August 2007 Archives
In the Future of Media Report 2007 we published some original research on the ownership of online classifieds in the US, UK, and Australia. One of the biggest industry fractures in the shift to digital media has been the emergence of online classifieds. Classifieds used to be the sole domain of print media. As classifieds have shifted to a medium that is superior in accessibility, searchability, and cost, new entrants have taken part of the pie. It has been possible for incumbent media to leverage their power and position to be successful in online classifieds, but in many cases other players have taken the opportunity and seized prominent positions.
As such we looked at the jobs and real estate online classifieds markets across the three countries, dividing the owners of properties into five groups: Traditional Media, Large New Media (e.g. Yahoo, eBay, Google), Small New Media, Industry (e.g. recruitment or real estate firms), and Other. We used traffic to the sites as a proxy for their prominence. We would also have liked to have compared online classifieds with print classifieds, but it is difficult without financial data. Perhaps a project for our 2008 Report... The analysis is below – click on the charts for full details in the Report.
A few months ago I wrote a piece about new business models for content, sparked by a fascinating dream I had. In the post I mused:
My dream sparked off many thoughts about content business models, including the evident one of replicating the model in the dream – getting people to pay to skip ads. If you extend this far enough, you get to a model where you can price advertising by how much people are prepared to pay to skip it. Consumers should be able choose how they pay for content – by payment or attention. Ultimately we should be able to move to dynamic content markets, where there is a different cost depending on whose attention you are capturing, and the context in which it is embedded. Perhaps people will pay a lot of money not to have an ad inserted in the middle of a chase scene in a movie, but they will even be prepared to pay to see the ads during the break in the Super Bowl.Now the model of ads being presented as content is rapidly gaining prominence. People are not quite yet paying to watch the ads, but they’re certainly choosing to watch them. An article in the New York Times titled Now, the Clicking is to Watch the Ads, Not Skip Them and a piece in AdWeek called Ad Portals: Will Viewers Tune In? lay out some of the current and forthcoming offerings:
VeryFunnyAds.com, an online version of a TBS show, is predicted to have reached 75 million viewers in its first year. The ads are mainly 30 second TV commercials.
Honeyshed, from Publicis and Droga5, will be an online space dedicated to branded entertainment.
Didja.com (as in ‘didja like it?’) is due to be launched in early 2008 by NBC Universal will feature outstanding TV commercials, as well as other branded content.
AdPerk is an advertising network for opt-in viewers who choose to watch ads and branded network (this model pays people with magazines for watching content, but has a similar intent, says Gregg Hano, publisher of Popular Science, which has just launched AdPerk on its site, in a Beet.TV interview )
The naysayers of the dot-com era took particular delight in the demise of Henry Blodget, the Internet analyst at Merrill Lynch (where I used to work in the late 1980s) who was caught out promoting Internet stocks that he apparently privately thought were “a piece of junk” or “a dog”. As part of a subsequent settlement he is now not allowed to work in the securities industry. However Blodget continues to research the Internet industry on his blog Internet Outsider, where he has recently been writing provocatively titled posts such as Dead-tree media deathwatch: RIP Business 2.0, Running the Numbers: Why Newspapers are Screwed, and The Great Advertising Share Shift: Google Sucks Life Out of Old Media.
In this last post, Blodget analyzes the top 19 media companies (with supporting spreadsheets provided), indicating that advertising has shifted to online by 7% over the course of one year. The top-line figures are that US advertising at Google, Yahoo!, AOL, and Microsoft grew by $1.3 billion in the second quarter of 2007, while advertising at the 15 largest other media organizations fell by $280 million in the same period.
Or from another perspective, total advertising increased by 8% to $13.8 billion over the last year, with online increasing from $3 billion to $4.2 billion (23% to 30%), while offline advertising decreased from $9.9 billion to $9.6 billion (77% to 70%). Blodget comments:
Among the most powerful applications of network analysis is understanding industry structure and the implications for strategy. While this is still a relatively new field, we are beginning to uncover some very specific approaches and applications to industry network analysis. If you go to a large strategy consulting firm to provide strategy recommendations, you will get a thorough analysis of your industry. However this is almost always highly linear, looking at market shares, value chains, and industry trends. This hides the richness of highly interconnected industry structures. The next 5-10 years of strategy analysis will see a far greater use of network analysis to understand leverage points for
In the Future of Media Report 2007, we included some new analysis by Laurie Lock Lee. In the Future of Media Report 2006 we used Laurie’s analysis of shifts in media industry networks from 2001 to 2006, and earlier this year I featured some high-level analysis on the network structure of the Australian media industry. This new network analysis goes considerably deeper, analyzing the change in industry structure before and after a significant acquistion, by Macquarie Media Group of Southern Cross Broadcasting. An overview of the analysis is below. See the Future of Media Report 2007 for the full details.
There are a wide range of highly practical applications of industry network analysis. One, as illustrated in the example below, is analysis of industry structure before and after potential acquisitions or divestments by your company or your competitors. This can show the industry impact of major transactions, and provide further insights into their value. Another example in the media sector which we are currently exploring is examining the rich networks between advertisers, ad agencies, media buyers, and publishers. Viewing this from a network (rather than a simple market share) perspective enables very specific insights into how advertising spending can be shifted from one publisher to another. I'll continue to post high-level views of some of this work and the kinds of benefits our clients are deriving from this.
MEDIA INDUSTRY NETWORK ANALYSIS: CASE STUDY
Laurie Lock Lee, Optimice
In our Future of Media Report 2007, we did an analysis of all media industry transactions of more than US$1 billion from 1993 to mid-year 2007. The transactions are not legible in the image below, so to get full details and analysis on the media industry transactions, click on the image for the complete Report.
Even at a high level of the general trends in activity, two things stand out. The first is the sharp rise in activity in 1999-2000, highlighted by the massive US$166 billion AOL/ Time Warner merger (remember that?), which still dwarfs any other transactions in the media sector, followed by a spectacular slump in activity in the following three years.
The second is how fast activity has risen in the last 18 months. Remember that the 2007 figures in the table are for the first half-year only. In fact if you take out the AOL transaction as an extraordinary one-off, there is a far faster pace of activity today than even in the boom years at the turn of the century. The question is, of course, whether this pace will be maintained or even accelerate, or whether it will again decline. While the answer is significantly related to stockmarket levels, since so much of the activity has been private equity-based, there is the potential for transactions to continue even after a fall in equity prices, as private equity firms snap up opportunities.
Continuing our series of excerpts from the Future of Media Report 2007, in this post we will cover the Fastest Growing Online Properties, which features some of the research done by Nielsen//NetRatings for the Report. The relevant data and commentary from the report is below – click on any of the images below to get the complete Report with full details.
One of the great things about having Nielsen//NetRatings as a research partner for the Report is that we were able to bring together global data in new ways to provide original research and insights. There are some very interesting perspectives that emerge from the differences in how new media properties are taken up across countries.
The US leads in usage of all leading social networks. The pace of growth in UK and Australia is extremely high, however they still signifi cantly lag the US in terms of breadth of usage. MySpace is the incumbent globally in terms of market presence. Facebook began as a US college-only social network, however since opening to other users has had strong international as well as domestic uptake. Opening up the Facebook platform to thirdparty developers in May 2007 has contributed to phenomenal global growth as consumers integrate increasingly more interactive tools.
There is much excitement at the release of private equity firm’s Veronis Suhler Stevenson’s new measures and prognostications on the media landscape, with most commentators focusing on their prediction that Internet advertising revenues will exceed those for any other media form by 2011.
The single thing I find the most interesting in the report is the different paces of growth across different media users. “Consumer” usage of media is actually DOWN 0.5%, driven by shifting from long-format media such as TV to short-format media such as online news and video. In contrast, “Institutional” usage of media (comprising business, education and government) is UP 6.9%, outpacing the increases for “marketing” and “advertising”.
I have long said that we are moving to a world in which ALL BUSINESS IS MEDIA, and that is supported by these trends. Almost all of what businesses do today is gather, process and disseminate information or knowledge-based products, making what they do essentially a media business. This is reflected by a massive 7.4% difference in the growth trend in consumer versus institutional use of media.
The second key aspect to pick out of the report is the 6.8% total growth in spending in media over the last year. While global GDP growth for 2007 is forecast to be 4.9%, suggesting just a 2% outpacing of the rest of the economy, this masks the fact that media is heavily overrrepresented in the US, which accounts for 42% of media globally, where the GDP growth is expected to be just 3.3%. In other words, a very rough view suggests that media will double it’s share of the global economy in around 25 years or less. This just happens to be the figure I’ve been quoting for some time, so we seem to continue to be on trend for this.
One of the transformative technologies over the next 5-10 years will be improved video search. With video becoming the majority of digital content on the web, the ability to find what is relevant and useful is a vital task. Imagine being able to find, in a world dominated by video content (accelerated by eventually most mobile phones including video capabilities), the video segments most relevant to what you. In an interview on Beet.TV, Google’s Gabriel Stricker talks about Google’s ambition to search all video on the web, including the content on YouTube and the dozens of other video hosting sites. As he mentions, only a tiny fraction of existing video is on the web, so part of the task is helping video to migrate or be accessible on the web. On one level, this is about making it easier and more compelling for video creators – professional and amateur – to post their content on the web. Another innovation that will advance this is when all video cameras and video processing software come with one-step functionality to get content on the web.
One thing that Gabriel didn’t mention in the interview was the mechanisms that Google intends to use for video search. At the moment most video search uses only the title, any tags given by the author or others, and potentially words used in links to the video. To be truly useful, video search needs to index both the words and images in the video in a meaningful way. The first phase of this is now possible, with fairly good voice recognition technologies allowing traditional text search capabilities to be overlaid on the video search. Examples include Blinkx and Nexidia, which allow video search using its voice recognition and text indexing capabilities. One of the applications is to have contextual ads next to the video changing depending on what people are speaking about as the video proceeds. However the next phase, of recognizing and indexing the images in video, is largely beyond current technologies. Image recognition of even simply objects has proven to be one of the most difficult tasks in artificial intelligence. Massively greater computing power than we currently have available, along with far better evolutionary algorithms, will be necessary to be able to reasonably accurately identify what is relevant in video content.
I just found this detailed review of the Future of Media Summit 2007 written live by Sue Kirkland Smith, Lloyd Grosse and Sarah Creelman of Public Relations Institute of Australia.
It contains a detailed review of every panel session, and concludes by saying:
In conclusion the event was fantastic and really addressed a number of important issues facing the future of media. It was also great to have the experience to have the forums presented via a streamed pipeline between Sydney and Silicon Valley.
I found it interesting to hear everyone talk about advertising as the great white hope. The only mention of PR was the Edelman Trust Barometer. There was no talk about how public relations or corporate relations might create a greater offer in this space. Clearly advertising has this space in its crosshairs. So many of the presenters said that the only way forward was to use an advertising business model but juxtaposed that with the assertion that users are both numb to advertising and that advertising impairs social networks.
It really reinforced for me that PR needs to do more to develop thought leadership in this space.
Two analogies were used that are still ringing in my ears - “the right nut for the right bolt” and “filtering the noise from the signal”.
It's well worth reading the entire post - there are many great insights and nuggets from the Summit there.