One of the bigger topics of discussion in the media world this week (fueled by a feature story in The New York Times) is Apple's push to lower the price of TV shows on iTunes to 99 cents, roughly half the current price. Apple's position is that 99 cents is the ideal number, proven by the massive success of music downloads at this price; and they are aggressively trying to get their TV network suppliers to agree.
I started buying TV shows and movies on iTunes just about a year ago and now watch almost as much TV on my iPod and lap top as I do on the 40" plasma screen in my living room. I am basically paying for this content twice, once to Apple on my credit card and a second time to TW Cable in my monthly cable bill.
For me, the iTunes option is purely a business travel survival tactic. I am OK paying 34.95 for an entire season of my favorite show, "30 Rock", to have on my iPod/laptop and ease the pain of a long business trips. But I was reluctant to pay $9.99 per episode (or $54.95 for all six segments) of the Ken burns documentary "The National Parks - America's Best Idea", as I was some other shows.
I would certainly sample at a lower price, which probably would lead to a purchase of more episodes. I buy dozens of songs every month on iTunes without ever thinking twice.
As reported in the NY Times article only 375 million TV episodes have been downloaded from iTunes compared to 10 billion songs. iTunes clearly remains a music store and will need to do something dramatic to grow the TV side of their business.
The latest news is that CBS, the highest rated network, may be willing to test a few shows under a dollar in the near future.
If the networks cooperate and Apple has even a quarter of the success with TV that they are having with music, the implications for the TV industry will be enormous.
Two billion dollar questions:
1. Will the new revenue from iTunes (and the other services like Netflix and Amazon who would be likely invited to participate) offset the lost revenue from broadcast advertising as more viewers migrate to this new platform?
2. What will be the impact be to the existing television subscription providers (cable, telco and satellite) as consumers bypass them and create their own a-la-carte programming packages?
Friday, February 26, 2010
Saturday, February 13, 2010
Advertising In the Super Bowl is a Good Bet
A few years ago a friend of mine who ran a digital agency was outspoken in his belief that advertising in the Super Bowl was a colossal waste of money. At the time, for less than the cost of one thirty-second ad in the game, an advertiser could take over the home page of MSN, Yahoo and AOL for an entire day, reaching an even bigger audience and engaging them in a more direct manner. His view, albeit a self-serving one, was that this was a much better way to make a splash with a couple of million dollars; and I agreed.After all, the game could be a blowout or a yawn; and creating a buzz-worthy commercial is always an expensive gamble. And then there is the jaw-dropping mathematical calculation: $2+ million = 30 seconds = $68,000 per second.
But the emergence of the social media engine has changed everything. Weeks prior to this year's Super Bowl, the "stream" was flowing with news and gossip about who was going to be in the game and who wasn't (Pepsi actually received millions of dollars in attention for choosing to sit out), and whose ads were going to be naughty (Go Daddy) and nice (Google).
During the game, millions of Tweets provided real time viewer commentary on the popularity (and effectiveness?) of the ads. For days after the game, even the ads that ranked towards the bottom of the popularity polls were getting written about and linked to in the blogosphere and garnering millions of additional views on You Tube, NFL.com, their own sites and other video destinations.
Stuart Elliot wrote in the New York Times the other day about renewed interest in a trend he calls "big event television" which he went on to describe as programs "that can attract large, involved audiences at a time when consumers have been atomized into tiny niche markets."
Seems every advertiser with the means should consider the Super Bowl, and start planning the creative and social media executions a year in advance.
Thursday, February 4, 2010
Facebook's Advertising Potential
I have become more active on Facebook of late. Of the 350 million registered users, I am now one of the 175 million that log in every day and one of the 35 million that update their status. Other statistics from Facebook's own press room are even more eye opening:
I spent the last week documenting every ad I was exposed to while logged into Facebook. Most of the ads were from direct marketers - insurance brokers, credit card companies, online games from Zynga such as Mafia Wars, as well as ads promoting Facebook ads. Many of the ads screamed out my age or college alma mater, along with an offer of some sort that provided a cheesy peek at Facebook's targeting capability. Another peek, less cheesy, came when I included a photo in a status update and was immediately served an ad for a new camera; although this might have been a coincidence?
Google's ad revenue has grown so explosively because the company connects advertisers with customers who are actually looking for things and only charges when an action is taken. Facebook provides marketers something much different, but perhaps even more compelling.
A blogger describes Google's ads as "pull advertising" (the consumer is actively pulling the information) and Facebook advertising as "push" advertising (the advertiser is pushing their info in front of a much larger group of consumers who are ideally targeted, but not necessarily in market at that moment.)
Or as an another blogger puts it: "While Google is fundamentally keyword-targeted, meaning advertisers bid on keywords, Facebook Ads are fundamentally profile-targeted, meaning advertisers bid on people."
And while both companies go to great lengths to protect the user experience, Facebook's ads are significantly bigger than Google's and include images.
It seems Facebook is just getting their ad business going and is relying mainly on low hanging fruit from direct marketers (Zynga alone represents a significant percent of Facebooks entire ad revenue) and their sales partnership with Microsoft. But with the ability to target ads based on user profile data along with other user information and activities to an audience of millions, Facebook is sitting on an enormous potential ad business that will appeal to direct marketers and brand marketers alike. (Google is overly dependent on direct marketers and aggressively investing and developing products to engage the brand marketers who represent much bigger budgets.)
Additionally, Facebook's brand fan pages, which are free to use, have become an essential ingredient in every business's marketing plan.
A recent Mashable article concluded: "Today, Facebook stands on the precipice Google inhabited just before it became a top money-maker. By taking a page from the Google playbook, and aggressively marketing — and explaining — its power to influence buying decisions, Facebook ads could become as essential to 21st Century marketing as the yellow pages were in the 20th Century."
- 2.5 billion photos uploaded to the site each month
- 3.5 billion pieces of content (web links, news stories, blog posts, notes, photo albums, etc.) shared each week
- 3.5 million events created each month
- Fan pages have created more than 5.3 billion fans
I spent the last week documenting every ad I was exposed to while logged into Facebook. Most of the ads were from direct marketers - insurance brokers, credit card companies, online games from Zynga such as Mafia Wars, as well as ads promoting Facebook ads. Many of the ads screamed out my age or college alma mater, along with an offer of some sort that provided a cheesy peek at Facebook's targeting capability. Another peek, less cheesy, came when I included a photo in a status update and was immediately served an ad for a new camera; although this might have been a coincidence?
Google's ad revenue has grown so explosively because the company connects advertisers with customers who are actually looking for things and only charges when an action is taken. Facebook provides marketers something much different, but perhaps even more compelling.
A blogger describes Google's ads as "pull advertising" (the consumer is actively pulling the information) and Facebook advertising as "push" advertising (the advertiser is pushing their info in front of a much larger group of consumers who are ideally targeted, but not necessarily in market at that moment.)
Or as an another blogger puts it: "While Google is fundamentally keyword-targeted, meaning advertisers bid on keywords, Facebook Ads are fundamentally profile-targeted, meaning advertisers bid on people."
And while both companies go to great lengths to protect the user experience, Facebook's ads are significantly bigger than Google's and include images.
It seems Facebook is just getting their ad business going and is relying mainly on low hanging fruit from direct marketers (Zynga alone represents a significant percent of Facebooks entire ad revenue) and their sales partnership with Microsoft. But with the ability to target ads based on user profile data along with other user information and activities to an audience of millions, Facebook is sitting on an enormous potential ad business that will appeal to direct marketers and brand marketers alike. (Google is overly dependent on direct marketers and aggressively investing and developing products to engage the brand marketers who represent much bigger budgets.)
Additionally, Facebook's brand fan pages, which are free to use, have become an essential ingredient in every business's marketing plan.
A recent Mashable article concluded: "Today, Facebook stands on the precipice Google inhabited just before it became a top money-maker. By taking a page from the Google playbook, and aggressively marketing — and explaining — its power to influence buying decisions, Facebook ads could become as essential to 21st Century marketing as the yellow pages were in the 20th Century."
Wednesday, January 20, 2010
Cable Networks: Biting The Hands That Feed?
A big question facing the cable television industry: Can individual cable networks survive if they are forced to stand on their own as à-la-carte products outside cable's bundled pricing model?
These networks were initially offered to consumers along with dozens (now hundreds) of other programming options by the cable operators at a price somewhat reflective of their combined value.
This strategy, called bundling, enabled all these networks to slowly and steadily build their audience and brand recognition. And while not much has changed since Bruce Springsteen wrote "57 Channels (And Nothin' On)" in 1992, the quality was much worse when most of the networks launched in the 1980s. CNN was widely ridiculed as the chicken noodle network, E! was an endless loop of movie trailers and TNT featured mainly old movies.
Today, amidst the mostly dead wood, these cable networks do feature some of the most widely viewed sporting events and original programming on television; and many have become iconic global media brands.
Yet, it seems their future, much like their birth and life to this point, is intricately tied to the cable operators who provide more than half their total revenue in programming fees, enabling them to spend the money to pepper their line up with hits.
Which leads me to the well publicized battles here in New York between Time Warner Cable and Fox, and Cablevision and Scripps over these fees. How can two sides of an enormously successful business relationship air their grievances in such a public manner? (Millions have been spent on newspaper and TV ads.)
In The New Yorker this week, James Surowiecki eloquently describes the consumer appeal of bundling and why à-la-carte pricing could disrupt the entire cable industry.
"Successful bundling depends on the idea that what your are paying for is 'cable television,' rather than a collection of channels. Public fighting over programming costs disrupt that idea. When HGTV says it wants more money for its programming, it makes people who don't watch HGTV wonder why they should pay anything for it at all."
Will more of these battles force a public outcry for à-la-carte pricing and which networks, other than the top few would survive?
These networks were initially offered to consumers along with dozens (now hundreds) of other programming options by the cable operators at a price somewhat reflective of their combined value.
This strategy, called bundling, enabled all these networks to slowly and steadily build their audience and brand recognition. And while not much has changed since Bruce Springsteen wrote "57 Channels (And Nothin' On)" in 1992, the quality was much worse when most of the networks launched in the 1980s. CNN was widely ridiculed as the chicken noodle network, E! was an endless loop of movie trailers and TNT featured mainly old movies.
Today, amidst the mostly dead wood, these cable networks do feature some of the most widely viewed sporting events and original programming on television; and many have become iconic global media brands.
Yet, it seems their future, much like their birth and life to this point, is intricately tied to the cable operators who provide more than half their total revenue in programming fees, enabling them to spend the money to pepper their line up with hits.
Which leads me to the well publicized battles here in New York between Time Warner Cable and Fox, and Cablevision and Scripps over these fees. How can two sides of an enormously successful business relationship air their grievances in such a public manner? (Millions have been spent on newspaper and TV ads.)
In The New Yorker this week, James Surowiecki eloquently describes the consumer appeal of bundling and why à-la-carte pricing could disrupt the entire cable industry.
"Successful bundling depends on the idea that what your are paying for is 'cable television,' rather than a collection of channels. Public fighting over programming costs disrupt that idea. When HGTV says it wants more money for its programming, it makes people who don't watch HGTV wonder why they should pay anything for it at all."
Will more of these battles force a public outcry for à-la-carte pricing and which networks, other than the top few would survive?
Wednesday, January 6, 2010
Ad Spending Is Completely Out Of Whack
Ad Age just published their annual ad spending issue featuring all sorts of charts, graphs and lists showing where advertising dollars are spent and who is spending them. Here is where the ad dollars fell by media category:
Media Spending (dollars in millions)
Broadcast TV 46,385
Cable TV 19,635
Magazine 30,037
Newspaper 23,385
Internet 9,710 (20+ billion with search included)
Radio 9,411
Outdoor 3,729
Total 142,291
More than half the total spending went to Broadcast TV and Magazines. Note Internet spending, third from last, barely beating out Radio. (Would still be third from last with search included, but almost tied with newspaper.)
The following chart is from Forester and shows where people are actually spending their time:
We all know that ad spending is not properly aligned with media consumption. But to this extent? People spend almost as much time on the Internet as they do watching Television, yet the Internet garners only 14% of TV ad spending.
While much of the gap is a result of major brand advertisers poorly allocating their media budgets, another key factor is the dramatic price difference between the two platforms. It's significantly cheaper to advertise online.
Jeff Zucker's famous warning that the Internet would "trade analog dollars for digital pennies" is clearly becoming a reality. It seems quite possible that as advertisers move more of their ad budgets online, their overall ad spend will decline significantly.
Media Spending (dollars in millions)
Broadcast TV 46,385
Cable TV 19,635
Magazine 30,037
Newspaper 23,385
Internet 9,710 (20+ billion with search included)
Radio 9,411
Outdoor 3,729
Total 142,291
More than half the total spending went to Broadcast TV and Magazines. Note Internet spending, third from last, barely beating out Radio. (Would still be third from last with search included, but almost tied with newspaper.)
The following chart is from Forester and shows where people are actually spending their time:
We all know that ad spending is not properly aligned with media consumption. But to this extent? People spend almost as much time on the Internet as they do watching Television, yet the Internet garners only 14% of TV ad spending.
While much of the gap is a result of major brand advertisers poorly allocating their media budgets, another key factor is the dramatic price difference between the two platforms. It's significantly cheaper to advertise online.
Jeff Zucker's famous warning that the Internet would "trade analog dollars for digital pennies" is clearly becoming a reality. It seems quite possible that as advertisers move more of their ad budgets online, their overall ad spend will decline significantly.
Tuesday, December 22, 2009
Local, Local, Local
The amount of deal activity in local media over the past few months has been breathtaking. Dozens of startups targeting local advertisers and the communities that support them have announced marquee fund raising rounds; and almost every major media company has made a move to expand their presence at the local and hyper-local level of the advertising ecosystem.
Much of the activity follows the traditional media model of creating compelling content that advertisers will want to attach themselves to. AOL is dedicating significant resources to Patch, the hyper-local news network it purchased earlier in the year; CNN just announced an investment in Outside.in, a fast-growing hyper-local content and advertising platform; and ESPN is planning a national network of local sports news sites. All are capitalizing on extraordinary marketplace efficiencies while newspapers and broadcasters are weighed down by outdated distribution and consumption models. Interestingly, the success of these three initiatives are somewhat dependent on the promotional and content resources of a big mother ship.
Many of the venture-backed businesses are betting on the widespread shopper adoption of mobile apps. It was not uncommon this holiday shopping season to see shoppers snapping pictures of intended items and price comparing. Startups like Groupon (which just announced a $30 million funding round) and Postabon are creating social, online and mobile deal finding networks featuring local retailers. I recently typed my zip code and "jeans" into the iPhone Postabon interface and was directed to a 50% off sale for Lucky jeans in my neighborhood posted by another user.
Google's ambitions in local have been nothing short of schizophrenic. Just two months after launching a new search product for local businesses, they pulled the plug and were rumored for a few hours to be purchasing Yelp for $500 million. When Google initially announced their plans for the new product, many local media experts questioned their chances of success without a large, seasoned local ad sales force to cajole digital-media-resistant small advertisers. Undoubtedly, Yelp's 300 person sales force was a critical factor in Google's interest. The new rumor is that Yelp is planning an IPO.
The weakness of the newspapers, the emergence of mobile, and the ease of entry into the local conversations are driving all the activity in local.
But local advertising is a tough business. As a well-known local media consultant said, "local is sold not bought." Three things are needed for a company to succeed in local: a great product, significant capital to drive awareness and, most importantly, a big local sales force. The Yellow Pages became a $20 billion category, dominating local local advertising for years, based in large part on a famously aggressive local sales force numbering in the thousands.
It will be interesting to see who gains traction in 2010.
Much of the activity follows the traditional media model of creating compelling content that advertisers will want to attach themselves to. AOL is dedicating significant resources to Patch, the hyper-local news network it purchased earlier in the year; CNN just announced an investment in Outside.in, a fast-growing hyper-local content and advertising platform; and ESPN is planning a national network of local sports news sites. All are capitalizing on extraordinary marketplace efficiencies while newspapers and broadcasters are weighed down by outdated distribution and consumption models. Interestingly, the success of these three initiatives are somewhat dependent on the promotional and content resources of a big mother ship.
Many of the venture-backed businesses are betting on the widespread shopper adoption of mobile apps. It was not uncommon this holiday shopping season to see shoppers snapping pictures of intended items and price comparing. Startups like Groupon (which just announced a $30 million funding round) and Postabon are creating social, online and mobile deal finding networks featuring local retailers. I recently typed my zip code and "jeans" into the iPhone Postabon interface and was directed to a 50% off sale for Lucky jeans in my neighborhood posted by another user.
Google's ambitions in local have been nothing short of schizophrenic. Just two months after launching a new search product for local businesses, they pulled the plug and were rumored for a few hours to be purchasing Yelp for $500 million. When Google initially announced their plans for the new product, many local media experts questioned their chances of success without a large, seasoned local ad sales force to cajole digital-media-resistant small advertisers. Undoubtedly, Yelp's 300 person sales force was a critical factor in Google's interest. The new rumor is that Yelp is planning an IPO.
The weakness of the newspapers, the emergence of mobile, and the ease of entry into the local conversations are driving all the activity in local.
But local advertising is a tough business. As a well-known local media consultant said, "local is sold not bought." Three things are needed for a company to succeed in local: a great product, significant capital to drive awareness and, most importantly, a big local sales force. The Yellow Pages became a $20 billion category, dominating local local advertising for years, based in large part on a famously aggressive local sales force numbering in the thousands.
It will be interesting to see who gains traction in 2010.
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