Thursday, October 27, 2005

Media industry 'panic' over Internet but online still not getting fair share of media budget

Speaking at the IAB Engage 2005 conference, Sir Martin Sorrell, WPP’s CEO highlighted how traditional media are loosing ground to their online rivals. He singled out News Corp recent online media “panic buying” spree and the threat to some traditional media’s business models (newspapers classifieds v. Craiglist). His question to media owners: “How can traditional media continue to charge more for less?" Sir Martin Sorrell blamed the failure from traditional media to embrace online on the age of people who run major media/ad groups and a reluctance to change.

I could not agree more. One of my friend from research company Millward Brown (she left since) shared with me some insights on a 2005 survey they conducted titled “Why online isn’t getting a fair share of media budget?”

Here is the situation, figures may vary from studies to studies but it gives a general trend: the Internet is getting only 5% of ad spend while it has a nearly 35% media consumption. TV is getting 40% of ad spend for an equivalent media consumption. Newspapers are getting nearly 35% of ad spent too but for a 10% media consumption.

Why such a gap for online? Here are the most mentioned reasons:

  • Comfort with the known. Clients are risk adverse and don’t like to make sweeping changes to their media or marketing budget allocation. They will go with what is safe and make tiny incremental changes every year. As a result, they are loosing touch with overall media usage and fragmentation (especially given the speed at which it is accelerating),
  • Lack of understanding and lack of interest. Here is the age gap again… Most marketers think that their consumers are just like them. Company CEOs like to see their ad running on TV and on their favourite newspapers because this is what they watch and read. Younger marketer find that learning new things is time consuming, especially when they are pressured to deliver short-term results. So they go with the safest option: comfort with the known,
  • Marketing services are too siloed. The whole advertising system is biased towards ATL getting the lion share of client’s budget. If you were an ad exec or a media buyer, would you like it to change? Of course no, you would lobby hard to keep it that way. Margins and budgets are too low online to incentivise traditional ad agencies to shift. And clients don’t push hard enough for integration This is a vicious cycle.
  • Interactive is hard work. Yes, you cannot do last minute changes on a program as easily as you can with an ad copy. It needs a bit more planning. The pressure has always been on interactive agencies to be as flexible as their offline counterpart. Would it be a bad thing if traditional marketers were also better planners?

Addendum: if you work in PR, just replace "ad exec" or "media buyers" with "PR professionals" and TV with "media relations". Same mistakes, same punishement.

1 comment:

Inner Diablog said...

There is an assumption here that the proportions of 'consumption' and spend should be broadly equivalent unless one or more of the extraneous factors you have listed prevent the marketplace operating as it should.

In practice there may be other more significant reasons why advertisers still prefer the traditional media, such as the degree of receptivity to messaging the consumer of a particular media has at the time.