its future unless and until TV becomes a one-to-one medium like the Web. Then, of course, it will no longer be “broadcasting.”

It’s Time To Revisit Our Mobile Strategy

Here is the latest in my series of essays, Local Media in a Postmodern World.

Time to Revisit Our Mobile Strategy

While local media companies focus their attention on the creation of apps, the way most people are accessing their content is through the open Web. We simply must pay attention to how we are being viewed and apply creative efforts to monetize that. Most TV stations use content management systems (CMS) that serve complex web pages to users who click on links they like on Facebook, Twitter, Tumblr or any other of the major mobile apps people use. This is a self-destructive strategy, for not only do our monetization efforts go unnoticed; it puts unnecessary hurdles in user paths before they can read or watch the links.

“Local” is Losing to Outsiders

cofc2Long ago, my friend Bob Papper, he of the RTDNA/Hofstra University Annual Survey on the state of local radio and television news, said something in a meeting I attended long ago that really struck home. “Television,” he said, “didn’t hurt radio by taking away their listeners; TV hurt radio by taking away their money.” He was talking, of course, about advertising and how radio “money” was shifted to TV, which had a dramatic impact on the industry. This wise observation is something we all should be considering today, as digital innovative disruptions are similarly now impacting even television.

Local television stations are currently meeting bottom line needs largely through cable fees that may not last forever. Cable is under attack from many areas, most notably the ability of customers now to go directly to the studios, the networks, and others, for example, via services like Netflix, YouTube, Vimeo and Hulu. They can get their programming through digital technology in what is called OTT (over the top), and it threatens to hurt cable by taking away its money, too. This is the sort Darwinian evolution of human advancement, where nothing seems to last forever.

But it goes way beyond that. I’m reminded of the wonderful question asked many years ago by John Hagel of the Deloitte Center for the Edge in a most interesting essay. “What if there is no equilibrium?” He was speaking of a business environment in constant flux due to disruptions that come left and right. I like Hagel’s thinking on this, and the uncertainty within the West’s entire advertising hegemony is evidence that we really don’t know what to do.

So once again, one model is being shredded by another, and the real issue is money. And we’re talking LOTS of it. Chambers of Commerce need to be very concerned about this, for the revolution in advertising impacts local communities in ways that are insidious and potentially very damaging. Advertising dollars being spent by people in your communities are leaving those communities today in record numbers, and all the signs suggest it will continue rising. According to Borrell Associates, a company that studies LOCAL dollars spent online, the lion’s share of money spent by local advertisers online today goes to outside companies, many based in Silicon Valley. Most of that is money used that to be spent with local media companies.

“Digital advertising at the local level will grow, by our estimate, 42% this year. At that rate it would account for $2 out of every $5 spent by local advertisers. It’s grown to the level of dominance that newspapers enjoyed for years, until the late 1990s.”

But those dollars are not being taken in by local companies, as they were in the late 90s. Online “pure-plays,” and Borrell notes that there are “thousands of them,” are scooping up bigger and bigger shares of local dollars.

“In 2015, these independent companies will account for nearly three-fourths of all digital advertising, elbowing out local-media competitors who have tried for two decades to use their existing sales forces to also sell digital advertising.”

These outsiders pay no taxes. They employ no local residents. They do not contribute to the local community chest. They don’t go to churches, shop at local businesses, or send their kids to local schools. They don’t buy Girl Scout cookies or contribute to any club, service organization, fundraising or charitable effort. They don’t support the local ball clubs or go to the State Fair. They are outsiders threatening the parochial nature of most communities, big or small, across America.

The reason I use the term “insidious” in describing this is because the local businesses spending their money with Google, Amazon, Facebook or whomever are actually contributing to their own downfall. It’s the ultimate shell game. Look here, move there. These businesses can’t help it, because Google works, and it’s cheap. They make everything SO easy. But what good is that ad on Facebook, if it eventually leads to a broken economy where you live? One day, we will wake up and discover that everybody has gone, because the money drain on our communities will force them elsewhere. Think I’m exaggerating?

To paraphrase Ross Perot, “That sucking sound you hear is the lifeblood of your community being drawn by vampires a thousand miles away.”

Local media companies are really at fault here. As Borrell correctly notes, they are all playing in the wrong stadium when it comes to online advertising. It is highly sophisticated, elegant, and oh so complicated. They don’t understand it, think it’s the “same game” that they’ve always played, and insist that their brands will protect them. These are all insidious lies that now threaten the status quo in Anywhere, USA.

As the people at Block say, “Wake up America! It’s time to get your billions back!”

What is a digital media company’s “inventory?”

Sorry, but I can’t resist.

In a press release this morning from IB (Internet Broadcasting Systems Inc.) announcing a new deal with the Journal Broadcast Group, IB CEO Elmer Baldwin said, among other things:

“We’re helping them to discover new ways to monetize their growing digital inventory.”

This statement represents the group delusion under which legacy media companies operate, that an advertising “slot” on a website is inventory to be sold. The problem is that media companies don’t sell “inventory,” per se; they sell audiences, or more specifically, the eyeballs that might view that “inventory.” Many will accuse me of playing semantics, but it’s actually much more basic to business. The price for which this inventory is sold is based on CPM or “cost per thousand.” Thousand what? Thousand pairs of eyeballs. If, for example, the price the advertiser pays is “$10 per thousand,” then the media company gets 10-bucks when a thousand people view that ad as demonstrated by its logs. But the CPM model was created in the mass marketing days and works well when we’re dealing with significant numbers of eyeballs AT THE SAME TIME! It is a terribly inefficient and ineffective formula when applied to what is really a one-to-one environment as opposed to one-to-many.

I have stated ad nauseum that the only winner in these kinds of scenarios is the software serving the ads, because it captures and uses all of the data gathered while serving the ads. Eyeballs in the network increase in value in direct proportion to the data that’s attached to them. And so media companies play this “digital inventory” game as though it was the same game they play with their legacy properties. It’s understandable, of course, but that doesn’t change the reality.

Moreover, what this deal is primarily about is banner advertising. That’s the “inventory” — availabilities or “open slots” for banner ads on a media company website. The format has been dying for years, but if you’re a media company, it’s what you have, and so you make deals like the above and hope for the best. In addition, there’s the assumption that this “inventory” is growing, and that’s an important concept for mass marketers. We’ve never met a number that we didn’t think we could manage our way into making bigger. This is what leads media thinkers to ignore the invasive user experience in favor of tactics that produce more of that “inventory,” tactics like splitting web documents into multiple documents that challenge even the most patient consumer. The user experience MUST be number one, or the eyeballs that we think we can count on will go elsewhere.

The Web is NOT a mass marketing tool, despite what certain “experts” would lead us to believe. It certainly can mimic the properties of mass media, but the truths of everything important to business models lie hidden within the code that makes up the back end of what we offer. Silicon Valley knows this and is happy to play along with the “digital inventory” game, while picking our pockets at every opportunity.

IAB “Guidelines” Serve, well, the IAB

And behold, NYU professor & guru Clay Shirky pronounced that “Institutions will always try to preserve the problem to which they are the solution.” In that spirit, let us take a brief glimpse at the IAB’s new guidelines for <drumroll>Native Advertising</drumroll>. Native advertising  - a.k.a. “content marketing” — is an advertising disruptor. It is so, because its essential purpose is to, um, replace advertising by delivering content, real content that was paid for by somebody, presumably someone featured in the content. The IAB is the Internet Advertising Bureau, as in its middle name is spelled a-d-v-e-r-t-i-s-i-n-g.” They offer six guidelines, only one of them remotely content-related. The rest are, of course, advertising in a different suit.

The IAB laid out six core interactive ad formats that are currently being used within the native advertising landscape:

  • In-feed units
  • Paid search units
  • Recommendation widgets
  • Promoted listings
  • IAB standard ads with “native” element units
  • Custom

I won’t go into details about these. I simply wish to point out that only “In-feed units” smacks of content, but please, must we call them “units?” To qualify as content marketing, which is what “native advertising is,” it must present content, not an ad. But in order to really produce a useful set of guidelines, the IAB would have to sell against itself, which it’s not about to do. And so we get things like guideline number 5: IAB standard ads with “native” element units. Right. In other words, define it any way you wish, just as long as “IAB standard ads” are included. I just thought I’d point that out.