Ever seen the Showtime series, Shameless? It’s crude, rowdy and rude. I love it. William Macy plays the most sympathetic dirtbag on television, and Emmy Rossum is utterly natural as the sexy Mother Hen who keeps her wayward brood of siblings from spinning off the planet.
The problem I’ve got is that I NEVER watch TV. The only live programming that I watch is sports, and that’s a sometime thing. I consume a lot of video though, when I’m running on the treadmill, or sitting on a plane. Hulu, Netflix, iTunes, YouTube — those are the ‘networks’ that have my loyalty.
Of course, Showtime’s made a strategic decision not to put the current season of Shameless on those platforms. And, of course, Cablevision won’t let me subscribe to Showtime’s digital service.
I understand that both businesses are trying to establish sustainable and profitable models in a changing market.
I don’t really care. I want to watch the show. I’m pissed.
That’s not good for Showtime or Cablevision. Sometimes, I even forget that Shameless is out there.
The media transformation of the last decade has been just a warm-up for the big event. Think of the difference between a creek flooding in the Spring and the Arctic Circle melting.
There is more than $215 billion spent annually around production-quality video, according to the VSS Communications Industry Forecast. The $137.6 billion spent by consumers is the biggest prize available, dwarfing the $41 billion spent by consumers on all print media and the $30 billion spent on internet and mobile media.
This is the Video Economy.
Disruption in a market of this scale will have far reaching implications for media, with more angst and drama than the decline of the newspaper industry and the erosion of the magazine industry.
I saw two data points recently that tell me that the Video Economy is about to go into play, just like the Print economy did five years ago:
Nielsen’s tracking of consumer behavior shows two parallel trends that will erode the hegemony of traditional Video distribution. First, as Nielsen’s 3Q 2011 Cross Platform Report showed, wired cable usage was down 4% year over year, while telco and satellite usage was up. This kind of share shift portends the erosion of pricing power.
During the same period, multi-screen usage jumped. Mobile video was up 37%, timeshiftimg in the home up 14% and internet video up 7%.
This means that consumers are splitting their video entertainment dollar among multiple devices and access costs.
Combine competition for the primary pipe — cable or satellite — and multiplication of access points, and consumers increase the rate at which they make choices about what they pay for based on convenience and price.
The behavior shifts aren’t isolated to one demographic, Nielsen’s data shows. In fact, alternative access to the Video Economy — through the web and timeshiftimg — is prevalent among the most attractive demographics to advertisers.
The trend won’t slow, either. Just look at the adoption of tablets over the last six months. Adoption trends will increase as competition drives the price of entry level tablets down and innovation drives the functionality of high-end tablets up.
We’ve seen this disruption a few times and don’t need a crystal ball to help us project what is going to happen. The Print Economy and the Music Economy have showed us just how profound the disruption can be.
There is one interesting difference in how the Video Economy is structured that will influence how the transition plays out.
The content creators in the Video Economy are largely independent of the Networks, who are the biggest distributors of Video Content.
So, the best content creators will follow the money, and whomever can do the best job of monetizing the increasingly distributed habits of consumers will be able to command their focus.
Two things will drive monetization: the ability to attract consumer payments to video access and the ability to sell advertising against those consumers.
That’s what makes Hulu such an intriguing experience. My Hulu+ subscription is additive, but has the power to ultimately displace my loyalty to my cable subscription. Hulu has the ability to derive the kind of data about individual demographics and usage patterns that allow for improved ad targeting, giving marketers more confidence in the relevance of the audience.
Hulu isn’t the only game in town, either. NetFlix moving into original programming is a play to leverage their existing competency in getting consumers to pay for access to video content. Cable distributors are vying to offer place-neutral access. Premium cable channels are looking to go direct to consumers. A player like YouTube, with the biggest video audience in the history of Mankind, but with a fractional share of the Video Economy, is looking to original programming to drive their value proposition. (And, they are able to attract world-class content creators, because they have the resources to do it.)
The transformation of the Video Economy is less about a change in form and format than it is an exploration in what consumers are willing to bear in terms of cost. Consumers can do math, and, in this era, they’ve gotten very good at subtraction.
The change will drive some basic trends.
- The amount of production-quality content will increase, and the price of content that can drive audience will go even higher. That will erode the amount that distributors are willing to pay for new or less popular content. As a result, content creators will focus on creating more quantity to distribute in more places for pay.
- Technology-solution providers will gain traction in several key categories: video ad serving across platforms; consumer data aggregation; event tracking (when an episode was watched and where); and ultimately, ROI calculations.
- Distributors will battle mightily to restrict the distribution of content in order to maintain some leverage over some party.
Consumers won’t like it. Just revisit my anecdote above. The digital media consumer doesn’t like to get pushed around.
Two charts that I saw recently got me wondering whether the story of media over the last decade can be projected forward to the next 10 years.
The last decade was a period of media disruption, and ultimately, destruction for some traditional businesses.
These attention-grabbing charts certainly tell that story.
The first was a chart showing the trend in newspaper revenues since 1950.
Fifty years of newspaper growth was erased in 10 years, leaving behind institutions that are shells of their former glory, seeking a path for survival.
The second chart features the relationship between the time people spend with a specific media to the amount of ad spend for each platform.
Again, the conclusion is stark. The dollars spent on print are wasted, the web is still under-utilized and mobile is due for an explosion.
If one accepts newspapers as the proxy for print, as one might be inclined to do, it’s absolutely clear that the game is over.
Are the next 10 years just more of the same?
I’m not so sure.
We’re in a period where we can not directly equate distribution channel or media with a certain type of content and a certain type of advertising. For instance:
Television meant quality video narrative presented in 30- and 60-minute segments to scale audience. The viewer was passive and immersed, particularly susceptible to a certain form of branding ads.
Print meant quality content of words and images, professionally produced. The reader was engaged and intrigued, and advertising messages could used image and words to communicate key brand qualities to a targeted audience.
In today’s landscape, the different modes of content are easily distributed across multiple devices without significant disruption of the consumer experience.
Does that mean that ”use” and “spend” will level set by device?
The Flurry chart is based on a well-known rubric developed by Mary Meeker and updated in her annual State of the Internet talk.
What about the future?
The digital transformation of media has been an ongoing laboratory for challenging old assumptions about advertising and testing new assumptions. The relationship between consumer engagement with content, distribution formats and advertising spend is still being sorted out at the high-end.
Given that uncertainty, the decline in newspaper advertising provides an important reference point for evaluating the future prospects of the different media channels.
The newspaper business model benefited from an archaic media landscape, where access to information and to audience was limited. A newspaper provided local marketers with access to the marketplace. The paid circulation strategy of newspapers limited the number of people that would be reached in the market, but allowed the newspapers to spend more on content — a reasonable proxy for quality — than any other local media outlet. This balance between limited penetration of the market but high quality content benefited newspapers for decades even after radio and television became established outlets.
The internet changed everything. Even more explicitly, Google changed everything.
Google’s consumer proposition eroded two of the critical assets that newspapers controlled: access to information about local business and access to news.
By 2009, Google’s revenue was equal to the entire newspaper industry.
What’s even more striking is that in 2011, Google surpassed the total advertising revenue of the newspaper industry and the yellow pages industry combined. The $35 billion classified listings market — controlled by these two traditional media — had shifted the bulk of its spending to digital platforms. Search — both through Google and through vertical search engines — gave consumers a faster, cheaper and more effective experience than newspapers and yellow pages. It took just 10 years for consumers and marketers to fully organize themselves online.
Not every sector of the media marketplace is as susceptible to such a wholesale transition, however. The content quality and the usability of computing devices could not displace traditional devices. That’s why the number of bours spent consuming media still is largely spent off-line, as the following analysis of data from PQ Media and Veronis Suhler Stevenson demonstrates.
The device landscape is changing however, and that brings us to the next chapter in media transformation.
We are moving from the generation of computing devices to the generation of personal digital devices.
These devices — smart phones, tablets, readers — intersect with multiple consumer behaviors. They are not uniquely media devices, but they are rapidly becoming primary sources for media consumption.
The first generation of the digital transformation of media was characterized by disruption and destruction. The story of newspapers and yellow pages demonstrates that in a basic way.
The second generation of digital transformation will be characterized by extension, I believe. Traditional content formats, like narrative video and text, will extend onto these personal digital devices in order to satisfy the consumer demands to be able to access media wherever and whenever they want.
This extension will create an opportunity for forward-thinking (and well-capitalized) content creators to broaden their brand. Ad agencies and marketers will be receptive to these solutions.
The biggest risk may be for the first generation of internet business that drove the destruction of old media. Their consumer proposition was built around rude identifying information — an IP address and cookies — and delivery through a browser. A new generation of digital media companies that are trying to solve the consumer experience through mobile present a tremendous threat.
By the same token, the old media companies that have sustained their focus on developing content that creates consumer engagement may be the best suited to taking advantage of the new technologies that extend the screen and the page beyond their traditional formats. Marketers have demonstrated that engagement is an important component of a good advertising environment. The generation of digital extension will give those media companies that can create real engagement a chance to re-validate their importance in the media mix.
Tami was in LA and I was in Nashville. I was talking to a group of magazine entrepreneurs about money and Tami was part of a panel of PR and marketing gurus talking about blogging to a packed room of design bloggers.
Sounds further apart than just a few thousands miles, doesn’t it?
Turns out that the same simple message resonated with both groups.
A good part of our discussion at the Niche Magazine Conference revolved around how hard it is to make decisions about what to do — where to spend money, how to put in place moves that affect people you’ve had long-term relationships with, how to pick people to join your team, how to believe what advisors tell you.
These are tough things to figure out for any business person. When you are an entrepreneur, the decisions can be made even harder because you feel set apart and responsible.
My contribution to the conversation was a simple observation. Don’t fall into the trap of thinking that you’re Zeus up on Olympus. Be open. Explain what is going on. Trust people with information. Be compassionate, respect them as equals, and do what you think is right.
When I got to the airport later in the afternoon, I opened Twitter to see how Tami’s presentation was going. She’s at the Design Blogger’s Conference, and the stream was afire with commentary about everything going on at the show.
Tami’s talk was about the new rules for PR and marketing in the social age. She’s got great, practical insight about what a brand should do to take advantage of social media to build their story. The tweets made it clear that her talk was well received.
One comment struck a chord and was getting tweeted and retweeted:
“Brands have to be comfortable with letting people in and giving people access.” @TamiMcCarthy #dbc2012
— Kate Hathaway Weeks (@kjhweeks) February 28, 2012
There’s that theme again: Be open.
I’m struck by how compelling that concept is. In today’s world, information can’t be managed, it yearns to be shared. Conversations can’t be avoided. But there’s remarkable power in the act of being open.
It doesn’t mean be unfiltered and indiscriminate. It means understanding what your principles are and explaining what you have done and why you did it through the screen of the principles that you are open and honest about. That’s authenticity, and it’s essential whether you are a person or a brand.
It hasn’t always been that way and that’s why the idea is so hard for so many to embrace. The old paradigm assumed that you could assert and control identity. Dynamic times require dynamic identity and steady engagement.
What heartens me is that this is a good thing for everyone of us. It allows us to be truly compassionate, to respect our place in the world and the place of others, and to act with confidence.
I guess LA and Nashville aren’t so far apart after all.
The good news for me is that they are getting even closer. I’m posting this from AA Flight 1307. Tonight I get to see Tami and tomorrow I get to make my own contribution to the Design Blogger’s Conference. It won’t be quite as inspiring as Tami’s, but I’m looking forward to it, and I hope it will be equally open.
The digital display landscape shifted over the past several years as Facebook leveraged its tremendous audience to scale a disproportionate share of the overall growth. The result was that the company built a $1.7 billion business from nothing in a virtual blink.
There hasn’t been that kind of seismic share shift in digital ad dollars since Google exploded onto the scene a decade ago. I think we can draw two conclusions from that change: first, that Facebook built a better mousetrap than the legacy players, and second, that marketers continue to search for formats and outlets that convince them that their display ads are working.
It’s the second conclusion that fascinates me. Display advertising is a more nuanced science than response-based advertising, but no less important to the overall goals of brand advertisers. That’s not a consensus opinion, of course. There are a lot of people who look to data-driven marketing as the zero sum of the digital age, and yearn for a pure market of measured outcomes and zero waste. Talk with experienced marketers, though, and they’ll demo
nstrate intelligently why building brand across multiple channels that create multiple touch points with consumers pays off over the long run.
The problem is that the bulk of digital marketing doesn’t have the tools to apply science to the brand outcomes, no matter how much data they have access to. Some recent research by the digital marketing firm Vizu points to that gap:
The attraction of Facebook’s display advertising solution lies partly in the ability to gauge the engagement with the brand, and to feel comfortable that by connecting with the brand as part of their social graph, the consumer has granted permission for the brand to ask for their continued awareness. It’s not wholly scientific, but it speaks to the brand marketers goals more clearly than many other measures currently can.Agencies, however, said they are primarily optimizing against various measures of engagement 58% of the time, or even click-through rates at 19% of the time, as opposed to the 16% of the time for brand awareness.
eMarketer’s view of the digital display ad market says that the game isn’t over yet, and that there’s still the probability that a lot of share is going to move around.
According to a recent forecast, eMarketer looks to Google to quickly surpass Facebook in terms of display revenue, ultimately commanding 21.7% of the market by 2014.
Who should you bet on in this race? The company that does the best job of creating accessible information sets about its user that can be accessed and customized by brands so that audiences can be targeted and campaigns measured against brand-specific criteria. When brand marketers and their agencies are able to use proprietary insights to create dynamic audiences sets that scale efficiently and can be measured easily, then dollars will flow toward that source. Until then, it’s an open playing field.
I had the opportunity last week to speak at Round 3 of TalkNYC’s Tech Meets Madison Ave confab. Round 4 is takes place on December 7: if you get energized by meeting interesting people, hearing the juxtaposition of divergent experience and converging interests, and being in the middle of something that’s important and hard to define, I encourage you to go.
The setting is informal and high-end: the Ney Center at Wunderman. An enterprising, connected and unabashed digital advertising/social media entrepreneur named Derek Smith is at the center of the venture. He appears to have one simple mission: bring together people who should be talking about the intersection of technology and marketing and have them say interesting things.
I shared the stage with David Tisch, Managing Director of the incubator TechStars. Our mandate? Talk about the dynamics of partnership between established brands and emerging companies. What are the issues to watch out for? How can these partnerships work? What can drive them apart?
Our comments had to be relevant to a diverse audience: about one-third agency and clients; one-third investors; and one-third emerging companies.
Tisch talked about the energy, innovation and perspective embedded in early-stage companies. The challenge for any brand partnering with them is to make a calculated assessment about the company’s credibility and staying power. Most early-stage companies don’t succeed long-term, but the amount and sourcing of their funding, the track record of their founders and the solidness of their business concept are reasonable indicators of whether they will have better than average odds.
My contribution was to point out the difference between the risk tolerance and outcome ranges for early-stage, late-stage and mature capital. Brands — and their most significant marketing vendors, such as advertising agencies — have profitable business models that generate capital returns that need to be protected. The demands of innovation are constantly balanced against the conservatism of an established business. For these parties, entering into partnerships with innovative early-stage companies is in a large part about reconciling the potentially conflicting goals of the capital that funds these business.
Boil it down: Understand how each party makes money, what risk tolerance each party will bear, and how that risk will affect the most important relationships embedded within each company. An early-stage company that has lost focus may try to please the needs of their biggest source of cash…their investors.
One last note: it’s always intriguing to watch an entrepreneur get into something that reflects their basic nature. TalkNYC is a reflection of the positive, curious and social core of Derek Smith. I’m really intrigued to see where he takes this surprisingly low-key and increasingly influential event.
