Such a new metrics template will measure what matters most in the new digital world: generating interactive revenues. It will provide a universal assessment scale that will equalize so-called new and old media companies -- creating a unified digital media industry bound by interactivity. It will measure the effectiveness of media across all platforms and devices, gauging not just their initial connections, but their success in generating revenues and profits from them. This level of monetization will redefine all media values.
Media generally has measured only one-way connections: TV viewers, newspaper readers, radio listeners, magazine subscribers. Even now, it is difficult to know who is actually being reached, and how they are responding to content and advertising or marketing. Digital media is all about securing a payoff from two-way connections facilitated by the golden loop of interactivity among consumers and business. Hence, the need to create a scale of interactive quotients that measure actions and the revenues associated with those actions against such factors as the scope of a company's businesses or a potential market.
There is intensifying evidence that various levels and forms of interactivity should be used to define companies' performance. An ongoing tracking study from Interpublic's Universal McCann has concluded that social networking, blogging and text messaging are the Web 2.0 communications that have collectively achieved critical mass among adults 18-34. The annual PricewaterhouseCoopers/IAC report forecasts that digital and mobile distribution will account for 24% of the growth of global entertainment and media spending over the next five years.
The measurement of interactive exchanges can be revealing. It will emanate from consumers buying products and services, donating money to a cause or organization, or advertisers mining permission-based data. It will be generated by content producers directly monetizing consumer access and downloads and gaining their creative insights. Also, major media players -- from Time Warner and News Corp. to Google and Microsoft -- will create new ways to leverage their continuous rapport with all of their constituents.
There are statistical and technical geniuses who will create and utilize pervasive interactive metrics, which are way past due. The convergence of all things media is rapidly moving along without the meaningful universal measurements needed to establish and realize new marketplace values. Companies must know what their interactive connections are worth to value them properly in the digital marketplace.
The absence of such accurate and relevant industry-wide interactive metrics is beginning to have a counterproductive impact. The reported earnings and revenues and valuations of many media companies are increasingly out of sync with marketplace forces and trends. They reflect business activity in and against old static sectors rather than measuring the direct relationship to and benefit from interactive enterprise with their key constituents. For instance, companies such as News Corp., Time Warner and Walt Disney report the more traditional business performance of their filmed entertainment, television and publishing assets, while reporting interactive and new media revenue separately. This siloed approach to managing, strategically positioning and measuring media business is inaccurate and misses much of the new value being created.
In fact, skillfully utilizing the interactivity provided by the digital conversion of traditional static business is what most matters. That is why so many traditional and even Internet-related media companies appear so grossly undervalued, and why many are considering taking themselves private. On the other hand, ranking media companies by estimated unduplicated audience alone, as Alley Insider has suggested, only measures connections -- not more important monetizable interactions. That list spans from Google at 128 million unique users to NBC Universal with 51.2 unique visitors including the Weather.com.
Google, Yahoo and scores of smaller media players also are in need of embracing a next level of standard measurement. Their success is most frequently measured by page views rather than interactions resulting from connections and the revenues they yield. They are increasingly embracing traditional media's branded content and advertising without reconciling those returns with those companies' continuing static performance on television and radio, and in print publishing.
As broadcast TV stations and networks convert to digital early next year, as publishing struggles for online footing, and as news and entertainment content makes its way into broadband and mobile, it is time for a new model of interactivity measurement.
Within the next two years, more home televisions will morph into interactive monitors to access, store, transfer and manipulate (mash up) every kind of content and data. It will become an interactive brain center from which home appliances and services, mobile devices and electronic functions (such as email, IM, social networking, electronic commerce) are commanded. The process will be hastened by a new wave of home hub digital hardware and software from Apple, Microsoft, Intel, Sony and cable operators.
At the same time, Apple's less expensive 3G iPhone will inspire a next wave of more sophisticated, cheaper mobile devices that will drive the growth of interactive services for consumers on the go. Digital's fertile ground for innovation and commerce will be stymied without a universal system of measuring interactivity and the revenues they generate.