What does the aggregate US and global economic crisis really mean for digital and new-media initiatives by marketers? The Wednesday, October 15, edition of The Wall Street Journal carried an hysteria-driven article by reporter Emily Steel, who commented, “Financial woes likely will derail the growth of a slew of advertising technologies that until recently were being hailed as the next big thing.”
Is this really true?
She makes broad-based assumptions in her piece about marketers’ priorities and about the capabilities of digital and new-media initiatives. She also lumps together everything from mobile marketing to place-based media to advertising on social-media sites to embedded advertising on games and virtual environments in the same boat. She finally ignores the blurring of the lines over time between traditional non-interactive advertising, on one hand, and emerging interactive PR/social-media based digital marketing programs, on the other hand — making it harder to substantiate the reality of the exodus she predicts.
These programs and mediums are hardly all the same, whether judged on maturity of the platform or real effectiveness. And her broad-based comments do border on uninformed hysteria.
The article also ignores data that proves that digital and new-media initiatives continue to gain traction. Here are some figures I had readily available:
> Growth in place-based/digital OOH media ad spending: Media/advertising industry consultancy PQ Media believes that US advertisers spent $1.6 billion on place-based/OOH ad placements in 2007, growing to $3.1 billion by 2011 (cited in a previous blog post).
> Growth in mobile marketing spending: Tech-industry analyst firm Forrester Research believes that US mobile marketing spending will grow from $270 million in 2007 to $405 million in 2009 and $2.8 billion in 2012.
What does she cite as her evidence of this downturn in digital and new-media spending?
Steel’s argument is largely based on assumptions about the maturity of digital and new-media initiatives and assumptions that traditional media, such as broadcast, somehow is more proven and more effective.
She goes on to say:
In recent years, marketers have set aside a portion of their ad budgets to experiment with digital technologies such as Web video, mobile phones, gaming and virtual worlds. But with broader economic turmoil reaching Madison Avenue, these “experimental” budgets are among the first to hit the cutting-room floor.
Steel provides as evidence a data point from Chrysler LLC — an auto company with its own marketing woes — which has apparently “… already slashed its experimental ad buys,” said Steel. Of course she made no mention of peers such as the Scion divison at Toyota, which has moved over multiple years away from traditional broadcast advertising, with its low ROI, to digital and new-media initiatives that are a better fit for its younger, social-media and gaming-savvy audience.
She also serves up quotes and data from advertising-agency executives — whose interests are probably more aligned with traditional advertising channels. And Steel buries a dissenting point of view at the end of her article from a PepsiCo executive who actually argues the opposite of the reporter’s assertion: “The market is not going to drive us to miss one of the largest opportunities that we’ve had in a long time.”
Why are digital and new-media initiatives actually MORE compelling in a down economy?
I clearly disagree with Emily Steel, but why am I so confident in my beliefs? The issue is this: She is arguing from some broad macro-industry perspective, but she is not thinking like a marketer. In a tough environment, as marketers, we want to gain advantage … leverage … from our programs. We want to rise above the buzz and efficiently capture customers’ minds and wallets. And we want to move and change as their interests and lifestyles evolve.
Digital and new-media initiatives are, in fact, just what the doctor ordered in the current environment. Here’s why I believe that when marketers have to make tough choices, they will choose to keep or expand these initiatives……
> Moving from one-way ‘advertising’ to two-way ‘communication’: Digital and new-media initiatives offer the unique ability to not only speak to consumers but also to get their thoughts and feedback. These initiatives – for example, social networking sites such as Facebook and Twitter (cited in a previous blog post) – help us begin to move as marketers to a two-way dialogue with the consumer and our brand community, which improves our ability to engage with the consumer and to build and maintain a meaningful commercial relationship. It also helps us better target marketing communication on the basis of ethnography and psychographics than demographics — i.e., really knowing who our consumers are, not just guessing about them based on age, race, gender or geography.
> Rising above the buzz: Traditional media outlets, particularly broadcast with a never-ending explosion of new channels, are an increasingly-cluttered communication channel. The consumer can Tivo out the commercials; the consumer is more likely than not to have little network loyalty; and the consumer is increasingly more engaged on his/her computer, mobile phone or gaming console. As marketers, it’s critical that we find new ways to interact with consumers where our voices (and theirs) can be heard. Examples include mobile marketing, which I will be blogging on more over the next week and which can enable a marketer to target a consumer wherever (s)he goes, and place-based media.
> Small spend; low cost; high ROI: Not sure what else I can say. These programs are an order of magnitude less expensive than traditional broadcast media. And with their ability to rise above the buzz and be more interactive and two-way, they can have more impact and even more ROI.
> Staying with your consumer: Digital and new-media initiatives seek to (1) find the consumer as (s)he permanently shifts his/her time to new channels and (2) engage with him/her in new ways. And the consumer is, in fact, shifting; there is no doubt about that. The consumer’s time and attention is moving to new media platforms. Mobile marketing is one way to stay with the consumer, and new initiatives — such as advertising on video games — are incredible ways to maintain the continuity of the connection.
> Tracking results: The most significant argument that is heard time and time again about digital and new media initiatives is that their effectiveness can’t be tracked or that they don’t have standards. (Remember, this is what was said about Web banner ads less than ten years ago.) This could not be more off base. The reality is quite the opposite; in fact, these platforms have incredible ability to provide granular tracking of results — whether through the nature of the digital medium or through the nature of how social media mirrors consumers’ network. Nielsen and Arbitron may not be doing the tracking … yet … and the industry may not have agreed on a standard … yet. But this hardly means it can’t be done.
What do you think about Emily Steel’s article? Please share your thoughts.
I completely agree Adam. In this environment new media spending is going to cannibalize old media for all the reasons you mentioned above.
This just in…
NEWS ALERT
from The Wall Street Journal
Oct. 16, 2008
Google reported net income of $1.35 billion as revenue, which comes almost entirely from advertising, rose 31% despite the turmoil in the global economy. Excluding traffic acquisition costs, the search giant’s revenue rose 34% to $4.04 billion. CEO Eric Schmidt said the company is “realistic about the poor state of the global economy” but continues to manage its business for the long-term.
Kudos to you Adam. I completely agree with your “Staying with the consumer” premise and I would also add podcasting to the list of ways publishers of content can stay with their consumers. In the case of VoloMedia, we have a proprietary adserver that allows us to dynamically insert audio & video ads in to the download at the time of the request so that the ads stay with the content wherever the user moves the content whether to their desktop or portable device. Kevin Gianatiempo
Adam, as usual, you hit the nail on the head. Our current financial crisis has brought the Chicken Littles out in force. A broader part of this problem is marketing’s capitulation to finance by trying to tie what we do (e.g., advertising, promotion, product development) to financial metrics. This “metrics imperative” frames marketing activity as a cost rather than an investment. Thus, as marketers, we need to try to change the conversation to re-frame marketing as a key investment (rather new or old media) that fuels growth and profits (even if we can’t tie every investment to a specific dollar outcome).
@ John – Interesting bit of news from the WSJ. Turns out that digital and new media are the more recession-proof channels!
@ Kevin – Thanks for joining the dialogue. In fact, I think that the idea of achieving omnipresence as a marketer is really the Holy Grail. Podcsting is a good channel to add to the discussion. I’ll also check out VoloMedia!
@ Aric – Thanks also for joining the dialogue. You raise an important strategic point in this whole discussion. I might perhaps reframe with the challenge to marketers to be proactive, rather than reactive … so that you are an investment, not a cost. Thanks for this insight.
And it’s important now more than ever to do so. Getting granular with your target audience and having good ROI insight is an advantage of digital and new media channels. Just what the doctor ordered in the current economic crisis.
As John pointed out, Google posted very respectable numbers yesterday. This shows that not all digital media spending is “experimental”. In fact, for many small businesses that are priced out of more conventional advertising, online advertising–and especially paid search–will continue to be “fundamental”.
With that said, there IS reason to believe that the greater ad market will suffer as the consumer does in the next 6-18 months. Google might be able to survive this downturn unscathed, but second- to bottom-tier online advertisers will likely suffer with the rest of the ad market. If digital media spending is trimmed it will probably be in display advertising, which derives its value from the more abstract concept of branding instead of the sales conversion focus of paid search.
Essentially, digital media is perhaps the safest haven during a downturn, but I wouldn’t expect Yahoo! and other players heavy on branded advertising to celebrate a lack in consumer confidence.
Btw, good point about mobile advertising. It’s a new frontier that will probably see growth no matter what happens with the economy.
Thank you. I’ve just been preparing material for my weekly column on virtual advertising and of course this “cut back” is at the top of the news cycle so I’ve been figuring I’m going to have to deal with it, even though I didn’t buy it. The indiscriminate grouping of any and all digital media was suspect, and I know there have been some good results in marketing on social networks and even some of the virtual worlds — at least the ones targeting children. The problem was, there seemed to be no dissenting voices out there. With your article I now have an opposing view I can quote. Mind you, I do suspect there will be a drop in marketing through generalized virtual worlds which have shown little if any payback (and my editor won’t be happy with that conclusion since her publication, The Metaverse Messenger, covers Second Life), but that’s an exodus that was happening before the latest financial crisis.
Any way, great stuff.
@ Thomas – Thanks for your insights. You raise a good point about the type of digital and new media marketing efforts that need to ‘beware’ (because we’re not just talking about ‘roses’ here for everyone). But I think it is instructive of all marketing spending … not just spending related to digital and new media channels.
Marketing spending that is targeted and drives consumers to action is a critical piece of a marketing budget. Offer marketing, incentives, paid search and targeted/personalized (not spam) direct e-mail all have strong results because they are actionable and lead to interaction between consumer and brand.
Awareness is also critical, but I would argue not in the way that many marketing leaders think. Awareness in a way that is leveraged against and that builds upon your reputation — e.g., via PR, events and grassroots inivitiative — and that also strengthens the relationship between brand and consumer through personal and third-party validation is also a critical piece.
This brings us back to Thomas’s comment, though, about paid advertising that is designed simply to get a company’s logo out there. How does that build reputation and relationships? Now THAT is something that should be on the chopping block.
@ Christopher – Thanks for joining in and helping to ensure there is a more balanced dialogue around digital and new media. I think that marketing via the digital facilitation of social networks is absolutely an area that deserves more time and attention (and will get plenty of bandwidth on this blog).
Here’s the big-picture insight: As marketers, we want to be in direct contact with our brand communities. But where are they? How do we establish and build our connections? And how do we measure this interaction? Enter social media (and virtual worlds, essentially as a social network … just with better graphics). Social media is our starting place for re-engineering marketing technology infrastructure to actually accomplish what is so critical — build and capitalizing on relationships between brand and consumer.
I look forward to reading your column.
Appreciate all of the great insights and dialogue here. Let’s continue this discussion.
Marketing (and the technology infrastructure we rely upon to do our jobs as brand builders) is changing rapidly. Now is the time to change our POV and to take a new leadership role within our organizations — changing perceptions from marketing dollars as a cost center to marketing spend as an investment in our brands and companies.
Great Post Adam! I agree whole heartedly with your argument. Particularily with the cost assesment of digital media vs. traditional (non-interactive) media.
An effective campaign will reach its intended target and have a positive impact on the consumer. The way that digital media is structured is that you can deliver a targeted message to a brand community for a fraction of what a traditional campaign would cost. It’s silly to think that marketers would avoid digital media on cost alone. I would think that the cost would result in more experimentation by companies in this platform as media budgets are slashed.
However, The concern of many marketers, (maybe the bill-payers would be more appropriate) is that the lack of an established measurement tool for digital media. I agree with you, that it is possible to track the hits, page views, etc., but I think more people are looking for a more concrete way to quantify page views into sales.
Frankly, I’m surprised that there haven’t been more attempts to track these sorts of trends. It’s been the gorilla in the room for several years, why it hasn’t been solved yet (or why companies aren’t embracing it) is puzzling.
@ Doug – Thanks for your post. Very insightful, and thanks for joining the dialogue.
The issue of metrics is an interesting one. I see the greatest metrics challenge being the pervasiveness of traditional metrics from TV, radio and newspapers predominating and limiting our ability to grow and develop newer/better metrics.
For example, the concept of CPM as a cost basis equalizer is the wrong way to look at marketing costs. These ‘Mad Men’ metrics going back to the 1950s are not helping us to better assess the actual effectiveness of the connection between marketer and brand community.
It’s a bit of a chicken-egg. Sometimes the comment that there are ‘not good metrics’ for new mediums has more to do with the fact that they have new/different metrics that marketers just have not accepted because they do not jibe with existing ways of thinking.
A quick update. Since my post, I have continued to see more data to indicate that this WSJ article was incredibly off-base and that supports the premise that — if one is actually thinking intuitively — now is exactly the time when digital should be most compelling!
Specifically, just perusing the latest issue of BrandWeek, which has a headline, “Digital Ad Spend Stays Strong.”
Ahem.
Here’s the link:
http://www.brandweek.com/bw/content_display/current-issue/e3ie470eaeef1dd69b183e77710a05ecc97