Brian Wieser, MAGNA Global's Director of Industry Analysis, has issued his latest issue of Madison and Wall. It establishes an approach for studying change in the ad-supported media economy, which recognizes that investments of time and money are the important drivers of change. In the report they initially focus upon the most important players - packagers (such as TV networks, magazine publishers and internet portals), advertisers and consumers - and attempt to quantify factors that impact how these entities make decisions. Packagers are juxtaposed between the flows of money associated with content creation, advertising and content distribution: from their position in the value chain, they act as fulcrums of change and are consequently best positioned to determine how investments are made which ultimately drive change in the industry. However, most media packagers generate between 70 and 100% of their revenues from advertising, while fees from distributors and other indirect consumer revenues are correspondingly small. Advertising funds are thus the most important source of influence on media packager decisions, and so they next try to understand how advertisers are allocating their media budgets, and why.
More from the report summary
But what is the current? While it remains highly correlated with economic growth, non-media marketing is growing by high single or low-double digits in contrast to media growth in the low single digits. More money is going towards efforts such as sales force management, event marketing, CRM, retail and trade promotion and other so-called "below-the-line" activities.
Within media itself, television remains the most important vehicle for large national advertisers. Much of the perceived change in the media industry does not reflect changed behavior as much as it reflects new entrants with new business models in the marketplace, such as search marketing, which generates a majority of its revenues from small business advertisers whose spending was never reflected in nationally-oriented traditional media. Conventional online advertising is similarly dominated by advertisers who are endemic to the internet rather than traditional mass-market advertisers. When Wieser looked at the 100 advertisers who account for 80% of national television spending, they found that they account for less than 25% of spending on the internet banner ads.
Wieser emphasizes that new media does offer tremendous potential as a new sales channel for traditional marketers with e-commerce extension capabilities; it allows advertisers with high consideration products to find new ways to offer large quantities of information to their consumers; and in many cases, brands are better able to engage with consumers and reinforce messages that are already established via conventional media platforms.
Of course, advertisers would have no interest in new media (or traditional media, for that matter) if consumers were not utilizing these platforms. But what is the true state of consumer behaviors in new media environments? For an illustration of the state of one sector, they estimate that conventional television will continue to capture over 100 times as much viewing as online video by 2011.
Change is limited in the short-term for several reasons. First, business model issues frequently deter change. Second, today's new media penetration rates may mask trends that can only be understood when stratifying the consumer base by income and age. Third, although technologies have clearly developed to offer consumers the option to take incrementally more control of their media consumption, it is not yet clear that they are ready or willing to take as much control as they are offered: most consumers will be in no hurry to move to a world of infinite choice, once he or she realizes exactly what that entails.
Even if it is occurring slower than is commonly believed, change is in fact occurring, and on multiple fronts. Consequently, it is necessary for advertisers to be prepared to manage change. Steps that can be taken include organizational changes (i.e. internal systems, structures and incentives for experimentation) to take advantage of new media. Equally important, marketing R&D efforts must be structured to allow for comparisons against traditional media alternatives. Finally, new ways to determine the effectiveness of emerging media investments must be established, in order to tell whether or not new platforms provides or will provide meaningful lift, awareness or other benefits.
