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The Future of Ad Agencies Roundup

Friday, February 26th, 2010

“No longer can advertising agencies afford to rest on their creative laurels to pull dollars from CMOs.”

This according to Sean Corcoran (@SeanCor), analyst at Forrester Research, last night at #MITX’s “The Future of Ad Agencies.”

It came as no surprise that Forrester’s research indicates that agencies are struggling to find their place in the world of multi-channel digital marketing and to retain their role as a “one-stop-shop.”

According to Corcoran, a majority of CMOs – the agency’s typical client – are wary of single sourcing their marketing dollars.  Instead, they are searching for discreet solution providers – SEM/SEO specialists, communications, etc. – to provide bandwidth outside of their traditional agency relationship.

“Most CMOs don’t have confidence in their agency to provide services outside of their typical relationship,” Corcoran mentioned. And for good reason.

“Most agencies typically struggle with analytics and how to provide them to their clients,” he added.

Most interestingly, Cocoran stated that despite his urging toward his agency clients to adopt much more robust analytic infrastructures to address their clients’ demands for accountability and optimization, some are reluctant as they feel they cannot monetize that exercise. “Kind of a Catch-22 on their part,” he said.

Yet despite agency deficiencies, Corcoran was quick to note that despite CMOs’ unwillingness to provide the entire marketing pie just to one agency, they were just as reluctant to take strategic and creative elements from their primary agency and trust this deliverable to a more specialized provider – such as an interactive agency or a PR firm with diversified offerings.

Follow the Dollar

Despite all the talk of the digital realm taking over the ad world, Corcoran presented some startling numbers when it came to advertising spend.

Magazines still hold the lion’s share of ad revenues over all other channels with gross spend of roughly $29b USD – an off-putting revelation given the state of the current plight of publishers such as Reed Business Information and Conde Naste.

Television clocked in at around $26b USD.

What really got heads turning was the prediction that web ad revenues would exceed $50b USD in four short years. “By 2014, we could be seeing the web clearly dominate,” Corcoran added.

Meeting of the Minds

Following a presentation by Forrester’s Corcoran, a panel of advertising luminaries took the stage to wax candid regarding the current state of their industry, new technologies, client challenges, and their top priorities.

The following sat:

While the panel provided insight into the minds of the agency leader, one particular anecdote stood out.

Larry Weber, an internationally renowned communications genius recalled a recent brand experience that perfectly encapsulated the marriage between creative and technology.

He recounted that one recent Friday evening he received an email from Amazon indicating that the online retailer had invited him to view some online footage of his favorite author, John Updike, doing a reading of one of his novels at Harvard.

“So since I don’t have a life, I made a drink and sat down at my computer,” he said with no particular jest.

Ninety minutes later and after numerous video views, and not to mention $150 in book purchases, Larry was finally done. More important, according to Larry, was the data Amazon had now generated about his surfing and purchasing interests.

He added, “Agencies are now responsible for creating experiences for consumers, like Amazon did for me.”

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Phil Sawyer in MediaPost: For Digital Publishers: Ditch the Survey and Embrace the Scientific Beauty of Web Analytics

Thursday, January 28th, 2010

Conversion Associates’ own Phil Sawyer has been published this morning in the digital edition of MediaPost.  The article bemoans the continued reliance by many advertisers on “last century’s research methods,” specifically surveys.  While Sawyer acknowledges, “Survey research, done right, is still a valuable tool for print and broadcast advertisers,” he insists that web analytics harnesses the “great advantage of the Internet” (its measurability), and is something digital advertisers must fully embrace if they are to be successful in the future.

Phillip Sawyer is an Advertising Effectiveness Consultant at Conversion Associates. Previously he was a senior vice president and Director of the Starch Advertising Research division of GfK Custom Research North America, the international advertising, marketing, and public opinion research firm. He was also the editor of Starch Tested Copy, a newsletter on advertising effectiveness, published by GfK.

Click here to read the entire article.

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Phil Sawyer in AdAge: Why Most Digital Ads Still Fail to Work

Wednesday, January 27th, 2010

Phil Sawyer, resident Advertising Effectiveness Consultant here at Conversion Associates, was published today in Advertising Age. In the article, Sawyer details the flaws that still persist in digital ads despite the wealth of research done in the field. Among his seven mistakes that, research tells us, afflict so many digital ads today include:

1. They are too complex.

2. They use Flash for the sake of Flash — not for a clear purpose.

3. They are difficult, if not impossible, to read.

4. They are bereft of benefit statements.

“The problems are due to creative efforts that do not suit the medium and the refusal to employ research tools that can identify creative problems and how to fix them.”

Click here to read the entire article.

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How is Content for Free Defined?

Tuesday, January 5th, 2010

Throughout the year there has been much talk surrounding media, specifically newspapers (but also television, see Time Warner v News Corp), about how they won’t be giving “free” content anymore, or that the “free” access is killing them. But what are they talking about, and how are they defining “free”?

I suppose the convention is that “free” means that the reader/viewer of content does not pay a price up front to experience the content. The issue here is that the logic doesn’t follow that this means that a) the producer loses a sale of a price of admission, or b) that the producer loses money. In fact, where there is a large concentration of readers/viewers the “free” model is at its best – see US network television over the last 50 years. But as we know, this audience size is getting steadily smaller, and funneling ever so slowly into tighter niches (e.g. the Golf Channel).

Again, I think you saw the music industry struggle with this. Because I download a Metallica song for free, did not mean I was going to buy the album for $15, and in those pre-iTunes Napster days, it may have meant that I was actually just trying to sample some songs from my dorm before buying it on Amazon (I mean really, does a 30 second sample do anything?). And of course there is the argument that the increased exposure gained by offering the recordings free has proven in some cases to generate more money in other areas – like touring (a great example is the band Radiohead, which released an album at name your price).

Indeed the publishing industry is not the music business. But, I do believe that when we consider what “free” is we need to be careful. Free for whom? If a publisher puts ads next to content, that isn’t free content because the publisher is harvesting my eyes for revenue, so you’re welcome. So, Rupert, the Wall Street Journal, because it is free in some areas, gains more readers, which means your impressions are higher, and you could charge more for advertising to the larger audience. So the question then becomes, if I charge and reduce the visitors and impressions, can I increase revenue of the lost impression value through subscription revenue? Probably not, yet, I think what becomes interesting is that by creating this Wall Street Journal paid subscriber class, you can basically create a club. This club has a higher value than those that would view free content, why?

It comes down to what the real value of online publications should be – repeat visitors and average engagement in the medium of that class. Total viewers is still interesting, but as an advertiser I want to reach a specific demographic consistently, I’m going to want highly engaged classes that have a higher likelihood of seeing my ad more. Further, proving this to an advertiser online is very easy, the Wall Street Journal using web analytics can effectively be over the shoulder of different classes of readers (based on subscription/non-subscriber, male/female, etc.)

Because of this notion of identifying deeper engagement through demographic and “readership class”, what follows may be obvious. The key shift needs to become that a publisher or a producer no longer needs a large audience to generate value to an advertiser. In fact, often a concentrated and specific audience is more valuable as the advertiser’s message is not only directed with precision and accuracy, but also in these cases of specific match of advertisement and content, ads begin to lose that “interrupt” vibe, and can, dare we say it – begin to be truly informative.

It’s no longer about finding the mass of eyes, it’s about finding critical mass of the right eyes – and having the tools to do it. The publishers and agencies that understand and execute this first will win the century. When simple performance based / lead generation models can proliferate (as you see in the pay-per-click of AdWords, or the pay-per-lead model of a site like Trip Advisor) you start to see an incredible amount of opportunity for the entire publishing industry.

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Present.ly Improves Internal Collaboration

Friday, December 11th, 2009

A few months ago I was thinking about how to use Twitter for my internal corporate communications. I wanted to use it in two ways, 1) to get the “stream of corporate consciousness” by giving an outlet for employees by encouraging them to post new ideas, and 2) to gather different departments into a subject and create a live open sound board.

Now, I’ve used basecamp in the past, but something was missing there – we used it for a few weeks but it just didn’t stick, and many of my team were already on Twitter and were becoming accustomed to this type of communication or dialogue.

What I wanted to do was to have a general corporate feed, and then various groups or lists by department, even on project. As a manager this would be a great way to encourage more open discourse and also, leave an important internal record regard process and efficiency. I, not an engineer, and armed with remedial web coding prowess, was only able to hack a corporate feed together, but couldn’t – easily – get the internal system to be separated from our public Twitter initiative.

I was very concerned about doing something wrong or having something break pushing our internal communications public. Secondly, I was additionally concerned that the alignments I created were going to make it difficult for my teams to be on Twitter & working internally. So, after a few tests and excitement from the staff, we tried the hack, but for many of the reasons above it didn’t quite work and we resolved to return to using the basecamp company Wall.

And on Monday, at Web Inno 24 (twitter: @webinno #webinno24) I sawpresent.ly, and spoke briefly with its enthusiastic CEO Yoshi Maisami (twitter: @yoshi123)and damn if he didn’t make the exact program I’d been thinking up, but has made it about 1000 times beyond even my most Huxley-ian dreams. I have just begun to work with this system for a week and will be rolling it into our corporate culture in steps beginning next week.

I think this is an especially strong program where groups of people – especially those that may be in different departments (e.g. IT & design) – can discuss a project and get questions out faster. Also, it’s advantage for project management keeps a record so executives can quickly scan through projects and teams to get a very quick real time sense on what’s going on. There is something in the flow of it all that allows the utility of these short posts to be very strong here – very different than what I’m accustomed to with usual project management software, which tends to be more quantitative in reporting progress.

What I like with present.ly is the potential of putting the facts in context and getting, as best you can in written word, the tone of of the team (are the frustrated, joking with each other, etc)? As a manger I think this is a great way to spur communication and internal esprit d’corps.

I will not get into further details into all the specific features of the program (you can view here from their website), but important features I found that add to the twitter basics is the ability to attach files to posts and the url shrinking built into the updating bar, basic things that present a nice empowerment of the kind of “what are you doing” interface we’re accustomed. Present.ly is also ready to integrate into a variety of mobile apps, which is great, especially for salespeople and execs, who are constantly on the move and may need to give quick reports back to the home office while dodging traffic on Park Avenue, or running to catch that plane, or perhaps most importantly from the golf course (ed. note – I do not condone using a cell phone on golf course, in fact if you need to use it on the course, don’t tee off).

Finally, as an entrepreneur and one that takes a strong interest in innovation, specifically in user interface design it simply is one of the best programs that I’ve been working with in the last couple of months. Further, I really think the basic revenue plan has a lot of legs (and one I had thought Twitter would begin – and maybe they will) – which is that the program is free to use as a SaaS, but for those companies (or neurotics) who need higher security and want to keep communication behind the firewall, fees will apply.

I mean folks, take 5 of your colleagues spend 20 minutes to set it up and you’ll be surprised. Get it here:http://presentlyapp.com/

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Analysis: Rupert Murdoch & Eric Schmidt

Wednesday, December 9th, 2009

Analysis: Rupert & Eric, Things May Be Closer than They Appear
The first bit of December has shown some interesting gestures and proclamations on the future of newspapers laid out by Rupert Murdoch and Eric Schmidt, hosted by Mr. Murdoch in his WSJ. Is it true that we are preparing for a “high noon” scenario pitting digital v. print for a battle to the end? Will Rupert tell Google to take WSJ links down, nope – that’s hard to do when Google provides so many impressions to you (and last I checked the model is on CPM) – but this is where things begin to get interesting. Where is the marriage here? They need each other, but will need to learn to manage their companies’ collective power and ego to make it work – it’s like Cary Grant and Katharine Hepburn in A Philadelphia Story.

Google needs: more inventory of quality content to place higher quality ads against. The worst slap to Google wouldn’t be prohibiting WSJ links from its search, but prohibiting its AdWords Content clients from being able to purchase display ad space in the Wall Street Journal (and its brethren).

Further, I believe that Google’s own data is pointing to what Conversion Associates sees as well: That for most advertisers, the post-click performance that comes from sites with high quality content (which does not mean, but can be a high impression website), tends to be higher than those places where the content is a feed. This is why Eric Schmidt is saying, what we have been discussing with many of our publishers that the focus of innovation (to be digital is to carry the burden of having to innovate as a business process) must be placed not on “traffic” numbers – so important in the CPM business model – rather, on discovering new performance metrics that surround visitor engagement.

News Corp needs: to discover a method to increase the price of their digital ad inventory. This process must begin with getting out of their own way, as at present Mr. Murdoch seems to retreat on the idea that the present inventory isn’t worth more today than the price News is chargeing, for example the following statement from Mr. Murdoch: “A business model that relies primarily on online advertising cannot sustain newspapers over the long term. The reason is simple arithmetic. Though online advertising is increasing, that increase is only a fraction of what is being lost with print advertising.”

Dear Rupert, please apply what you know – When the arithmetic doesn’t work in your favor, buy the teacher and change the question. So what he says is true: the prices of CPM continue to go down as more Ad Networks proliferate and struggle to produce quality ads against the quality content. Rupert, your ad serving is not worthy. Raise the price of the ads, especially to the Ad Networks – like Google – to advertise on your site. But we know Eric wouldn’t like that would he?

The second thing, identify what Mr. Schmidt clearly recognizes, and oddly Mr. Murdoch seems to be skittish about – quality of the engagement that the WSJ and other strong publications produce – and that advertisers should and will be willing to pay more than what they do currently to get this quality. The present hurdle today we believe to this whole conversation is the process of proving this lesson, this reality, to the advertisers.

We also believe that the publisher needs to become more involved as a business to innovate methods where they control and present these results rather than relying on 3rd party ad networks, like Google. Granted, we also believe that there is a model to pay for the quality content. However, based on the results we see for our clients coming out of publishers with quality content, the gold is in the hills of simply charging more for the existing advertisements.

The solution is to innovate and improve relevant ads and innovating on improving relevant ads to readers over time and for the publisher to control more of their own inventory, and finally improve thier ability to communicate results to the end client.

Oh, do you see that that last sentence of advice to publishers is exactly the Google playbook. To restate, Google over the last 6 years:

* 1. publish relevant pages for visitors,
* 2. obsess about the user’s concept of what is “relevant”,
* 3. attach this to a measurable digital event, or proclamation of user action (i.e. a click),
* 4. develop a system to allow this event to be the center of a revenue model, rather than on the number of visitors,
* 5. create a platform to show advertisers their results (AdWords reporting, later Google Analytics),
* 6. in the process of ad creation force best practices (you can’t use superlatives in adwords, and automatic split testing available),
* 7. advertisers see the value, users experience relevance,
* 8. go Scrooge McDuck (at least this step should be familiar to Mr. Murdoch).

At the end of the day, it is important to see what both men agree on: We are at the dawn of a very exciting time in journalism. The sooner the business side of the house can catch up with better models of selling advertising the quicker publishing can thrive. At the end of the day, it’s still about making pages and producing great quality to your readers, but also, expressing to advertisers that your happy readers make happy customers for them. It can be done.

Relevant Links Here:

WSJ (may need to be a subscriber)

Eric Schmidt’s 12/1 Op-ed: http://bit.ly/6AGqB4

Rupert Murdoch’s 12/8 Op-ed: http://bit.ly/717IeN

Analysis from Silicon Valley Watcher, Tom Foremski (fmr of Financial Times): http://bit.ly/4MBVGM

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Newspapers: Go Offensive!

Wednesday, September 16th, 2009

A recent article in Advertising Age, Good Newspapers Can Survive if They Break Their Old Culture, raises the point that the future of daily newspapers is one where they exist but on a smaller capital base and the key is to cut costs, “We can certainly save newspapers, but only if we continue to cut costs,” says Mr. Klein. While cutting fixed costs is important, the present dialogue surrounding newspaper seems to be lacking in the idea of increasing revenues as well. Further, where ideas are being sprung with regards to revenue generation, he focus seems to be reserved to two options: 1) to charge higher subscription fees, and 2) produce a model of micro-payments on content articles (see Google suggestion at Harvard’s Neiman lab here). While each of these strategies are an important, what seems to be left behind is the simple fact: charge more for digital inventories.

Our data suggests that performance of traffic from either major publisher (i.e. nytimes.com, or wsj.com), or hyper-local/hyper-niche publications can produce at or better rates of conversion and action than even search based traffic for many different companies. Further, display ads to audiences is an especially critical piece of marketing for companies, especially those with new products, where product/service lexicons are too young to produce viable search terms. There the best option is to educate through clever display campaigns in a specific demographic.

The barrier to publishers’ abilities to charge more and increase revenues per impression or click (even action), have two distinct barriers that we see. These two barriers are uniquely linked and we are seeing some models that are evolving that suggest that these is true opportunity to revolutionize the unsustainable digital display content status quo. The main culprit hurting publishers are the ad networks which control content display ads. In the basics of this model a publisher pays for a 3rd party network to serve ads on the content of its pages. At this point there is a revenue split for the ad servicing, so the publisher is already losing revenue. Secondly, the publisher loses because there does not exist a relationship between the advertiser and the publisher. Further, because the advertiser is in negotiations with the Ad Network to produce as many impressions as possible, often times the advertiser never receives a list of results broken down by individual publishers. So publihsers whose content and inventory widly outperforms others – which is more likely than not – where the content is better, and generally more expensive to produce, the Ad Network reporting systems put the publisher at the mercy of their reporting. Do we see this often in print?

Yet, where this model really gets nasty is with the actual fact that the creative – and the research that could result – suffers. The present industry standard click through rate (clicks from a served ad) is .02%. In our experience, where we have designed ads specific for a publisher (like the nytimes.com) we open with click trough rates at .12% sometimes higher – that is over a 600% improvement in visitors, which is especially important if the advertiser purchased the inventory on a CPM model. Instead, in much of today’s model, the publisher’s ENTIRE inventory gets devalued because ads are either irrelevant to the demographic, or cheapen the publisher’s valued content by cheap-o creative (have you ever seen one of those “click the monkey” ads on the New York Times?)

Publishers: Take Control of Your Inventories, Own Your Clients, and Help them get more out of your inventory.

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How Online Advertisers Can Save Money and Learn from the Publishing Industry

Wednesday, September 16th, 2009

“When I was fourteen years old, my father was so ignorant I hated to have the old man around. But when I was 21, I was surprised to see how much he had learned in seven years.” -Mark Twain

We are in the midst of a revolution, we’re constantly told. The Internet has radically altered the ways we entertain ourselves and how we shop, write and think. It has fomented a “groundswell,” and the “long tail,” and it has both engendered and mortally wounded scores of industries.

Few can dispute that the Internet has reshaped the world, but it is a mistake to think that the Internet is completely distinct from traditional media — and that those who advertise via the Internet are relegated to constantly plowing new ground. The truth is that there really is nothing completely new under the sun because everyone and every thing has an ancestor — and that’s particularly relevant when we’re talking about audience reactions to sales pitches. No matter how fresh and sparkly the new medium, reaching human beings is still the ultimate goal of online advertisers, and human beings haven’t changed that much in the past 20 years. They still have hands, organs, affections, and passions, and they still weep and laugh. And they still react to advertising in pretty much the same way their parents did 50 years ago, even though the transportation of that advertising has changed.

And this is where Conversion Associates and I converge. For 20 years I have conducted advertising-effectiveness research and consulted with companies in a wide range of industries to improve the power their print, television, and Internet advertising. And I became attracted to Conversion Associates in a very early conversation when it became clear that they were interested in, as they’ve said “building bridges between the traditional and the digital media.” You don’t hear that expressed very often.

If you believe that the online world is so vastly different from, say, the traditional print world, consider these points, demonstrated through rigorous research on both print and online advertising:

* A weak response to advertising is almost invariably a product of the creative execution of the ad and not the medium in which it appears. If your ad isn’t generating sales or calls or engagement, don’t automatically blame the publisher or site. It’s usually the ad that needs to be overhauled.
* The most common mistake that advertisers make is to assume that the audience is as interested in the subject of the ad as the advertiser and thus is happy to embrace the most complex presentation of the material. Complexity is the enemy of advertising; simplicity is an online and offline ad’s best friend.
* Those who combine simplicity with a clear, powerful, and concise statement about product benefits almost invariably attract and hold the viewer’s attention — and eventually sell product.

These are time-tested principals, and, yet, consider how many advertisers pack their ads with unimportant, extraneous information, and how few advertisers explicitly and concisely spell out a benefit. If you look at online and offline advertising with just those last two principles in mind (and there are many more important ones), you’ll quickly see how rare really effective advertising is.

One quick story about advertising. About 10 years ago I spotted a small-space ad in The Wall Street Journal. It featured four drawings of different styles of dress shirts and the headline, “Great Shirts. Great Prices.” The body copy of approximately 75 words expanded on the “great shirts” theme — by describing in full how well-made they were so that they were light, but extremely sturdy and would last a long time — and gave the price, $29.95. The ad fulfilled my requirements for a successful ad: a four-word headline with simple pictures, combined with a clear statement of product benefits. And the description fulfilled my requirements for a great shirt. I called the 800-number, and the owner of the company answered. I placed an order for three shirts and then asked, “By the way, how’s the ad working for you?” He answered, “That’s the last time you’re going to see that ad for a long time.” Stunned, I said, “I’m amazed. I”ve worked for a long time in advertising research, and I thought your ad is one of the most effective print ads I’ve ever seen. Why are you pulling it?” He said, “Because I’ve gotten so many orders that I don’t have time to fulfill them all.”

Great advertising works — but very few advertisers have the luxury of being able to directly tie their sales to one discrete ad or campaign in order to gauge the ad’s effectiveness. Goals for an advertisement vary, and the most useful system for advertisers is one in which the client defines the goal and then uses a system that accurately and concisely measures the extent to which the ad met the goal. That’s what attracts me to CAP.

While the Internet is revolutionary, the path through the Internet was paved decades, and even centuries, ago. The really powerful advertising-effectiveness program, I’m convinced, is one that has immersed itself in history so that it can guide its clients away from the mistakes of the past, master the art of advertising, and triumph in a world that may be in the midst of a revolution, but that still offers generous rewards when energy, intelligence, and knowledge converge.

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Eric Schmidt, Google as a systemic innovator at scale

Wednesday, August 5th, 2009

Recently, in light of the news of Eric Schmidt’s resignation/ouster from Apple’s board of directors, McKinsey & Co*. sent me a news update in my email. Included in this email was this copy of a 2008 interview with Eric Schmidt on “the future of business” (say that with an echo in your head). Damn, if it isn’t still a great read – especially for those of us who are operating businesses that are of or primarily composed of divisions that are web based.

A critical thing I think is lost when people think about Google, is do we really know what kind (archetype) of business it is? People tend to refer to it as a search engine company. Is it not more like a publisher of search results (revenue from ads against content)? Some have called it an advertising/media company and that seems to be true too. But as I’ve grown up under the illumination of G, I think what’s often lost is how fantastic they are at innovation and producing improvements and wonderful mutations of their products and services.

We have heard Mr. Schmidt speak on 70/20/10 rule that they use to manufacture innovations (illustrated wonderfully in this Charlie Rose interview in 2005 – skip to 8 minutes in, Mr. Schmidt defines 70/20/10 at about the 9:00 to 10:00 minute mark – if you don’t know this definition, you should), but as useful as that is to understanding the model. It’s what is said in the 2008 McKinsey interview about why that is the model that is interesting.

I’ve never heard Google defined as well as articulated in this article, I quote the CEO: Google’s objective is to be a systematic innovator at scale.

That is an amazingly bold direction that heretofore they amazingly pull off. They also do so in a number of ways, not just the in-house innovation that brought you email and the AdWords program, but also through intelligent acquisitions that sometimes get lots of press (YouTube), and other times do not (Urchin as basis for analytics).

The bottom line is that due to the increasing physics of the declining costs of manufacture and distribution in the digital world, survival becomes about speed to innovation (and speed to create new models to create revenue around ancillary service, such as the AdWords to Google’s search business and Gmail).

This dips into some interesting intellectual property questions that I will take on later. The faster the mutations of innovation and revenue models, the less important copyrights and patents become. Which, actually can be seen is a good thing. Intellectual property rights are a necessary evil to allow an artificial monopoly on an idea for a period of time so the innovator may make a return. The idea being that this spurs more innovation.

What we’re seeing more with the web is innovation through enthusiasm (open source), and also an increased speed as to what’s new is old again. Anyway, more thought on this, but just to leave the argument open, the question is. Would you rather have the Google search algorithm without the company, or the company in place without the search algorithm? That’s their management genius and I don’t think it’s lauded/studied enough.

So, it’s not what Mr. Schmidt says, “The wisdom of crowds argument is that you can operate a company by consensus, which is, indeed how Google operates?” It is that in the information age this is the only organizational model that will allow for innovation to occur fast enough to compete and win, you must operate through consensus. For how you do that, read the article and see what he says.

*Quickly, I’d like to laud McKinsey & Co for distributing year old proprietary content in an extremely clever way. This type of distribution innovation would do well to be on the to do list of more publishers. Where is the innovation in journalism today? For example, the John Updike obit in the nytimes.com, mentioned his famous article on Ted Williams’s last game written for the New Yorker in 1960. The New Yorker publishes that archive for free and is serving ads against it (albeit they could be more relevant). Oh, and maybe they’ll get an additional impression from you – it is a great article. But anyway – this kind of long tail revenue generation of publisher archives has a lot of small revenue in it. Why else would Google be scanning everything in sight? Oh, to promote the enlightenment of our brothers and sisters…indeed. However, as Mr. Schimdt notes, the long tail is important, but what the internet really does is make the head of the tail more massive. You must excel in both arenas.

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Sir Martin Sorrell: I Want Quantitative Marketing Businesses

Tuesday, August 4th, 2009

Well, Sir Martin Sorrell, Group CEO of marketing communication services giant WPP, wants a lot of companies, that’s his deal.  However, an article describing a recent presentation of his – he, Sir Martin, the best mind in media on media – discussed what is valuable to him in a company. Comparing these ideas/mantras of his against what we have been led to believe is the most important piece (users/visitors/readers), is worth doing.  Two newsworthy items from today articulate a few of his points in ways we should understand in trying to predict where the internet Spindeltop is, or better, how do we make revenue wells more efficient per strike (increase revenue per user/visitor).

SORRELL says: “surveys have found that client companies prize, above all, insights about consumers, which in turn, drive the value of quantitatively-measurable products and services”

News we’re excited to see, proving he’s right: Bit.ly revenue model.

Bit.ly gets it.  Praise be.  Bit.ly, for those unaware is an online “service/tool” that is popular with the tweeters that need to shorten urls to fit in the character requirements for tweets.  While the vast majority of bit.ly users find this to be the prime benefit, what I saw quickly after using it, was that I got more interested in their reports on the links I placed in the internet  They will tell you how many people clicked on your links, and some more advanced data, that can be simply useful.

Ok, so now you know bit.ly, let’s return to the model a sec.  Ok, so whether you are a SaaS or a publisher, you need to understand that length of engagement generally is the most important value to an ad.  This is a problem in the ad-serving model in the internet (another is ad networks, but that’s for another article).  For example, the reason Bloomberg began serving ads in its terminals, was because they saw doldrums in the trading day – traders staring in front of screens for long periods – high engagement.  Also, high engagement of a niche target audience (rich 20-40 somethings) equals ads you’d see in the Robb Report going into Bloomberg terminals.

On the flip, you have something like Twitter.  Twitter’s very existence is predicated on not staying long – to tweet is to be flighty.  So, I don’t know how you take time out of it (from what we see higher time on page creates higher clicks too).  It’s not a very valued ad space, so that contextual ad revenue model is going to be tough because of the nature of the system.

Bit.ly is the first company that we’ve seen that is coming at it in the way we believe more online companies should.  Just package and sell the data baby.  A little can go a long way.  And this also allows Bit.ly to continue to have a free subscription model.

As Sir Martin expresses, insights on consumers drive tremendous value.  Give’em insight packages for dollars.  Congrats to Bit.ly, Twitter will eat you now.

SORRELL says: “having a local focus is becoming more important as with having a global focus”

News we’re excited to see, proving he’s right: YouTube attacking local news (globally).

Can you believe the headline?  YouTube Goes After Local News, Attempts to Sign Newspaper, TV Partners.  Obviously that headline is coming from the web, because it could use an editor.  And, let’s understand I’m taking Sir Martin out of context (slightly) to make a larger point (which is a derivative of his original).  He was referring to global media companies needing to expand and be more knowledgeable locally – all true.  But so do networks and ad models.   This ability is the genius of the Google AdWords model – that they performed this so well – and oh, my they’re doing it again.

This takes us to another Sir Martin point: “We know that consumers spend 20% of their time onine – we also know that our clients only spend 12-13% of their budget worldwide online, that’s a disconnect that has to be eradicated.”

By the way, ‘eradicated’ is a word you use when you’re pretty serious, so I think he’s frustrated with this disconnect in the media world’s approach to reaching their audience.  And in this little story I think you see the smartest advertising company, Google, take on the question, “How do we monetize our video network?” And that they choosing to focus on Local TV.  Just think about that for a second.  Yeah, probably Google has some analytics on that. What’s old is new again.

*Our quotes from Sir Martin Sorrell, are located here (also a reasonable video).

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