• by Joe Marchese , September 8, 2009

According to a recent Nielsen report, U.S advertising media budgets fell by more than $10 billion in just the first six months of 2009. The Financial Times has a good write-up on the breakdown of the decreased media spending here.

No matter how you slice it, a potential annual loss of $20 billion to the media industry is a devastating hit. There are a number of forces combining to cause such a massive decline. Of course, there is the overall economy, which is down, and many in the advertising space are very quick to point out that advertising "is the first thing to go in a bad economy." But what is amplifying the retreat from advertising media spending, is that in addition to the poor economy, there is a marked decrease in effectiveness and reach of the most reliable (re: known) media outlets, such as print, radio and some television. The question is: When/if media spending bounces back, what will be the media channels of choice?

There are those who argue media spending levels have been inflated and this correction is natural, and therefore potentially permanent. I don't buy this argument. Providers of goods and services will allocate media budgets based on their ability to drive sales at higher price points.

Direct-response marketing can potentially drive sales, but direct-response marketing will always struggle to help marketers maintain any sort of premium price point, which will drive their goods and service towards commodity pricing. Marketers have been able to drive sales and premium pricing based on the old media model in spite of its inefficiencies because their competition bought media in the same inefficient manner. The efficiency of media buying therefore need not be measured in direct ROI, but could instead be measured as maintaining and growing overall share of market versus competition and maintaining price premiums. This is why, in my opinion, television has been able to maintain its media pricing despite the "TiVo effect," because everyone is competing in the same market.

One argument that I do agree with is that a percentage of media budget may be permanently shifted to other marketing activities, such as creative development, CRM and loyalty programs. But as I have commonly argued in this column, the lines between media and other marketing activities blur significantly as media becomes more interactive and immersive. So media will be able to better drive other marketing activities, such as the ones mentioned above.

The real struggle media providers and buyers are facing is that the definition of media delivery is getting increasingly complex while at the same time significantly less transparent, greatly impacting efficiency. There is no better example of this than the online "impression." No two impressions are equal, and there is effectively an infinite supply.

I could add a new ad unit to my blog tomorrow and in doing so, ad a new ad "impression" to the world, but of course the amount of consumer attention and consumer spending has not changed. And that impression would be priced exactly as it should be, near-worthless.

However, in some cases impressions deliver true value for marketers. In most cases this depends on the level of engagement of consumers with the content and their willingness to accept marketing messages in exchange. Similar arguments could be made today against legacy measurement in traditional media. Television, pre-TiVo, or radio, pre-satellite radio, were really selling on the engagement of their audiences, and the ability to transfer that engagement to marketers for periods in exchange for payment. So why not create a marketplace for exchanging consumer attention, based on message and content engagement score, across multiple media platforms?

In the end, media spending will flow towards the most effective way to deliver marketing messages to engaged consumer audiences. If there is an efficient and transparent way to do this, marketers will spend the maximum available budget in order to gain market share and maintain price premiums. There is nothing that media buyers and providers can do about the macro economy, but they can ensure that the metrics they are buying on are best aligned with marketer goals.

Thoughts? Leave a comment and drop me a line on twitter @joemarchese (www.twitter.com/joemarchese)

P.S. I will keep everyone updated here with regards to last weeks "The $1 Million Social Media Marketing Challenge" (https://www.mediapost.com/publications/index.cfm?fa=Articles.showArticle&art_aid=112764), as conversations go forward.