Like many of you, I've been spending a lot of time lately thinking about how media is transforming -- and trying to understand what this means for the future of the media industry. The
Internet, the digitization of media and the explosion of electronic distribution channels are changing the economics of the media industry right before our eyes. At its simplest, media is changing
from an industry driven by scarce distribution to one driven by scarce attention. Now that the consumer has so many choices, controlling distribution no longer means that you control audiences. The
consumer (or viewer) is the present and future center of the media world.
This is why media companies are suffering from such extraordinary audience fragmentation, having to work so hard to
capture audiences and even harder to keep up their ad rates. Certainly, the maintenance of ad rates is also under extraordinary pressure from the current financial crisis. But what I think is clear to
most, is that if media companies don't solve their "audience problem" (or "business model" problem) by the time this crisis is over, their businesses will probably be over
anyway. Thus, it is critical today for media companies not only to structure their businesses to survive the crisis over the next two or so years, but to structure them to be competitive in what will
certainly be significantly altered media landscape that values audience attention, not media distribution. Here's some of what I think folks should expect from this new media reality:
Smaller mass media. Audience fragmentation will not only continue, but accelerate. It will be harder and more expensive to truly capture and keep audiences' attention.
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Heavy, inflexible fixed cost structures mean death. Not only that -- but the inability to move nimbly and develop, test, measure and
adjust new media products to audiences in a constant and dynamic way will also mean death.
Exposure-driven ad model dies. In a world
where media distribution is scarce, so are audience exposures. In a world where media distribution is plentiful, audience exposures become plentiful as well and very, very cheap. This is why MySpace,
Facebook and Twitter are killing the CPM-driven model of the current display ad model in the online world. It is only going to get worse. In a world where attention is scarce, value shifts away from
the exposure and toward either unique sponsorship (athlete or sports team) or performance (Google AdSense). Anyone stuck in between will die.
Subscription relationships
become even more precious. Where attention is scarce, those companies that already have access to both the attention and wallets of audiences have a perishable opportunity to hold or expand
those relationships, but they will need to move quickly and aggressively. Whether these efforts look like Jeff Bewkes' "TV Everywhere" strategy or sports teams giving season ticket
holders free hot dogs and preferred parking, it is incumbent on media companies to find ways to hold existing subscriber relationships, at all costs. The advantage that such relationships give
companies over their competitors is enormous, particularly when times are tough. Just look at the ascendancy of cable programmers and their dual revenue streams, relative to broadcast networks and
their ad-only models. Audience re-aggregation becomes critical. As audiences fragment, it become even more important for media owners to participate in
scaled offerings to advertisers. Whether this means more consolidation and more ad networks across different media, scale becomes more essential and in the future it will likely only be achieved
through "re-aggregation" plays that combine access to audiences from multiple properties for sale to advertisers and marketers. As you can tell, I think that our media future is going to
be all about audience attention rather than media distribution. What do you think?
David,
You're exact right, particularly about the 'altered media landscape that values audience attention' and as I mentioned to you previously our online voice consumer conferencing solution (TalkShoe) melded with social media sites is changing this landscape and essentially replacing forums and chat with real simultaneous, bi-directional communications. Engagement levels, which are a higher form than pure attention levels, have doubled since last year! Keep up the great articles!
Dave: I actually think it's a bit scarier - and perhaps you to, but don't want to come right out and say it when that would imply our working raison d’etre is about to evaporate - but I (think I) see technology evolving faster and faster in ways that permit consumers to find what they wish to find, while they avoid what they deem to be annoying at that moment. Hypothesizing from there, I can imagine a near future in which a person who needs a car can avoid ALL car advertisements and mentally log into the ultimate Consumer Car Reports portal, with his most desired options instantaneously registered (cost, resell, mpg, seating), and within seconds CCR delivers the top 6 choices, along with the best 20 places within 50 miles to go finalize an already-negotiated, pre-approved contract.
And the same will be true of news and information - that is, more true than it is already with Cable and Satellite On Demand, RSS, and all the "my-anything and everything" sites.
So - why will we need advertising? And if we don't need advertising (or the agencies and campaigns) how will we pay for free, or quasi-free, anything (network TV, radio). How can this become anything other than life by subscription? And isn't this the opposite of Chris Anderson's vision?
I might have a modest advantage here - I come from the music industry where, complain as we will, we have already experienced this evaporating phenomenon. And though vestiges remain, the entire Industrial Age model is only refusing to attend its own funeral - (as if fortifying the fortress walls makes any difference when the castle is built on the isle of Atlantis).
100 years from now - if we haven't committed societal "S" by some other means (and considering that Madoff grew much of his biz while many average citizens were worried about getting their bath oil through airport security, it appears we are pretty adept at coming up with the options) - then I'm guessing there will still be new products and services. But I would not be surprised to find that the operating principles of introducing and promoting brands in those days were developed by Tobacco marketers today - the people who are not allowed to say anything about their product, show its package, communicate its logo, etc.
I've been thinking lately as I watch many web-sites go from an awful number of ads on a page (5....6..7...) to fewer (in part because sell through is down in this economy) - that the future of online media (if typical display is even a part of it) will be nice pristine pages with perhaps just one ad. It will be a HIGHLY targeted (based on elaborate user profile) ad, but there will just be one that goes to the highest bidder at that moment. What would happen to Google PPC if they offered just ONE ad on a Google search result? Would the reduced supply for valuable traffic cause bidding to escalate enough to generate the same income derived from the the 10+ you currently see today on a popular terms? After all a user can generally only click on one ad at best... This isn't something Google can effectively test in a sandbox because it involves global supply and demand. They'd need to effect the change globally and for an extended period to really gauge the longer-term impact. Just like you see demand driven spikes in today's bid management for certain words like "stem cell", imagine what highly constrained supply would do -- for advertisers, this is a key reason why dominance by one SE is scary. I know... I know.... other SE's would emerge with lower bids and dollars would shift... but would they? People love Google now... other SE's can't compete - wouldn't users love it even more if it carried just one ad?
I think I have yet to hear what you said clearer or more succinct.
What's not broken: Marketers spent $300 Billion reaching US consumers in 2008, roughly $1,000 per citizen. What is broken: media is losing their control as the powerful middle man of the ad economy.
You talk about consumers being more fragmented than ever and I look at it semantically differently. Media is fragmenting. Consumers on the other hand, have never been easier to unite.
Media plays one role in the ad economy: aggregating consumers. And that role has netted all of the ad dollars spent buying consumers' time and attention, and most of the consumer loyalty that advertisers were paying for. (are consumers more loyal to Lost or the advertisers' that make Lost possible?) It's 2009 and consumers can aggregate themselves, replacing media as the alpha dog of the ad economy.
I've been blogging about this at www.OurSeatAtTheTable.com. My view of the future has consumers being paid for the time, attention, consideration, loyalty, viral marketing, and personal information that has been bought and sold for decades without us. By redistributing the flow of ad dollars directly to consumers, the real winners will be advertisers who may get as much love from consumers as they currently get from ad reps.
Dave manages to capture the media industry issues well, but he stops short of actually providing the A-Ha!
Passion for Sale
http://mediablog.com/media_renaissance/2009/04/passion-for-sale.html
Went back to look through a couple of Gern Leonhard's videos which definitely stress the "attention" issue - the real challenge we all face, I suppose, is that while we may be working hard to improve our vision of the process underway, as Terence notes, no one - not Dave, and not even Gerd - seems to have an answer. The question that I feel like this whole discussion (and discussions like it everywhere) ignore is this: if the revenue model of media and content are changing as much as we all agree they are - how will we pay for premium content in the future?
Gerd's presentations suggest that our evolving social and sharing media systems should/will incorporate mechanisms to charge for premium content . . . so my question is, in that world of ubiquitous UGC, why would anyone work or invest that hard to create premium C in the first place?
Even though I've seen this theory before, it never really struck me as important. But putting it the way you did, made perfect sense.
I guess you can put me in the "undecided" column, because while opinions abound, I don't think a suitable business model has evolved yet.
I recently started a new blog to track the future of media as well as attempt to create my own solution. Check it out and let me know if I'm on the right track: http://makemyownmedia.blogspot.com/