Online Advertising Consolidation

Jeff Jarvis notes that Google controls 40% of online advertising, and that their share of online advertising is growing faster than online advertising as a whole. In a world where online services are increasingly monetized by ad revenue – this concentrates incredible power in Google’s ad serving algorithms.

It’s not hard to understand why they are growing at such a clip – first the search market is tightly tied to the transactional ad spending – and that’s still growing rapidly as merchants discover the power of on-line ad to drive people to their site/store. Google is also one of the few companies that make buying ads or listing inventory easy – allowing both sides to scale in relation to each other. Finally contextual placement means assures the clicks that reinforce every party involved.

Some authors see the transactional ad market as a tiny sliver of the potential online ad market – noting that traditional media especially TV still collects the lion’s share of ad revenue and it is mostly brand (value / awareness) advertising. In fact it was only this summer that internet advertising surpassed radio – the media that came closest to transactional advertising for an age where in-store activity drove transactions. And radio in the smallest of the ad media – a third smaller than local TV and less than half the size of newspaper’s ad share.

ad-share-by-media-type.JPG

Magazines – another media form that offers advertisers content that can be relevant to their ads – is more than 2 times as large as internet advertising – while national TV is more than 4 times as large – and national + local TV is almost 6 times bigger. Taken together the entire internet has just 7.8% of all advertising spend – and Google ‘just’ 3.1% of the overall market.

ad share

 (Note both Tables from http://www.tns-mi.com/news/09112007.htm)

 Jarvis is right, “We need new networks that identify and create new marketplaces for new value — greater value than the coincidence of words on a page, which Google sells. “ This should be the domain of ad networks – but if my recent experience is an example they are not stepping up to the plate.

Ad Networks and traditional media have an opportunity to act as an interface between Agencies, who develop and place brand advertising for national customers, and small web or multi-platform publishers. This will be increasingly important as consumers shift their media attention from traditional media to web driven media. As Google learned the value is in the relationship between the advertiser and the content publisher – and that’s more difficult to automate for brand advertising because the content of the entire site becomes important.

The problem is that Ad Networks and traditional media have not automated enough of the qualification process for web publishers – so site traffic has to be substantial before they can afford to describe a sites market to advertisers or target ads specifically enough to that the revenue from them is better that is available from Google.

That has to change if Google’s online dominance is to be challanged.

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Sampling Music

Bob Leftez writes about discovering The Weepies – a great but lesser known band that he discovered through their labels downloadable sampler – like Prince done in conjunction with a local paper.

Bob like them so much he wrote a post about them (bet their traffic spiked). It also gave him a platform to talk about music sampling.

 “But now every act has a MySpace page. Music is free. It’s everywhere for the tasting. Where does one start? One doesn’t start on MTV. Nor the radio. … Yet, the major labels want us to buy their records on faith, as if it were still 1973.”

While I believe he’s right – that sampling helps build a bands brand. It’s not as clear a story for labels because its complicated by their revenue and cost structures (see my comments at the bottom of his post – hopefully).

Buried within his post are a couple of almost throw away thoughts which get to the heart of the sampling story. Both are in this sentence “Terry McBride and his Nettwerk Group get it. They assembled this “Seriously West Coast” sampler for the “Vancouver Sun”. Maybe that’s why I checked it out. I trust them.”

First is the issue of Trust. As a label Nettwork has built a reputation – I assume around progressive acts and insightful marketing. That’s more that just providing samples – in fact those samples may have been trashed without the labels reputation – because there is just so much stuff out there. Given that reputation is the sum of what you do it makes me question the wisdom of many of the music industries recent actions – which seem designed to kill their reputation not build it – but that’s another story.

The second part of the issue is the mechanisms of sampling meant that Nettwork was able to limit it to geographic and personal networks – by tying access to the download site to a specific time and location – by partnering with the Vancouver Sun. Like Prince before them, who parleyed a newspaper album giveaway into 20 sold out concert dates and worldwide reviews of both the concert and the accompanying release, the Nettwork sampler targets only readers of the print version of the Vancouver Sun, and then requires they act within 7 days.

Both limit the long term impact of the samples on revenue – while building reputation and connecting with the geographic network and opinion leaders they desire (of which Bob is no doubt one).  As a side note – in a connected world it points to both the power of location specific events as marketing tools – and of old media to reach those groups with physical (Prince CD) or restricted access download information.

Guess what I’m trying to say is that sampling needs to be part of a marketing strategy – not a knee jerk reaction for labels numerous problems. Am I missing something?

Physical & OnLine Media Advantages

Jeff Jarvis, writing about Prince’s distribution of his new CD inside the London’s Sunday Mail says:

“it exploits the one last advantage of printing a paper on atoms and delivering them: distribution”

That’s not totally true. Each media type has several unique characteristics which can be used independently or in conjunction with online presence to extend the online into a physical experience.

For newspapers there’s distribution, locality, political / social identification (which come into play when the paper is read in public), as well as the social engagement that occasionally arises when accident, interest or expertise make citizens actors in the news. For TV its diverse thematic connections, story telling that models life aspirations and privacy. For radio its locality, mobility and personal connection with the announcer and other listeners.

What makes these characteristics important is that they form the basis of what can be unique media experiences where the online and the physical can be used independently or in conjunction.

It’s the ability of every media platform to transcend the online and situate it with in real physical relationships that will be the basis of its new identity and value.

Washington Post – 10 Principles

Jeff Jarvis writes that the Washington Post, which recently posted its 10 Web Principles needs an 11’th – a commitment to collaborate with readers.

His argument seems to be that the paper is still casting its self in the center and hasn’t come completely to grips with its role as an institution shaping the relationship it and its journalists have with the community and their discussion of the news.

While it’s true that they haven’t defined that fully, principle 5 says

“We embrace chats, blogs and multimedia presentations as contributions to our journalism.”

While principle 7 says

“We recognize and support the central role of opinion, personality and reader-generated content on the Web.” 

That same principle goes on to instructing journalist to separate opinion from reporting.

To me these principles are a good start – because they commit the Post to an integrated Web and Print strategy – breaking stories in whatever medium is ready first (typically the Web) at a time when advertising revenue to cover this change not shifted as markedly as the papers reporting will.

While it would have been nice to see principles specifically related to user engagement – it is also no surprise that these are not listed – both because this could be the basis of a competitive strategy but more likely because they’re learning how this fits with their role as a news (not opinion) organization.

What’s interesting is the Post has developed an ad-hoc social network around the active commenting on their articles. This community could be the source for experts, opinion leaders and sources for Post reporting – if mapped and harnessed. It’s this type of engagement with a social network – that likely doesn’t define it’s self as a social network – that is likely at the core of Jeff’s post.

It’s a set of relationships with audience that no media has effectively defined – which explains why the is no 11th Principle – yet.

I’d expect the Post will be among the first to identify the issues and define the mechanism that move readers from commenting to contributing journalistically. I also hope they give some thought to how they can build the name recognition those commenting develop into an engaged social community that connects around news and story development.

Federated Advertising Platforms

In a recent post I’d said “media will come to recognize that they are as much in the advertising assembly business as they are in the ad delivery and content businesses”

Seems Time Inc. already recognizes which led to an interesting post at Publishing 2.0 comparing Ad Platforms and Ad Networks. The core distinction is who controls the relationship with the advertiser. I’d go a bit further suggesting there three big areas of  difference:

– who controls the relationship to the advertiser
– how member sites are qualified
– how is site readership related to advertisers target demographics

Ad Networks, such as Google, develop vast relationships with both advertisers and sites matching ads to sites algorithmically. It’s efficient and highly lucrative for the network owner because the most of the value lies in securing the advertiser and linking ads to sites.

The down side is that sites and ads are interchangeable, at least to the extent the algorithm allows. While this is true to an extent for almost all ad mediums what’s different is how the matching occurs. Advertisers can buy placement only according to indicators the algorithm tracks. Sites are selected the same way. Differences in site selection have to show up in the algorithm or they can’t be used for placement.

A problem arises because matching traditional advertiser metrics to the algorithm depends on an inferred relationship.  Characteristics like traffic, links in & out, metadata, keywords, location etc. need to be aligned with typical brand metrics like ages, sex, income religion or more sophisticated  psychographic and aspiration indicators. The alignment is imprecise, which may count for the struggle advertisers have moving online – and the growth in services like Search Engine Optimization which need to continually refine the relationship between ad placement criteria to match target market behavior.

The alternative approach is the Ad Platform which does some of the same things Ad Networks do (algorithmically based ad placement) except they layer on an ability for a more direct relationship between the advertiser and the site – which opens the probability of site selection based on traditional advertiser metrics – because site owners need to understand this as it also drives content choices.

It is here that traditional media can build a new value. First the cost of building the relationship with the advertiser is expensive which opens opportunities to profit on the delta between advertiser’s costs and what sites receive per placement. An added value is that sales costs can be amortized across more sites increasing margins.

The skills required to build advertiser relationship are also very similar to those used to qualify sites for advertiser suitability. And this qualification increases the range of properties a platform can offer an advertiser – while still delivering site metrics that are of use to advertisers. 

By extending their Ad Platforms into sites outside their direct family traditional media grow revenue and reach – while maintaining two differentiators that are core to their current and long term value – their relationship to the advertiser and their ability to relate content to market characteristics advertisers understand.  

The Future of Newspapers (and Radio & TV)

Jeff Jarvis asked what newspapers will look like in 2020. It’s an interesting question because 13 years is a huge timeframe – when you consider what the past 13 years have wrought. But here’s a stab.

First the underlying processes technologies that are in evidence now, or in accelerated adoption cycles, will be the same processes and technologies that papers and media will be wrestling with in 2020.

That seems like a relatively bold prediction. The reason is that the buildout for the telecommunications infrastructure to support high speed data has occurred and for business reasons it will not be supplanted in 13 years. Sure there will be tweaks and faster speeds but the underlying issues remain the same. Mobility will increase but again that doesn’t fundamentally alter anything it just makes what’s already happening on the web more available. Same goes for what ever nomenclature you want for user contributed content – it will increase in prevalence and types adding to the competition for attention that has affected media so much recently.

Short term all media will blur looking more like each other – but longer term this will not prove competitive (because it pits media against each other and not the real competition) – and each media will revert to its area of strength (intimacy & community for radio, information & analysis for newspapers, and entertainment for TV).

Regardless of medium, media will solicit and incorporate more user content – not just because it makes sense to interact with your audience when your competition is. They’ll also do this because it reduces costs, increases connection with the medium and provides new value for advertisers. The latter will occur because advertisers will recognize that only few people will contribute to multiple communities – and few products are sticky enough to be among those few. The centralization and advertiser friendliness media provides will be seen as welcome for initiating & hosting these discussions.

Demographic changes will also affect media. Internet use will rise to about 90% of the population – as older people decrease in number and usage patterns established by today’s teens become common in older demographics. This will make competition for attention more intense. The rate of user generated content will not grow at the same rate – in part because it is a function of education and that will not change dramatically – but also because it depends on audience attention and that will not grow dramatically either (more popular sites will get a lot of the new traffic). 

None of this actually answers Jeff question however – so here goes.

Thirteen years from now newspapers will still be published – much as they are today – though they will be thinner and likely free. Their purpose will be to provide to entertainment during commutes and provide a non-browser interface to promote the papers web site(s) and content expertise. There is a possibility that weekend feature issues like the NY Times magazine will make resurgence – as they provide an avenue for in-depth reporting and higher cost advertising (because of the staying power of the issues).

The biggest changes will be in business models and how content is delivered. First media will come to recognize that they are as much in the advertising assembly business as they are in the ad delivery and content businesses. What they’ll recognize is that there is a large margin delta between what advertisers pay for Google and what Google pays most sites. Most of this delta can be attributed to the value of owning the relationship with the advertiser. Media will live in this delta providing more value to partner sites and better targeting to advertisers wanting regional and niche sites.

The relationship media will develop with a multitude of regional or topical sites around advertising also speaks to a new model for content distribution and creation. Site owners and authors already understand audience, traffic, readerships etc, and have tools to measure them. Media will use its’ ability to link to sites across mediums (web and internet) as the first tool in its reemergence. Media can build smaller sites traffic – and in doing so establish beachheads against attention overload – buy providing more sites where their advertising and content appears.

The other area where business models will change is around content distribution – with media acting as clearing houses, filters and store for a federated network sites that share content community and overlapping audiences.

Of course I could be all wrong as well.

Recognition in the Attention Economy

Michael Goldhaber’s prescient 1997 article “The Attention Economy and the Net” argues that we are at a time of transition between economic systems. The industrial economy is giving way to an attention economy – and with it the way value is apportioned.

The underlying argument is that when there is an abundance of information the value of any piece of it declines because much of it is substitutable. The only defense is originality – and even then it is constrained because we only have 24 hours to give attention – and the glut of information sometimes distracts from finding originality.

What’s hard to fathom is that organizations that historically have been dedicated to distributing or controlling original information are the very ones that seem to have the biggest problems with this transition. What is most odd is that many of these organizations are “attention” businesses – trading on the fact that if you have someone’s attention you can redirect it – say towards some product, service or goods.

Also odd is that many of the winners are also attention companies – just trading on attention in different ways. These, mostly web companies, start with the premise that lots of information is available – but that is not what drives their popularity. It is that they treat attention as reciprocal. They use aggregated and filtered attention to deliver new value to users (page rank, friends suggestions and most popular are all link attention) – delivering better search and broader audience for creations and finds. Their algorithms are proxies for attention.

Rob Horning in a PopMatters article talks about the psychological and cultural importance of attention, linking recognition as critical for shaping attention habits. No man is an island, and relationships we foster between people and institutional validate our personal identities. The more that relationship allows interaction the richer the validation. Designing sites to focus on attention tracking and reciprocal attention, as most social media sites do, encourages a fundamental human behavior, while enlarging ones sphere of influence. It is no wonder these sites are so disruptive to traditional media organizations – the reciprocal relationships they engender confer both legitimacy and relevance to the user.

John Hagel also sees a strong psychological component to reciprocal relationships saying “we are unlikely to offer that attention unless something of compelling value is offered in return.”  That something else is reciprocal attention.

In the years since those posts were written organizations large and small are turning to social media to build dialogue with and between their customers. It’s a return to a direct relationship between the company and the customer. Deborah Shultz calls it weaving.

What’s most interesting to me is that traditional media while late to the show understanding this, and seem to be jumping on board.

The CBS purchase of Last.fm one example. The Washington Post recent story on Teen Shopping is another. A single story on teen shopping weaves a financial story together with personal stories that elaborate points while rewarding participants with respectful recognition. It’s a formula that’s bound to engage the social networks of profiled teens – encouraging online and physical reading – and dialogue that is part of every Post article. It’s good story telling – and relationship building.

A brand has to communicate – and that communication has to be reciprocal if it’s going to hold its own – in the attention economy.