Photograph of a young girl listening to the ra...

(Photo credit: Wikipedia)

Can TV and radio stay relevant as advertising platforms in the face of the intense relationship consumers have with their digital devices?

Most forecasts believe so, but we think it’s an open question after reviewing the conclusions of two different research studies that were recently released.

Pew Research last week released the first of a series of papers that celebrates the 25th year of the Internet through a series of related research projects.  The data is available here.  Since the term internet is synonymous with media, we were intrigued by the findings.

It’s a given that everyone is online, but when you look at the growth over the last 25 years the inexorable climb to ubiquity is compelling.  9 out of 10 adults in the US us the Internet today.   Internet use is nearly as pervasive as TV use.

According to Nielsen’s latest Cross-Platform Report, released on March 5,  those Internet users are online about 2 hour per day, either on their computer or their smartphone.

That volume is dwarfed by the amount of time spent with TV and radio, according to the Nielsen study.   Adults spend more than eight hours watching live or time-shifted TV or listening to the radio.

Voila Capture 2014 03 06 02 08 39 PM

Those eight hours fuel the continued investment of lion’s share of ad dollars to TV and radio.  If you want to intersect with consumer’s attention, you’re pretty much guaranteed to catch them on TV and radio.

According to eMarketer, 48% of all ad spending was in TV and radio in 2013, while 25% went to  digital media.  And, while digital media is projected to increase to 31% by 2017, TV should hold its share at 28%.

Voila Capture 2014 03 06 02 30 53 PM

While they are spending a lot of time with their TV, the intensity of that relationship has been surpassed by other devices, Pew’s research shows.

When asked how hard it would be to give up specific technologies, more than 50% of Internet users said that it would be very hard to give up the Internet.  49%of cell/smartphone users said it would be very hard to give up their cell/smartphone.

Only 34% of all US adults said it would be very hard to give up their television.

Voila Capture 2014 03 05 11 46 55 AM

We believe that the intensity of this relationship with technology will have an unforeseen impact on advertising spend.  Purchasing behavior is increasingly influenced by sources of information other than preference or marketing.  Examples are user reviews, press mentions and social media chatter.  While consumers are spending only a couple of hours online, they turn specifically to online sources when making decisions about what to buy.  This virtually frictionless process is so rich and dependable, giving consumers a clear expectation about the value of goods and services, that the impact of advertising in traditional channels is significantly diluted for most brands.

The one thing that we’ve learned as the Internet has completed its first 25 years is that if something loses its effectiveness, it stops getting used.

TV and radio advertising are dangerously close to being on that path.

Enhanced by Zemanta
English: This is actually Tom's Restaurant, NY...

(Photo credit: Wikipedia)

Every time an internet company files for their IPO, we learn a little more about the underlying economics of the transforming media landscape.

The themes of successful companies are consistent, particularly in the consumer space:  Platforms matter; achieving scale and reducing friction drive profit; and consumers are willing to try new things.

Take ordering take-out.

GrubHub was founded on the premise that consumers would be as comfortable placing a take-out order online as on the phone.

Turns out they were right.

After merging with Aramark’s Seamless platform late last year, GrubHub illustrates the power of achieving a leadership position with a scale platform.

Voila Capture 2014 03 05 12 11 14 PM

The company claimed 3.4 million diners were actively using its service at the end of 2013, placing more than 135,000 orders a day.

That translates into $137 million of revenue and an ebitda margin of better than 28%.

GrubHub is confident of its growth potential too: it currently serves 28,800 restaurants out of what it defines as a target market of 350,000.

GrubHub’s transaction model, whereby it takes a cut of the restaurant’s take, ultimately displaces a segment of the local advertising market.  As take-out orders increase through GrubHub’s platform, an establishment can rethink its local marketing strategy.

With each restaurant relationship, GrubHub increases the network effect of its service.  As a result, restaurants stay and consumers stay.  This is the same dynamic that has contributed to OpenTable’s success.

Enhanced by Zemanta

Around the same time that the maker of breakout mobile game Candy Crush filed for its IPO, we caught up with eMarketer’s new forecast for digital ad spending in the US.

We were intrigued.

King Digital Entertainment is a well-established game developer that created the perfect storm over the past two years with Candy Crush by harnessing mobile, multi-platform access and in-app purchases.  The company exploded: $164 million in revenue in 2012, $1.9 billion in 2013 and profit of nearly $570 million.

Voila Capture 2014 02 21 09 12 33 AM

What captures our attention is the key metrics that drive the King Digital business.

First, mobile.  This delivery platform made up 9% of total revenue in 2012 and 70% in 2013.  They figured it out.

Second, the economics of scale.  King delivered 41 billion games plays in 2013.  It averages 324 million users a month.

Ninety-six percent of users play free.  But those 12 million players that convert to payers spent an average of $17.32 during their game play.

King doesn’t solicit subscriptions.  It sells game aids in .99, $1.99 and $2.99 bites.  The psychology is deft: as a player, you assess how close you are you to beating the level and whether it’s worth spending a dollar to extend for five turns.

This isn’t a new concept — it was built into pinball games from almost the very beginning.  But King masterfully executes the balance between incentive and emotional usury.  If you haven’t downloaded the game and played it, we highly recommend.  You can’t understand this business model without experiencing it.

What relevance do King’s key metrics have to eMarketer’s new forecast?

King is the quintessential example of the app economy.

It does not spend a single dollar on advertising.  The company relies on its network of players to promote its own games.

We are in the inflection point of dual digital economies: the advertising economy and the app economy.

166180

At TMT, we believe that the rise of the app economy is influencing the change in the digital ad economy.  Engagement is demonstrated to be highly profitable.  The challenges are to engage at scale and to have a business model that promotes profitable conversion.

The days of trying to convert users without engagement are passing quickly.

This is reflected in eMarketer’s forecast.  Low-engagement ad formats such as lead generation, classifieds, banner ads and even search are projected to slow markedly in growth over the next several years.

High engagement formats, including video, sponsorships and rich media, are projected to experience double-digital growth over the next five years.

The successful providers of advertising will give marketers access to a similar consumer experience that King creates in its game.  Easy access to engagement — regardless of the topic — and seamless opportunity to convert to an economic relationship that improves the quality of engagement.  Native advertising, video, sponsorships are all examples of this development, and the trend is only going to increase.  User behavior dictates that it will.

 

Enhanced by Zemanta

In the midst of the fervor to transform marketing with content, one brutal truth is too easily overlooked:  Content is hard.

How hard?  At The Media Transformation, we’ve been involved with over 300 content brands in our careers: daily, weekly, monthly, annually, video, print, TV, film, digital.  Across all of those brands, the majority of which were entertaining and effective, we can count on one hand the number of content leaders who had the management skills, creative spark, market perspective and business savvy to be called exceptional.

So, when pundits call for brands to create newsrooms, to build immersive content strategies and to engage the consumer, they are glossing over the unfortunate reality that there is a small group of people who can execute these plans with enough confidence and context to advance brand goals.

The brand leaders know that this is hard work.  According to a recent Curata survey, a plurality of US marketing professionals say they are struggling at the work of content curation.  The biggest challenge is with contextualizing content.

NewImage

A recent Outbrain analysis gives some insight into why contextualization is hard.  For a brand marketer, the imperative is to deliver relevant information that keeps prospective customers moving forward in the sales funnel.  A few brands commit to entertainment as a form of engagement that reinforces the brand image, but the majority of marketers need to justify their content marketing spend through the prism of leads and conversions.

When Outbrain examined click-through rates on content recommendations, it discovered that unrelated content recommendations delivered 16% higher click-through rates than related content recommendations.

 

NewImage

The lesson is that you can’t dictate consumer interest, and when you initiate a content-marketing program you either have to commit to trying to broadly entertain or to specifically focus on moving prospective customers into the sales process.  For most brands, it is hard to deploy the resources and engage the talent to do both.

 

Enhanced by Zemanta

Working with a client, we discovered that the proliferation of customer choice required a new filter for determining the viability of a strategy.  We believe that identifying the necessity of the brand benefit within the context of the customer experience provides a anchoring concept to the subsequent strategy discussion. This requirement applies for business-to-business and consumer markets.

The proliferation of customer choice is made up of two dimensions:

First, the customer has many different options to choose from in order to satisfy a need.  These options typically cross product categories.  For instance, if you decide that you need to improve your coffee experience in the morning, you can choose from coffee makers that range from low-tech to high-tech, and you can choose from coffee presented in myriad packages, from fresh roasted whole beans to vacuum-packed grounds to pre-packaged coffee pods.  In order to compete for the customers’ attention, you need to be able to demonstrate a clear set of benefits that meet the customer requirements across the categories.

Second, the customer process of exploring the options, specifying choices and purchasing is essentially frictionless.  Each competitor in the market has equal opportunity to provide information to the customer, and the customer’s switching risk — moving from a known to an unknown solution — is mitigated by the availability of information.

Framing strategic thinking in this environment can rapidly be overwhelmed by the power of the customer’s optionality.

Voila Capture658In this case we were working with a brand that is in the midst of a fundamental transformation from a traditional publishing model to a dynamic media model.  The brand leaders had done a very good job of shifting their focus from product to customers and came to the strategy discussion equipped with quantitative and qualitative insights about the market.

They were confounded, however, by  how to adjust their strategy so that they could recharge their growth and perform more effectively in the market.  Part of the issue was how they defined themselves in the market.

Customers consistently reported high  levels of satisfaction with the brand’s products.  The brand we were working with was one of two leading brands in the market, recognized most prominently for its print publication.

As the group worked through the implications of the research, we suggested a shift in how to define the strategy question.

Since the customers and end-users had so many choices available to them, we believed that it would be clarifying to array those choices along an X and Y axis that evaluated each choices effectiveness at satisfying the market needs.

Voila Capture656

We defined a necessity as an activity or outcome that absolutely had to be completed in order for the market participants to be successful at their job.

The conversation was complicated by the three dimensional aspect of any media business: the end-users and the customers are not always the same, as in an advertising-supported business such as a magazine or web site.

The brand research showed that the highest necessity for  customers was delivering leads and the lowest necessity — although still valued — was driving brand awareness.  The research also showed that for  end-users the highest necessity was specifying products that facilitated business solution, while the lowest necessity was to be informed about new products.

With that framework in place, we were able to identify which of the media platforms in the market were the most effective at satisfying the needs of the customers and the end-users.  We were also able, using the research, to identify which of those platforms were garnering the most end-user attention and growing the fastest in terms of customer investment.

This gave the brand leadership clear focus on where the emerging opportunities in the market were and how they could migrate their established brand attributes and capabilities against those opportunities.

We believe that every brand can benefit from this kind of necessity-based strategy framework, but that it becomes incredibly powerful in talking about media brands.  This conversation also helps to facilitate focused conversation around issues that become much more complex in a digital environment.  Traditional publishing strategy was a linear process that focused on the dynamic between product/reader/advertiser.  A media solutions strategy requires a more dynamic discussion that can entertain myriad product and services solutions.  By clearly focusing on the hierarchy of needs of the customers and the end-users, and identifying the pathways for migrating brand skills to become more critical to the satisfaction of those needs gives smart teams tangible plans for success.

Enhanced by Zemanta

There are two big webs — the Google web and the Facebook web — and everything else orbits around them.  Content marketers — publishers and brands — are smart to double down on both, but especially Facebook.

Voila Capture623

Here are five top reasons why to focus on Facebook:

1.  Everyone is there.

You’ve heard all about how Facebook isn’t cool anymore, the kids are leaving, and usage will drop by 80% by 2017.  (Although a Carnegie-Mellon report says everything will be just fine.)

Ignore all that.

Facebook isn’t cool because it isn’t scarce. That doesn’t mean it’s not important or relevant. It’s like the toilet tissue of the Internet. Everyone uses it. On Facebook you get people who are active and engaged in their interests.  They create, share and consume content.  That’s nirvana for marketing

Pew Research Center shared some data at the end of last year that cements the dominance of the Facebook platform.  Sixty-three percent of Facebook users are on daily, and Facebook users overlap with every other big social media platform at 80% or more duplication.

If you want to get to consumers through social media, Facebook is the place to be.

2.  Facebook wants you to be successful…yes, for a price

Here’s a remarkable quote from Facebook’s Matt Barker speaking at a local digital media conference:

“Facebook has focused on shifting its product set from a social network to a marketing platform…with a consistent structure and clear call to action.”

—Matt Barker
Head of SMB Partnerships
Facebook

Facebook has re-oriented itself around toolkits: the toolkits consumers value to keep them engaged (it’s the largest photo upload site on the web); and the toolkits marketers need to engage the consumer.

The powerful thing about Facebook’s tools is how discrete they are.  You are able to promote individual pieces of content and focus on prompting conversions that you value, whether its driving web site traffic or generating likes.

Yes, I know Facebook used to let you do all that for free .  But, seriously, you didn’t expect that to last.  Credit Facebook for building a toolkit that lets you achieve your goals according to your budget.

Right now its the easiest and more transparent marketing platform on the web.  (Yes, better than Adwords.)

3.  You know who you are interacting with

The biggest challenge with digital marketing is figuring out exactly who it is that you are interacting with.

This is great for the consumer.  It’s devilish for the marketer.

Voila Capture665

One of our big themes here at The Media Transformation is what we call “Solving the Identity Layer.”  You haven’t succeeded until you can identify the individual.  Then you’ve got the ability to deploy the full spectrum of your marketing strategy.

On Facebook, consumers’ social identity aligns with their physical identity.  Each bit of information that you acquire can layer more knowledge and more efficiency into your marketing program.

When you know who they are and what they interact with, you can tailor your content to generate the outcomes you value the most.

4. You can clearly track outcomes

Facebook wants you to have a plan and to be focused on the results.  The ad management tool provides you with fairly versatile and rich reporting tools.  It’s not the combination of Adwords and Google Analytics…and there’s a lot of good to that.

And remember, you can see exactly who you are engaged with within the Facebook platform.

That’s unparalleled.

5.  You can drive tons of traffic to your web assets

Buzzfeed has shared some fascinating data about the source of their traffic referrals over the past few months.

Facebook is rocking the house.

Voila Capture664

We’ve seen the same thing here at The Media Transformation and our affiliated sites The McCarthy Group and Gallarus Ventures.

Facebook referrals are outstripping Google referrals.

Not to mention the added benefit of being able to figure out where those referrals are coming from.

Matthew Ingram of Gigaom wrote a thoughtful and comprehensive article about the referral trends and the benefits and potential pitfalls that we highly recommend reading.

If you’re not investing in your Facebook content program, you’re missing the most versatile and homogenous marketing platform there is.

 

Enhanced by Zemanta

Two interesting demographic data points that bode well for the economy caught our attention last week.

First, households. Our point of view is that you can cut through all the noise about the state of the consumer by looking at household creation. The more households, the more spending.

Voila Capture651

This Census Bureau chart compares two household tracking tools — the Current Population Survey and the American Community Survey.  While the data points diverge by about 150 basis points, the recent trends show that the percentage of American adults who head up households is rising.  This is a precursor of overall household growth.

Voila Capture626

Households increasingly are headed by unmarrieds, a long term trend. The average age of a first marriage has increased by almost two years in the past decade.  This has contributed to a decline to 19.6% of households that include married couples with children.

These unmarried households drive different aspects of the consumer economy than married households. Again, we believe this is a fairly simple trend: unmarrieds are larger consumers of the experience economy — trips, entertainment, restaurants — while marrieds are bigger consumers of the consumption economy — home sales, appliances, home improvement, child-related goods and services.

Enhanced by Zemanta