Advertising

Social Media and the Internet: Click … or Clique?

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All of the hype about social marketing and social media might make you believe that people are flocking to this new form of communications in droves.

Well, if you think this … you’re right. And now we have the stats to prove it. The Nielsen Company has just released web statistics for the month of August that report that time spent on social networks and blogging sites accounted for ~17% of all time spent on the Internet.

Compared to August 2008, this figure is nearly triple the percentage of time spent on social networks and blogging sites just one short year ago. Seeing as how there is an upper-limit ceiling on the total amount of time available to spend online in any given day, the increased attention on social media is coming at the expense of the more traditional use of the web as an informational tool.

This is not to say that text and video content don’t remain central to the online experience, because that is clearly the case. But the ability consumers have now to use platforms like Facebook and blogging sites to “connect, communicate and share” is what’s driving much of the continuing growth of the web and online engagement.

Because of this new emphasis, is it any wonder more online advertising dollars are chasing social media than ever before? Nielsen pegs advertising on social media sites as representing ~15% of total online ad spending in August 2009. That’s more than double its proportion a year earlier.

Along with the shift in online ad revenues to social media sites, we’re also experiencing a major change in clickthrough behavior as it pertains to online display ads. Research published recently by comScore shows that the percentage of people who clicked on one or more display ads during a monthly period of Internet interaction – in this case March 2009 – was only ~16%.

How does that result compare with earlier surveys? It’s dramatically lower, and dropping. Just two years ago in 2007, ~32% of people online clicked on at least one online display ad over a month-long period – twice the proportion as today.

What’s more, the comScore analysis reveals that a very small portion of viewers represent the vast majority of the clickthrough activity. Specifically, only ~8% of the people are responsible for ~85% of all clicks. Of course, we can be sure that the robust clickthrough behavior of these 8% translates into equally robust product sales … NOT!

Clearly, any company that is attempting to promote products and services over the Internet needs to carefully study the composition of its market and the behavior of its online audience targets before making extensive online advertising program commitments.

The reality is, with the dynamics we’re seeing such as the behaviors noted above, it’s more likely an online promo effort will fail rather than succeed unless a dispassionate review of the situation is done beforehand and a practical, realistic program put into place.

But that’s so unlike many of the web advertising programs we’ve seen implemented up to now, which could be best characterized as: “Throw a bunch of advertising at the web and hope some of it sticks.”

Condé-Nast Gets Real – and Reality Bites

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Conde-Nast logoThis week, magazine publisher Condé-Nast announced the closure of four magazines, including two bridal publications plus the prestigious and well-known Gourmet Magazine title.

It’s an indignity for a publishing firm that has fallen pretty far pretty fast. For years, the company seemed by-and-large unaffected by the winds of change in the publishing industry. Even as other firms were belt-tightening and divesting themselves of low-performing magazine titles, the storied “in-your-face” Condé-Nast business style – replete with jet-setting executives and seemingly endless clothing and expense accounts – appeared to remain intact.

It didn’t hurt that parent company, Advance Publications, also owns cable TV properties that could help prop up the print publication segment of the business – at least for a time.

But with plunging ad page revenues from its luxury goods advertisers on the order of 30%+ throughout 2009, it was only a matter of time before the day of reckoning would arrive. And the sense of impending doom was only heightened when McKinsey & Co. consultants started roaming the halls, poking around the company’s headquarters like a nosy relative, asking all sorts of questions and taking notes.

And now, a few short months later, we have this announcement.

Accompanying the news of magazine closures and personnel layoffs, Condé-Nast reported that it is shifting its priorities to digital properties even while focusing on a fewer number of “core” magazine titles.

Will it be enough? One unnamed company executive was quoted in The Wall Street Journal as saying, “We’re going to make a go of everything else.” But I think that’s doubtful. McKinsey has recommended that nearly all of the remaining publications cut their budgets by upwards of 25%. Whether or not that happens – or whether it will be enough to save the remaining titles – is something we’ll be able to judge pretty quickly.

UPDATE (11/7/09) — The New York Post is reporting that Condé-Nast has now hired Michael Sheehan, the famous crisis manager and media coach, to help the company with PR. Sheehan has coached presidential candidates from Clinton to Obama, as well as handling AIG Insurance’s PR during its financial meltdown in late 2008. Reportedly, Gina Sanders, publisher of Lucky magazine, prodded top brass to bring Sheehan in, citing deep morale problems at the company. Considering the dramatic events at the publishing house over the past year, this news is not at all surprising.

It’s official: Clickthrough advertising effectiveness on mobile devices is somewhere south of atrocious.

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As usage of the Internet on mobile devices like the Apple iPhone has become more prevalent, many businesses have been wondering how important it is for them to cater to these users through the creation of web sites that are optimized for mobile display.

Although creating a mobile version of a web site doesn’t have to be a major undertaking, it is “yet another task” to add to the marketer’s never-ending to-do list. So, just how important is it?

Chitika, Inc., a Massachusetts-based online advertising network, has analyzed the behaviors of “mobilists” and found some interesting results when it comes to their viewing of advertising and taking action. In tracking more than 92 million ad impressions served up by browsers, it turns out that mobile internet users clicked through at a far lower rate than those viewing ads on desktop machines.

How much lower? The overall clickthrough rate for mobilists was 0.48%, compared to a clickthrough rate of 0.84% for non-mobile users. That’s a serious difference, and gets about as far in the basement as you can go.

But why are the numbers so abysmal? More than likely, several factors are at work. First, consider the ways people use their mobile devices. It’s usually because they want to know something immediately … and it’s at times like those that folks are less inclined to get sidetracked by clicking on advertising links. By contrast, the “immediacy” factor with non-mobile devices often isn’t as acute.

Also, consider the load time on mobile devices – rather much slower. For that reason, mobile web content tends to be less informationally rich — or compelling in its appearance — thus decreasing its “stopping” power.

What this means for advertisers is that the key for succeeding in the mobile space is catching consumers at just the right time, not happening to catch them at any time. Easy enough in theory … but would anyone care to volunteer for putting this into practice? Best of luck to you.

From the perspective of the media purveyors, the Chitika findings certainly won’t make their task of attracting additional advertising revenues in the mobile sector any easier. Perhaps that’s why The Wall Street Journal announced last week that, beginning in November, it will be charging mobile users a weekly fee to access its content on mobile devices – and those fees will be charged to WSJ subscribers and non-subscribers both.

It’s further proof that relying on display advertising revenue simply isn’t cutting it as a practical business model in the mobile environment.

Dealing with all those blankety-blank ads.

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In a world awash with advertising messages screaming at consumers from seemingly every nook and cranny, some companies go to great lengths to stand out from the crowd.

The most recent "extreme" example of this comes from Hyundai’s financial services subsidiary business, which purchased $2.2 million worth of advertising space recently in a new subway station in South Korea — essentially all of the available real estate — then populated the large white panels with … practically nothing.

As transit passengers move through the new station, they encounter giant advertising spaces on the walls that are covered by 95% white space, with only one small photo image plus the company logo to hint at what is being promoted.

No doubt, the goal of this “way-less is more” approach is to draw attention to the advertising precisely because of its minimalist message.

After all, it’s different. Unexpected. Even irreverent.

But is it working? Viewing photos of the subway station interior reveals that the largely blank advertising wall signs do attract attention to themselves in a kind of perverse way. They convey a sense of something unfinished, unbalanced, and perhaps a bit unsettling.

I’m reminded of 20th Century American composer John Cage’s famous work titled “4 minutes 33 seconds” which is — you guessed it — four and a half minutes of complete silence. Perhaps not surprisingly, this work got more media attention for Cage than any of his previous compositions ever had — even as one critic quipped that while the quality of the piece itself was simply outstanding, the premiere performance itself could have used a bit more vivaciousness on the part of the players.

What all this shows is how people try to “cut through the clutter” today is the same as has been done for years: Run as far as possible in the opposite direction while lassoing some valuable publicity along the way.

Based on those criteria, it looks like Hyundai has scored pretty well on this one.

The “age-old, old-age” disconnect in advertising.

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Here’s an interesting statistic: Consulting firm McKinsey & Co. projects that by 2010, half of all consumer spending in the United States will be generated by people age 50 or older.

It’s a reminder of just how important the Baby Boom generation has been to the U.S. economy over the past three or four decades. And now, just when you might think that power has shifted to younger generations, the McKinsey statistic helps us realize that Baby Boomers aren’t ready to leave the stage just yet.

In fact, they’re not even ready to leave center stage yet.

Here’s another interesting stat: The average age of creative personnel at ad agencies and related communications firms is … 28 years old. And the number of personnel over the age of 50? Fewer than 5%.

And therein lies the age-old, old-age disconnect.

Perhaps it isn’t surprising that ad agencies are stuffed with creative types who are mostly between the ages of 20 and 35. After all, that’s traditionally the demographic group most likely to buy and spend … and so the vast bulk of marketing dollars – traditional and emerging – are devoted to this segment (as true in the 1970s as it is today).

And of course, having a bunch of twenty-somethings spending time developing marketing pitches to other twenty-somethings makes perfect sense. It’s just that the 18-34 target is no longer where the bulk of the buying power is happening. That’s still happening with the Boomer group, whose average age as of 2009 happens to be 53.

Just how significant are “the oldsters” today? McKinsey’s statistics are telling. They include the finding that the over-50 population in the United States brings home nearly 2.5 times what the 18-34 group earns. Which makes it no surprise that the over-50 group represents more than 40% of all disposable income in the U.S.

And when you look at spending, the over-50 segment — which makes up only about 30% of total U.S. population — accounts for well over half of all packaged goods sales and three-fourths of all vacation dollar expenditures. These spendthrifts buy more than 50% of all the automobiles. They even spend significantly more than the average online shopper during the holidays – 3.5 times more, to be precise.

These are strong financial figures.

Now, consider for a moment to what degree ad creative personnel who are 20 years younger are going to really understand older consumers. Sure, they’re well-versed on the ever-growing interactive and social marketing tactics that are available today. But how likely is it that they’re actually able to craft compelling advertising and marketing messages to older consumers?

Undoubtedly, many will scoff at the very question. For one thing, these creatives grew up with Boomer parents.

But when you consider how many common, worn-out clichés one sees in the advertising that’s aimed at the over-50 set — online as well as off — it does make you wonder if the communications firms are putting their creative emphasis in the right hands!

Rupert Murdoch’s “Paid Content” Gamble

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Rupert MurdochMedia mogul Rupert Murdoch’s pronouncement last week that beginning in July 2010, online content for all of his news media properties will be available for a fee – not for free – has surprised many in the industry.

“Quality journalism is not cheap,” Murdoch declared. His announcement comes hard on the heels of his massive media conglomerate News Corporation reporting a ~$3.4 billion loss for the last fiscal year.

While admiring Mr. Murdoch’s brave stance and willingness to get out in front of an issue that has bedeviled the newspaper industry for the past four or five years, one is left wondering if he’s playing the role of Don Quixote rather than Richard the Lionheart in this drama.

For sure, the pay-per-view business model looks great to any publishing company that has seen the advertising-driven business model come under so much stress and strain in recent years. And The Wall Street Journal, one of Murdoch’s properties, has been able to charge a fee for online access in a practice that dates back prior to that publication’s acquisition by News Corporation.

So what will happen in this glorious experiment? Will legions of newshounds flock to the various Murdoch sites – The Wall Street Journal, Times of London, Australian, New York Post – and plunk down pay-per-view dollars or a monthly access fee for the privilege of reading the latest news bits?

Or will people rely on the many other (free) outlets for news, while also receiving and passing along “copy-and-paste” materials over the web — an effortless task that can be completed in mere seconds?

[And good luck trying to use legal means to prevent the dissemination of copyrighted material; the litigation costs could well outstrip any compensation dollars awarded, while being a major distraction inside the company and causing a PR kerfuffle outside.]

That giant sucking sound you hear could be the hordes of cyber-visitors heading on over to CNN, USA Today and other free news sites, whose traffic volume will spike and perhaps even bring in additional advertising revenues off the extra hits. Would these and other free, advertising-driven media properties like to find ways to increase revenues? Sure. But most of them would prefer to be #3 or #4 to take the leap on paid content – not a high-risk first or second.

There will always be some people willing to pay for premium content. But let’s face it; most news isn’t “premium.” It’s a commodity – and its dissemination is helped along by hundreds or thousands of people copying and forwarding articles and and/or links via e-mail, Twitter, LinkedIn, Facebook … you name it.

Rupert Murdoch has a history of being pretty savvy when it comes to the news business. And certainly he has the power and the resources to undertake this new effort.

But his naiveté may be showing on this one. He is, after all, nearly 80 years old and notoriously online-illiterate himself. And while the saying goes that “knowledge is power” … “power without knowledge” isn’t usually a good recipe for success.

Mag Drag: The midyear report on magazine closings says it all.

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The “gone for good” list has been compiled for the first half of 2009 … and it looks pretty grim for the magazine industry. In fact, Oxbridge Communications’ Media Finder, a database that tracks U.S. and Canadian periodicals, reports that a record 279 magazine titles ceased publication during the first half of the year.

The news that 187 new magazines were actually launched over the same period is little consolation. The net loss of 92 magazines is more than ever, and demonstrates all too clearly how the recession has hit key market sectors particularly hard – finance, automotive, fashion and several others that have traditionally been major contributors of advertising revenue to print publications.

Which categories of magazines fared worst over the past six months? Media Finder’s data show that “regional interest” publications suffered the most casualties, with 27 magazines in that category folding. “Lifestyle” publications were also hurt, with 14 titles biting the dust. And magazines catering to the construction business and related segments were also hit hard, no doubt reflecting the depressed real estate and housing market.

What’s particularly interesting about the YTD 2009 list of shuttered magazines is that many of them were well known in their category and boasted significant circulation. Certainly, periodicals like Country Home, PR Week, Portfolio, Nickelodeon, Hallmark Magazine and Teen weren’t slouch publications by any means.

What can we expect for the rest of 2009? Is the worst over? Seeing as how the economic recovery is (optimistically) still months away, you’d have to bet on additional magazine titles folding during the second half of the year – including a few more of the big ones.

And we’re certain to see editorial format and other changes being made to some of the more famous publications (such as Newsweek’s recent makeover) in a bid to reestablish their relevance and maintain their financial viability.

The Latest NYT Financials are Atrocious

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The latest quarterly financials have just been released by the New York Times Company … and the figures are worse than even the more pessimistic observers had forecast. Not only did the company lose nearly $75 million in the first quarter, it is also laboring under a $1.3 billion debt load. Rival newspaper The New York Post was quick to report that the Times’ cash position, net of upcoming debt maturities, is a mere $34 million.

The looming cash crunch is causing some analysts to speculate that the venerable Gray Lady is slouching towards insolvency.

Not surprisingly, the biggest cause of the financial tailspin is plummeting ad revenues. Declines in classified advertising led the pack (down ~45% compared to the same quarter last year). National advertising fell ~22% and retail advertising declined ~25%.

What’s even more startling was the weak performance of Internet advertising. Instead of growing as had been the case up to now, those revenues actually posted a decline of ~6%. This result blows a huge hole in the notion that online advertising will take up the slack in print advertising.

What’s become abundantly clear is that newspapers have yet to adjust to a world in which they no longer have a near-monopoly on the news in a city or a region. The fact is, for years newspapers were able to bankroll large editorial and administrative staffs precisely because there were few if any other ways for local or regional advertisers to reach their audience. So they were able to charge a pretty penny for advertising space and get away with it. A lucky few cities had two competing newspapers, but many have had single-paper monopolies for years. TV and radio advertising represented alternate promo options, of course, but not in the same medium.

[For those who think that the New York Times, by virtue of its reputation as one of the United States’ leading newspapers, is less a local/regional paper than a national one, they are correct — up to a point. National print advertising represents only around 45% of the paper’s advertising revenues.]

The simple fact is that people today have far more choices online for local, regional and national news – practically all of them free. At the same time, the advertisers have more options than ever before in choosing where to advertise.

So what’s next for the New York Times Company? More staff layoffs? Unpaid furloughs? Halting pension plan contributions? Perhaps all of these … plus trying to sell off other assets like the Boston Globe or the Boston Red Sox franchise.

The all-too-likely outcome: None of this will make much difference.