Ad Spend Trends in the US

Executive Summary: A quick check with *you* on your thoughts on media and ad spending in the US. The objective is two fold- identify what you believe are the factors driving the trends, and then seek your forecast for this trend.

Trend: Advertising Dollars

I attended a conference where a respected businessperson emphasized a trend in the media industry. Ad spend in online channels was not growing the overall pie in terms of dollars. Instead the online channels were cannibalizing other channels. So the question arises- is there a disssonance between the change in the size of the pie, its slices, and consumer/ end user relevance?

Older, publicly available statistics are available here:
1. Fred Wilson:
http://www.avc.com/a_vc/2010/06/ad-spend-trends.html
2. Hal Varian:
http://www.theatlantic.com/business/archive/2010/05/a-google-eye-view-of-the-newspaper-business/56360/1/

Some Macroeconomic Factors

1. Are economic conditions factors in terms of the overall ad spend pie? How?
2. Are demographic trends factors in the stagnation of the overall ad spend pie? If so, how do these trends play out in terms of the slices of the pie?

Marketing Teams as Factors in Ad Spend Shifts

I also noted some opinions a few years ago that the move of marketing dollars from traditional media to online media would be slow because of deep, embedded marketing and agency relationships, as well as marketer mind share.

Consumer/ End User Behavior

1. Has the user's behavior across the various marketing communication touch points, even with the addition of online media touch points, changed?
2. Has the user's reaction to these marketing communication touch points changed over time?

What do you think?

Smartphones, Hypercompetition and Integrated Marketing Communication

Executive Summary: You are a second ranked player in a hypercompetitive market. You learn, from an independent research house, that your customers are more likely to buy your products than your competitors customers are likely to repurchase theirs. What do you do? Do you utilize this in your marketing communication? From the Desk of A-Kick-in-the-Shins-Does-Not-Always-Save-Nine. :-)

The Statistics

While looking at statistics toward structuring a perspective on industry trends, I came across an interesting study on customer loyalty for smartphones, where, even though the iPhone outperformed Android phones in NPS (Net Promoter Score- a Bain methodology) metrics, (marginally) more Android users are likely to buy a similar device, compared to the number of iPhone users' likely to repurchase an iPhone.

 

Waiddaminute? Did you read that right?

 

The Communication Opportunity

 

Given the hypercompetitive smartphone market, you would think the Android marketer has hit the jackpot. You can imagine Google Android folks rushing to their agency with a new brief to launch the next multichannel campaign (broadcast, web, etc.) in no time.

 

You can even imagine a few briefs ("Android users keep coming back for more") and a few advertisements:
1. Android user sees a store sign, "New Android Phone" and buys one, while iPhone users are shown getting their grip right for the iPhone, or,
2. Android user gets another Android phone as a birthday or a Valentine's Day gift, "I always wanted another Android", or,
3. Voice over wraps up with "Even when independent researchers praise the iPhone, they can't help but admit that more Android users are likely to buy another Android phone, than there are iPhone users willing to buy another iPhone."

... and many more!

Some Structure and Strategic Thought

 

The standard approach may be pretty simple in the abstract: Corporate Strategy -> Market Strategy -> Communications Strategy -> Portfolio of Communications Tactics. However, things aren't as straightforward in the "real world", are they?

If you were an Android marketer who finds this statistic, you would consider a few things, not necessarily in a top down, structured manner:

 

1. Source and quality of information:
Is the source and quality of information firmly in your corner? Well, you'll take a firmly independent corner too, wouldn't you? It’s more than just checking if your competitor can throw a more effective/ damaging response with the same source of information.

 

2. Timeframe: Does this lead to a "multi-period game" over advertising where you do not win, or you have no first mover advantage, or both parties end up in an expensive stalemate with a negative outcome for you? Coke vs. Pepsi advertising is an example. Also, think about Pepsi stepping back from Superbowl advertising in 2010.

 

3. Communication Themes: What is Android's driving theme for the season or for the year? What is Android's multi-year communication and branding strategy? Does this drop in the ocean create ripples that turn in tsunamis, or should this drop be assimilated quietly using different tactics?

 

4. Portfolio of Tactics: Does the Android team have a portfolio of tactics aligned with its communication and branding strategy? Does the portfolio explicitly accept or reject this opportunity?

Digging into the Details
Let’s dig into a couple of the items listed above.

Timeframe:

Lets take one question- Do you think there are season spanning advantages to pushing the message? Here are some hypothetical situations that elaborate upon this. Say, it's the holiday season, and Android launches the campaign based on this research. Does Android have time to make an impact on sales? Does Apple have time to respond right away and nullify the advantage? Can Apple hit back harder around the same theme at the next key sales period?

The Source and Quality of Information:

The study, using the Net Promoter Score methodology, declares that the iPhone outperforms others in user loyalty:

http://www.zokem.com/2011/01/in-the-us-market-iphone-outperforms-other-mobile-platforms-in-user-loyalty-by-a-wide-margin-android-is-second-blackberry-fourth/

Given the number of iPhone users that have stuck through a lot of thin (network, antenna, cracked case, etc.) this should not be surprising. However, as you scroll past the Net Promoter Score based results of Mobile Platform Loyalty Ranking graph, and down to Repurchase Behavior graph, you would note an interesting result.

89% of Google Android customers would buy a similar device in the future. Compare this to 85% of iPhone customers being willing to by an iPhone in the future.

Huh?

Now, there are various perspectives to this:

1. The iPhone has set very high expectations and is doing a fantastic job keeping its user engaged.
2. Android targets a different customer segment than the iPhone and phone’s pricing could be a factor. (Perhaps not for long-http://www.pcworld.com/article/219712/cheaper_iphones_why_apple_might_risk_its_brand_identity.html)
3. Also, iPhone’s AT&T exclusivity (for this study period) could be a factor in Android's stats.

We can come up with a few more as we think through this. However, what do you think?

Sustaining a Brand Conversation: To Strategize, or not to Strategize, about Social Media? A Note to Brand Marketers

Why should you care about the Social Media industry beyond what you are doing in it? Why should you care about how it evolves?

You care about sustaining a Customer Centric Conversation with your customer. That's why.

You are already a step ahead of the competition if you are asking these questions.

Some might question why we need to think about market structures, channels, consumer behavior, and returns on investment in the Social Media industry. Fair enough. There is enough activity in the hyper-competitive Social Media market right now for folks to dive in and get a lot of the work done quickly in funky, interesting ways, while helping the market evolve as a byproduct. We could even discount research that discounts first mover advantage.

Recently, Facebook surged past MySpace in Monthly Unique Visitors. If that news made you wonder how you are impacted, or how your company's busy work in Social Media is impacted, you are asking the right questions.

If You want to sustain a conversation with your customer, without being distracted by the ebb and flow of the social media buzz around you, you know you want to tie in your social media tactics with strategic market insights.

Instead of steps that assist your journey toward an effective social media presence, your search leads you to information on how to get things done. Lets change that. Right here. Right now.

Here are four thought enablers that help you cut through the clutter to formulate a social media strategy.

The Interplay between Marketing and Social Media:

1. Marketing is currently following Social Media: What we define as conversational marketing right now, is just marketing catching up with social media. Social media can be abstracted as a process of developing new channels of communication. How you leverage these channels is driven by your brand. Marketing in these channels will mature when brands begin to consistently leverage the innovation in channels for improved resonance.

2. Marketing Future 2.0 goes beyond Web 2.0: Marketing has a few steps to take before it truly takes off, and leaves social media behind to become a platform. I will hold on my vision for marketing here.

3. The Social Media Industry is a Market: Social media will become a platform and will have a few dominant players like platform markets do. However, the innovation game is not over yet. While some players have taken an early lead and have shown the legs to innovate, social media tools have not reached a communication channel innovation plateau yet.

4. Value: Value, value, value! How do we justify social media spend to a corporate? How do we tie it into the brands, say, in terms of a Brand Equity Pyramid? This is the outcome of some ruminating on my previous blog here: http://randomjunkyramblings.blogspot.com/2009/06/brands-economics-blink-twitter-facebook.html

Needless to say, the note assumes that you already are pursuing social media opportunities for your brand. If you do not have your feet wet yet, you are welcome to read some of my previous posts below for some ideas- I would heartily welcome a conversation on those points of view.

http://randomjunkyramblings.blogspot.com/2009/06/economics-brands-blink-twitter-facebook.html

This loops us back to the next post that started this train of thought, proving that Execution -> Metrics -> Strategy are not linear, but form a circular reference, and spiral into greater maturity as the industry matures. Therein lies the risk and the reward.

While I am at it, here's a blatant plug: please feel free to contact me for more! You know how to find me.

Psst... Watch out for my Twitter game- BigBirdBots!

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Consumer Insights from News: Market Sizing

Three events this year have generated a lot of interest from consumers:
1. President Obama's Inauguration
2. Iran Elections
3. Michael Jackson's demise

There are interesting insights to be gleaned from analyzing patterns in data across channels that deliver news -or music, in the case of recent tweets over the Michael Jackson tribute song- to the consumer.

Kick off for Rigorous Analysis?
Keeping thoughts of rigorous analysis aside- how about plotting each of these event on 3 axes? These three events can be compared to other, more "regular" events like the NBA finals. The key point to note is that some of the delivery channels are pretty nascent and they may not have a large universe of comparison points.

The Objective?
The deep dive may help size the market for various solutions, like developing quick reaction advertising patterns that respond to breaking news, to more effective tools for the media and advertising industry. Of course, from experience, I would like to emphasize the sizing can only supplement your own acumen about the market opportunity.

What do you think?

Note: Updated with the 3 axes plot approach to kick of analysis.

Consumer Behavior and Robert Pittman on Investing in Media

Consumer Behavior
Robert Pittman had some interesting insights on consumer behavior. He provided an “action oriented” view of Maslow’s hierarchy by citing convenience and branding as key components of a consumer’s decisionmaking.

He defined convenience as physical, tangible productivity tools and branding as a means to prevent switching. Applying that to internet tools/ properties/ networks, the key trade off is effectively the relative “delta” of convenience vs. switching costs.

Advertising channels and consumer behavior
Robert pointed out that the internet is not killing TV, its really killing newspapers. Some thoughts put forth around this idea:
1> Pricing: He compared the cost per thousand impressions between TV/ radio and newspapers. He then questioned the rationale for the market difference.
2> Change in spend across channels: He presented data that highlighted the marketing spend across newspapers, yellow pages and the internet, with newspapers currently garnering more than twice the ad spend on either the internet or the yellow pages. Change in marketing tactics to adjust to the internet as a medium has not been drastic. Given the theme, this presents a tangible opportunity in the internet media segment.
3> Nature of advertising channels: The cable TV industry is larger than the broadcast TV industry; however, the cable TV industry is quite fragmented. This creates a difference in how advertisers approach these two channels.

Some takeaways
1> Critically analyze the value of internet properties
Is the internet properties’ lack of stick just a function of low switching costs?
Do internet properties really make us more productive or more effective as they interweave into our daily life?

2> Expect unrelenting, inexorable change
Citing the fact that TV show ratings lead their revenue impact, Robert sees a similar trend in the internet media. The internet is truly impacting consumers and consumer facing companies. Adapting to this change in consumer behavior will define which companies fail and which survive.

The talk led to questions, as usual:
1> The web and TV: How do we categorize the impact of online TV series viewers on series like The Sarah Connor Chronicles and Dollhouse? The former got the axe despite as many as 7 million viewers following the series online.
2> Channel relationships and Ad spend: Are the industry structures in place for the media planning industry to move quickly, seamlessly and effortlessly across the various advertising channels? Is it just a function of channel relationships, or it is also a function of the industry still being in the process of wrapping their arms around opportunities in the “new media” segment?

What do you think?


The Usual Disclaimer: This is purely a knowledge sharing resource and I have been careful to protect panelist/ speaker interests. Ethically, context is everything, and I will gladly retract anything that affects the parties mentioned. Call this my mini OpenCourseWare, if you will, where Open signifies life experiences.

I am not selling the product...

...just the message:
http://www.youtube.com/watch?v=m5xCGZuvhWI

Notes on first impressions of the ad seen on CNBC during Lunch:
1> The background score by Gustavo Santaolalla has parallels with Indian music.
2> Its a 90 second spot. The rationale? Apparently, time is the only true luxury.
3> This is an interesting brand initiative- and is the first Louis Vuitton TV ad ever.

What do you think?