Commentary

Media's Salvation: Interactive Consumers

Interactive consumers will be the salvation of a painful, protracted recession in surprising and constructive ways--if only media and Internet companies respond to trends.

For instance, AOL vice chairman Ted Leonsis predicts that consumers will become merchants and advertisers, utilizing digital interactive tools to secure more value and wealth. It is a logical progression in the rampant interactive conversion, even in a gloomy global economy.

These individual marketers of their own personal goods and services will demand the easy access, accountability and assured ROI that only digital media can provide. This will be a key catalyst in shifting more of the overall ad and consumer spending from traditional static media. Amazon, eBay and Google are among the Internet players that do not solely rely on brand advertisers and maintain a competitive edge by catering to entrepreneurial consumers, says Leonsis, who retires next month from an active role at AOL.

Such homegrown interactivity is a powerful and hugely underestimated force that will continue to spur growth in ad-supported media and entertainment, even as business tanks in 2009. Media and Internet companies that fail to grasp the significance of individual consumer needs are doomed to falter in trying economic times. Slashing costs and hording cash will matter little in the long run if companies resist reinventing themselves for new digital realities.

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Local newspapers and television broadcasters will continue to fold, and online social networks will not be monetized, if media does not fully embrace the notion that personal relevance and social interactivity trumps all. Email, instant messaging, texting, blogging, tweets, user-generated content and video-sharing are exploding because consumers are more interested in each other than in any mass media.

So, the code to prosperity can be cracked if the digital revolution is viewed through the eyes of empowered consumers. "Getting into deeper, more profitable relationships with your existing base--and hunkering down with them--is a wise course of action," Leonsis recently advised a Web 2.0 crowd.

Industry analysts are beginning to pick up on the mantra. Key 2009 themes: discard old business models and create new ones driven by new technology, stimulate weak discretionary spending with compelling "must-have" content and services; move to relevance (engagement)-based real-time metrics from conventional impression (exposure) metrics. All could have a strong upside, according to UBS analyst Matthieu Coppet.

Further consolidation and deleveraging notwithstanding, media's ability to thrive in the new world--not just survive the economic malaise--hinges on a complete, radical shift to a take-no prisoners consumer mindset. Media and entertainment companies literally will have nowhere else to turn in 2009. A 5% miss in advertiser spending and a 2% missing consumer discretionary spending, which is likely, would purge earnings by 32%, Coppet estimates.

In that case, shifting from news and drama to video games or from in-store sales to downloads isn't enough. Neither is transferring the same newspaper copy from the print to the Web page, or pre-roll commercials from prime-time TV to streaming video sites.

There are clear signs of consumer unrest with rehashed commercials on TV network-related streaming video Web sites, and of advertiser dismay with newspaper sites, where ad sales have declined during the past two quarters. Consumers and advertisers do not want ill-fitted, conventional media retreads on their smart phones, mini laptops, iPods and PDAs. They will increasingly reject interactive content, marketing and services that are not uniquely constructed for them.

Media cannot afford to lose a dollar of advertising on any platform in the next 18 months. UBS said Monday that it expects local domestic advertiser spending to decline 13%, traditional print and broadcast media 11% and overall U.S. ad spending to fall nearly 9% in 2009, with only Internet spending up an estimated 10%--less than half of what was expected a year ago. Global advertising will decline 4%.

Media and entertainment companies need to get over their infatuation with self-serving platforms and adapt new forms of content and advertising that are better suited to digital consumer behavior. Everything from ubiquitous interactive communications to commerce must be uniquely tailored to individual tastes and needs, making them indispensable even in a tight market.

In that context, Leonsis' warning must not fall on deaf ears.

What consumers cannot find to their liking in the digital universe, they will create. They are comfortable with being the masters of their own content, services, marketing, communications and semantic structures. Theirs is the ME-dia network incarnate, and the only one that really matters. Any media or Internet company that spends too much time looking inward, instead of outward, will be missing a lucrative opportunity to click with interactive consumers.

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