That is one of the implications from two new sets of research, drawing a stark contrast between 25.8% projected growth next year for emerging media ad spend (on search, social, mobile, gaming and online video) and the -5.5% decline in traditional media ad spend for the fifth consecutive quarter just ended.
Local advertising weakness is worsening and spreading to national ad platforms, according to Bernstein Research's proprietary bottoms-up "ad tracker" analysis of recent trends. The notable deceleration of flat national magazine ad growth to -10% in the second quarter could "presage pressure on national TV advertising" in the second half of 2008, Bernstein analyst Michael Nathanson said. The related spending pullback by advertisers of food, pharmaceuticals, toiletries and cosmetics and computers--which comprises 45% of broadcast TV and 30% of syndicated TV revenues--threatens to rattle traditional media revenues across the board into next year.
The local newspapers, radio and TV stations hurt the most by the retail ad slump may expect--but likely will not receive--much relief from interactive media platforms that cater to smaller, local businesses.
As explained by Magna Global analyst Brian Wieser during a UBS-sponsored conference call Wednesday, the big winners in an estimated $19 billion emerging media advertising market are the right kind of small, savvy businesses as well as search platforms (like Google, Yahoo and MSN). Search, which dominates with about three-quarters of the emerging media ad revenues being generated, is expected to grow 24% to almost $14 billion in 2009. Much of this search virtually bypasses local traditional media online extensions.
Meanwhile, the 200 largest advertisers responsible for 90% of all ad spending in the U.S. continue to be heavy users of television, which even in its transformative state remains the only cost-effective mass audience platform--even as blue-chip players on Madison Avenue dabble in widgets, social media and online video. While individual program ratings have plummeted, the overall network TV prime-time platform last year maintained a 96.7% live-only reach with adults 18 to 49 years of age. It appears that more consumers are collectively watching more television content on more platforms, even as they diversify into emerging interactive media forms, Wieser says.
However, Nathanson makes the important point that even national television is in for an economic jolt in the coming months. With national magazines such as Time and national newspapers such as USA Today posting more precipitous second-quarter declines in ad revenues (of 10% and 17%, respectively), it's just a matter of time before national TV advertising experiences double-digit deceleration, Nathanson said.
Contemplating the points and information presented by Bernstein and Magna raises a bevy of critical questions. How will local broadcasters generate adequate revenues from interactive platforms? How can local television, radio and newspapers become part of the national digital dynamic that has small businesses working around them? How long will it take major advertisers to overcome their infrastructure and strategic obstacles to adapt to emerging media and strengthen their e-commerce capabilities?
Answering such questions could put advertisers and media companies ahead of the pack when the economy begins to rebound. For now, the reach and frequency paradigm that drives advertiser spending on network television--that delivers more hours spent at a lower cost--is still a cost-effective platform for widespread branding. The ad dollars spent per hour on media consumption are around $0.10 for television (which the total U.S. population spends a collective 539 billion hours with annually), while online search yields $9.39 for every hour a consumer spends with that medium (with which the total domestic population spends an estimated 37 billion hours annually, according to Wieser.)
Still, television doesn't hold a candle to the ability of interactive platforms and devices to qualitatively match target consumers to the products and services that most interest them. The nascent options collectively represented by social, mobile, search and online media will become more potent as television becomes an interactive device. That's when Madison Avenue's reach and frequency economics will be in for a major change.
Several other phenomena that are implied, although not explored by the research reports, are also worth noting. Some of the small- to-medium-sized enterprises now enjoying affordable reach on emerging interactive media platforms were once the bread and butter of local broadcasters and newspapers. These small enterprises now seek scale and sales, with target consumers most likely buying through search or ad networks.
That means traditional local media may not benefit from the democratization of advertising online that allows smaller businesses (defined as enterprises of $10 million or less in annual revenues) to achieve with $1 million in targeted interactive reach today what would have cost them $10 million years ago investing in static traditional media.
One important caveat: nothing is likely to remain the same over the next 18 months. Even in an unstable economy, companies will continue to experiment with, shift dollars to and refine their use of search, social media, online video, gaming, mobile, advanced TV and out-of-home media platforms. At the same time, new and old media platforms will continue to dramatically change against a backdrop of deeper, broader consumer adoption.
As Wieser wisely pointed out, emerging media ultimately will be driven by the notion that "it's all about people, not pages." It's about the value and not the cost of buying a lifetime target customer. That may be a sobering realization for some in a weak economy in which unprecedented trends and interactive spending become less risky than their dismal new reality. It's anyone's guess where those numbers will eventually fall.