Media company chief executives participating in the opening day of Goldman Sachs' annual Communacopia conference widely acknowledged the vulnerability of conventional television and print advertising, while hedging big bets on online target marketing, which has the potential of generating more wealth and sustained value across all of their platforms and businesses.
Clearly, the industry's massive, unsettling schism has Time Warner, News Corp., Walt Disney and Viacom gingerly walking the fence between the destabilizing old-line mass media and the emerging consumer-centric media economies--advertising being central to both in very different ways.
InterActiveCorp CEO Barry Diller does not mince words about the fate of 30-second TV spots and quarter-page print ads priced on estimated mass eyeballs. "Those businesses just absolutely have to be challenged," Diller declared at Tuesday's conference in New York.
"Are they still going to be mass engines of communications that are going to sell on a good spot basis and take revenues in? Yes. [But] there is no question that more and more will move over to the Internet. I can give you so many examples of ... the slow take of people in advertising because they have been essentially buying mass wholesale and it's been a fairly easy business," Diller said. "All of this is going to crack and change over the next few years because efficiency demands it."
However, all the media chief executives participating agreed that targeting the audience in precise ways to collect premiums from advertisers, which must be re-acclimated to their own radically changing business, is complex and challenging.
Time Warner CEO Richard Parsons conceded his company's struggle to monetize AOL, noting that it's now giving the fifth-largest Internet brand the advertising-support base it should have had initially. If you can't accomplish the transition from a subscription to an ad network in the midst of an online advertising explosion, when can you?
"The game is ours to lose," Parsons said of AOL's latest turnaround strategy. Parsons also dismissed concern voiced by Goldman Sachs analyst Anthony Noto and Liberty Media CEO Greg Maffei that the advertising and ratings for general entertainment cable networks (like Time Warner's TBS and TNT) could go the way of mass-oriented broadcast TV networks in an era of special interests and targeted consumers.
Viacom CEO Philippe Dauman simply stated his advertising transition strategy as "focusing on our top 200 to 300 advertisers ...with a tie-in to online programming" from the company's MTV, Nickelodeon and Paramount franchises. But that doesn't take into account the distinct differences in the interactive pitching of products and services, as well as relating to target consumers online--or the reticence, if not sheer ignorance, on the part of so many advertisers to even tread there.
Walt Disney CEO Bob Iger underscored his company's dependence on advertising for only 23% of its total revenues, before explaining the self-sufficient marketing interdependence of its core TV, film, online, theme park, consumer products and branded evergreen content businesses. It is the ultimate economic hedge. "We are not looking to grow advertiser-supported businesses as a company," Iger said. But there is no question that Disney's finely honed, targeted interactive strategy these days is all about new-wave marketing and advertising. Disney is the eighth-largest advertiser in the U.S. just behind media fellows Time Warner, Verizon Communications and AT&T.
News Corp. CEO Rupert Murdoch also declared his company more recession-proof than ever "because our revenues are increasingly non-advertising." For example, 60% of the more than $1 billion made from cable channels last year was generated from subscriptions and that will double over the next three years. All the same, he was quick to note that Fox's CPMs are up an average of 8% across its media platforms this fall, and that Fox Interactive Media is on target to generate more than $800 million in revenues this year on a doubling of targeted advertising clickthroughs.
While still milking old media advertising for all it is worth, News Corp. is feverishly working on more richly and broadly defined new media advertising models on its MySpace platform. "Hyper targeting this enormous audience we have ...has limitless possibilities. You can just see the money growing, and it's exactly what advertisers want, ..." Murdoch exclaimed at the Communacopia conference.
Driven by the new mantra--the more specialized the target, the higher the advertiser premium--News Corp. is preparing to monetize 110 million MySpace users by hyper-targeting their special interests, ZIP codes and any other common denominator that will sell Madison Avenue. Even an old-line media company like Dow Jones, which News Corp. is set to acquire for $5 billion, has untapped targeted value to advertisers, given its core affluent and influential readers, Murdoch said.
With the accelerating trend in online advertising shifts from premium ad inventory purchases to non-premium performance-based display ads, coupled with the fall-off in traditional media ad spending, media chieftains clearly recognize the need to straddle their core revenue from new and old sources. And that means going after advertising dollars everywhere they can, every way they can, by any name they want to give it.