Big J Institutions Ignore the Digital Truth

January 2019 was another tough month for media companies struggling with ongoing revenue declines. Layoffs came in bunches as Gannett, Buzzfeed, Verizon, The Huffington Post, and others tried to balance the books against losses on the inbound side of the ledger. The problem, however, isn’t those always‐evil “market forces;” it’s now and always has been an inability to correctly read the declines and respond accordingly. To use a very old illustration, if the railroads had known they were in the transportation business, they would’ve owned the airlines. But, no; they assumed they were in the railroad business, which allowed the disruptors in. Same with media: they’re not in the news business; they’re in the advertising business.

The digital advertising market is far bigger than local media companies understand, and this remains the top obstacle in all efforts to “save” local media (and “media” in general). The most baffling element of this is how these companies refuse to even compete for all the dollars locally, choosing instead to compete only for dollars already spent on their models. As a result, the local digital media market is only 15 percent of what’s available totally. And, the saddest part of all of the indictments of media managers is that the market is growing while the traditional forms of advertising are shrinking, so you’d think these corporate managers would want a different business model. They don’t.

Nobody knows this better than Gordon Borrell, the man who provides the measurements for how well or bad these companies are doing. Borrell provides details sliced many ways, but perhaps the most revealing is his recent data on what he now calls the “addressable” digital market. This is a percentage of the total digital advertising market that believe the local media company sales pitches and spend money with these companies. This figure is the share of the market that media companies serve, and it has been shrinking for as long as I’ve known Gordon. What media companies don’t seem to understand is that their model is inefficient, because it’s based on the archaic marketing rules (reach/frequency) governing mass marketing. Meanwhile, digital pure play companies (those who exist to provide targeted ads to individual browsers based on those browsers’ history) get 85 percent of the total market.

In a webinar last month, Borrell provided data about this “addressable” market, and while it remains a big number, it’s nowhere near the overall marketplace. Here’s a snapshot of that (provided to us by Borrell), and it shows the futility of chasing only those dollars spent with a mass marketing model.

Data provided by Borrell Associates

This graph reveals that all of these media companies today are competing for only 15 percent of the total market. In Texas, they call this “dumber than a bucket of hair,” but Borrell is much more circumspect, calling this obvious failure a product of the environment in which local media companies operate. That’s fine, but shallow industry thinking is never created by “the devil made me do it;” it’s a question of knowledge, tools, and the intelligence on how to proceed.

Many years ago — before I went to work for AR&D in 2006 — I was invited to make a presentation to a media group in Tampa. Sweeping changes were just beginning to impact their business, and they wanted a summary of those changes, so they could figure out what to do. At the end of my session, I was asked a question that completely altered my focus on “the problem” they faced. “This is all great, Terry,” the top dog said, “but where’s the money?” I didn’t have a very good answer for them, so I spent the next 10 years studying the question. The conclusion I reached early on was that if these companies continued to proceed with only mass marketing as their model, they would soon fade from relevance altogether.

So, to me, the issue wasn’t about content, because while media content was certainly being disrupted, the blow to their business model was the only one that really mattered. Nobody listened, in part because these companies are run by mostly older men, who seek first to help themselves and their families in a comfortable retirement. Rocking the boat isn’t conducive to that end, and this is another part of Gordon’s “environment” that contributes to making foolish decisions at the top.

On another occasion, I was making a presentation to the top managers of an east coast media company. Among the strategies I recommended was to get into the local search business. The owner of the privately‐held company was present, and he asked me, “You really want me to compete against Google?” I said, “Of course. Google is competing against you.” The company tried a couple of things I recommended, but their need to move every innovation into their mass media business model proved me right.

I simply couldn’t convince anybody that targeting individual browsers in the community was the Holy Grail of digital advertising and abdicating this to the pure plays was corporate malfeasance. At core, the problem begins with executives believing they’re in the news business. They’re not. They’re in the advertising business, and that’s where their focus should be.

And, here’s the most chilling aspect of this: local media companies are unable to see the impact the disruption to advertising is having on the local communities they serve. Here’s another image from Borrell’s addressable market presentation:

85% of digital advertising money that originates in the community goes to pure play internet companies. That money leaves the market forever. These companies pay no local taxes, employ no local people, contribute to nobody’s community chest, and are a net drain on the economic well‐being of the community. This money drain is staggering compared to what local media companies are getting, and it shows no sign of a reversal any time soon.

Finally, I had a telephone conversation once with a guy from an ad exchange about the possibility of partnering with local media companies. In what was an embarrassing reality, this sales executive told me, “We don’t need to partner with anybody, Terry, because we already have access to 100% of the browsers in any market anyway.” 

You can ask Borrell about all of this for yourselves at his annual Local Online Advertising Conference March 11–12 in New York.

If I owned a local business, I certainly would want my money to go where it’s the most efficient and effective for growth, and all the evidence loudly screams that targeting local browsers is the way to go. The sales pitch of the account exec representing my favorite TV station seems shallow and archaic in comparison. There are no secrets that media salespeople can manipulate to their advantage anymore, and maybe that’s the real problem.

Regardless, managers who wince as if I’m calling their baby “ugly” have only themselves to blame, because the things I preached back then have certainly all come to pass. It ain’t rocket science, folks, and here’s a final prophecy for consideration. Either local media companies band together to attack the problem at the local level, or there will only be room for one “winner” in each market in the not‐so‐distant future.

Leading With Bleeding

I worked in several hyphenated markets during my 28‐years as a TV news manager and also in markets with more than one population center. This produces a phenomenon that I referenced in my essay 20‐years ago, The Lizard on America’s Shoulder. The problem is this: when newsrooms cover numerous population centers, their newscasts provide a false sense of danger, because every story seems to be bad news, especially in what we call “the A‐block,” the opening segment of news. To my knowledge, there’s never been a study of this phenomenon, but I think we’d find that the practice produces a frightened populace.

Let’s face it: bad news is easy to cover. It’s exciting and works well with the hyperbole demanded by marketing, whether it’s within the newscast itself or in promotional announcements for the newscast. The old saying is “if it bleeds, it leads,” but in contemporary newscasts, it often goes beyond just the lead, and that makes people nervous (like the Lizard of C.S. Lewis’s Great Divorce).

What we really ought to talk about, however, is what’s happening with social media, for this nervousness created by constant exposure to the darkness of life is much worse on Facebook than any broadcast newscast. Firstly, we now have the news‐gathering process made public, including everything from the original dispatch of police on through the many iterations that exist prior to the story’s finished product (the newscast). Newspapers are in on this, too. Secondly, we have friends who are passing along links that they think might interest you, and very often these represent that same darkness. Then there are click‐baiters, those God‐awful sites that take an old story — and some are very old — and break every paragraph into a page, leaving the payoff to the hype until the very end. Blend in rampant politics offered by both amateurs and professionals, and there’s little wonder we’re all agitated and at each other’s throats.

Folks, this has a psychological impact, and it’s probably my top reason for not watching local news anymore.

The truth of the matter is that nobody is going to do anything about what we see, read, and watch, because “the media” still functions within a theatrical paradigm and not as invited guests to our individual parties. The web is not a mechanism that really caters to mass marketing, but it’s all that people in media management know, so we’ll just have to put up with it for awhile longer. Everything will eventually shift to pull, and those who only know push are going to find themselves on the outside looking in.

And, if they’re not going to do anything about the mass anxiety they create, then we’ll have to do something about that ourselves. Take note of what you consume and act accordingly.

“As a man thinketh in his heart, so is he.”

Push. Dig. Push. Dig.

AP Photo

Sometimes, events in media are so bizarre that all you can do is just laugh.

The Walter Cronkite School of Journalism and Mass Communication at Arizona State University (a great school) has been given a $1.9 million grant from the Knight Foundation “that will provide funding over three years to fund initiatives aimed at ensuring TV news companies remain competitive in broadcast and digital storytelling.” The AP says the money will be used to “research the future of television news.”

Okay.

The story reports that part of the grant will be used to develop “an online hub where newsrooms can see the latest strategies their counterparts elsewhere are trying out.”

“The best way I can describe it is I think it’s going to be a resource where someone can come to this site from anywhere and get a sense of what new ideas are floating around in space, what works and what doesn’t,” said Cronkite Associate Dean Mark Lodato.

The school also plans to become a testing ground for improved local news content and dissemination.

“In an academic space like ASU, you can fail and understand the progress. It’s very hard to do that in a corporate environment when corporate dollars and people’s jobs are at risk,” Lodato said.

This reminds me of the failed “Newspaper Next” project by the American Press Institute over 10 years ago. One thing we learned back then is that it’s pure foolishness to ask the people digging the hole you’re in to come up with a solution to the hole. It’s impossible. They can’t stop digging, and that means every solution involves some form of digging. Dig. Dig. Dig. The money will be used to make sure that TV remains competitive in “broadcast and digital storytelling,” as if that’s a problem. Dig. Dig. Dig. Moreover, the hole doesn’t have anything to do with content in the first place; it’s about paradigm shifts in advertising, so why not study that? Our world today is all about pull strategies, because the devices we’re using to consume content these days are too personal to willingly permit pushing. Again, you can’t ask people pushing to come up with something different, because all they know is push. Push. Dig. Push. Dig. You get the idea.

And, I love how Dean Lodato has already pronounced failure. No need to say it after‐the‐fact if you admit it up front. Moreover, there’s no more competitive business in all the world than local television news, and if you think stations will drop their pants and reveal their “new ideas,” you’re effing nuts. Besides, that’s what consultants do, right? No, I’m not talking about dropping pants.

Maybe it’s just that I’ve become a total cynic when it comes to this stuff, but I view this as a colossal waste of time, attention, and resources. Besides, the industry doesn’t care. They’re far too busy licking their chops over the $8 billion that’s projected to be spent with them during this year’s mid‐term elections. Most of that will likely go straight to the bottom line regardless of whether the fundamentals justify the candidate spending. Therefore, from a corporate perspective — is there really any other that matters? — there’s no problem.

And so it goes.

Media mergers and hanging on

I need to step away from book promotion for a minute to make a comment the current state of local media. First, there’s the merger/sale this week between Sinclair Media and Tribune Media that will give Sinclair over 200 local stations in the American TV world. In that world (mass marketing/mass media), the bigger the footprint, the greater the profit, for the core competency of media companies is the ability to produce an audience for marketers. Secondly, an interesting article today in the Columbia Journalism Review about the fiscal health of Gannett and its future headlines this way: “Gannett and the last great local hope.”

Sinclair and Gannett will take their places in the halls of commerce as the last buggy whip makers for the mass media industries of television and newspapers, and while there’s certainly nothing wrong with this, there’s a much bigger problem ahead for local communities, and that is the loss of local advertising. I’ve been harping on this for so many years that I’ve grown weary of the sound of my own voice, and while the prophecies of 15 years ago are now coming to pass, the industry still doesn’t understand what’s really taking place.

The old saw about business disruptions goes like this: “If the railroads had known what business they were really in, they would have owned all the early airline companies.” The railroads were in the transportation business, not “the railroad business,” and that was their Waterloo. In like manner, media companies are in the advertising industry, not the radio, television, or newspaper industries. Follow the disruptions in advertising, and you’ll see the downfalls in local media.

But it’s even worse than you think, for the ascending advertising giants are all digital ad exchanges and ad networks. They have the ability to serve ads to any and every browser anywhere and at any time, so the collection of data about those individual browsers (you don’t need a person’s name) has been the task of anyone wishing to remain relevant in the ad space. Local media companies have simply turned away from this most important task (“It’s not our business model.”).

One of the most significant obstacles that the net overcomes is geography, and so local advertisers — who used to spend their money with all sorts of local media companies — are now spending that money outside their markets with people who can do this browser‐level targeting.

Gordon Borrell

Ask Gordon Borrell about how much money — real money — is moving from businesses in your community to advertising companies outside your market. You’ll be shocked, or you won’t believe it. These outside interests pay no taxes, support no community chests, employ no local people, and support no local organizations such as youth sports and so on. The money goes straight out of your community and into their pockets. It doesn’t pass go. It doesn’t collect $200. It just strips your community of a vital part of what makes it a community in the first place.

And yet, there is silence where there ought to be cries for help, because local media companies have badly failed the communities they used to serve by assuming that one can remain an analog mass marketing vehicle in the age of digital competition — not for the content they create (which is all we talk about) — but for the money that supports the production and creation of that content.

And so Sinclair grows and Gannett hangs on, both victims of their own corporate malfeasance. One thing they will never be able to say is that they weren’t warned.

You may now return to your regularly scheduled programming.

A birthday message for media

Today is my 70th birthday, and while I should be using the occasion to kick back and relax, I’m writing a birthday message to my old media pals.

Screen Shot 2016-07-09 at 7.20.37 AM

The above image is my Google home page for the day. It’s a birthday greeting from Google served only to me and, I suppose, all the other people who have a Google account and were born on this day. The reason this is significant to media companies is it reveals the anachronistic, archaic nature of online mass marketing, which remains the only model that media companies know. They still sell their online “inventory” as if it had value against the purchase of advertising on individual browser screens. It doesn’t. Google not only recognizes my browser as me, but they can follow me virtually anywhere I go on the network. The giant ad exchanges can serve individualized ads to me directly; they don’t need Wanamaker’s “hope” to reach me in a crowd.

The question then becomes, why does an advertiser need your online mass if it can cull out only those it wishes to reach? The advertiser doesn’t, unless you happen to be a part of the ad exchange or network the advertiser is using. Geography is a simple matter when you have access to every browser anywhere. That is what media companies are up against. Media sites, mobile or otherwise, are just dots on somebody else’s detailed map, and it gets worse every single day. The extent to which media companies fight this is truly astonishing, because nothing they can do or offer can slow it down.

Meanwhile, as each day ticks by, another local advertiser wakes up to the realization that this can be done, and the value of your online mass sinks deeper into the abyss. The money drain from your community is far beyond what you realize, and so you’re doubly screwed.

Happy birthday to me.

Free Range Content Consumption

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

Free Range Content

Facebook’s wish to put media content inside its own application is potentially self‐destructive to those providing the content. Moreover, for Facebook, it smacks of the days of AOL. All of this would be irrelevant, if media could bring itself to release its content into the wild of the Net, but that appears more and more to be an impossible task.

To media companies, their competition is and always has been other media, which is an absurd proposition online. When a TV station, for example, behaves online only as it does in the linear world, it has already lost in the battle for relevance.