Online Ad spend Surprises Ahead?

If you follow the trends in online advertising or, better yet, have budget responsibility for it, then keeping an eye on reports from The Interactive Advertising Bureau (IAB) is a good idea.

The IAB is an association of some 500 organizations who, representing 86% of the estimated 2011 online ad spend of $31 billion, have substantial skin in the game.  It has a pretty serious roster of Board Members and Directors.  A Sun Microsystems alumnus and colleague, Elisa Steele who is now CMO at Yahoo!, is on their Executive Committee.  Likewise, the opinionated King of Search, John Battelle, is a Director.

Just how much skin do all these folks have in the game?

For starters, here’s a forecast jointly compiled by IAB and Price Waterhouse Coopers.  It’s actually a mix of historical (for a baseline) and projected ad spend by Industry.  (Caveat: as I wrote in a June 20 blog, one must take such forecasts with a sizable grain of salt as they represent what advertisers would likely do in the future should their assumptions about that future hold true.  Such assumptions rarely do.)

Some eyebrow-raisers of note: 

• Online ad spend is expected to almost double in the next 5 years, increasing from 2010 spend of $26 billion to a projected 2015 spend of about $50 billion.  By way of comparison, U.S. advertising in all media is estimated to be $500 billion in 2010.  Online ad spend would still come in under 10% of the total.
• The Consumer Packaged Goods (CPG) industry (US$2 trillion producers of food, beverages, clothing, tobacco and household products) rank 5th overall in online ad spend.  Even with large expected yr/yr gains, it appears that the likes of P&G and Colgate-Palmolive are reluctant to move spend aggressively from traditional media.  Their caution is understandable: they defined effective advertising in print and broadcast media, and are not about to bite the hand that feeds them.
• What does stand out is the apparent “all in” strategy of automotive manufacturers.  Ranking 4th in online ad spend in 2010, the auto industry is forecast to rise to be the second largest online ad spender in the U.S. by 2013.  Given how the industry has been re-defined in the past 7 years, one can sense that there is a greater willingness to take risk in the industry than if the status quo had remained unchanged.

There is little in the way of history for advertisers to rely upon in evaluating online advertising strategies.  Much of it is still unchartered territory; advertisers are still feeling their way along. Add to this the challenge of incorporating social media, and one gets a sense of just how much is at stake in solving this Rubik’s Cube. 

Don’t be at all surprised if the data in 2015 looks very different than what is projected.  Given the faltering economy and the demand for increasing shareholder value, the pressure to innovate in this space will be high.  As firms crack the code on developing effective online campaigns, expect to see the rest of their industry follow quickly.

Online ad spend on the order of $75 - 100 billion by 2015 is not out of the question.

 

 

 

Seeking Intelligent Life

After being offline for a few weeks, the SETI (Search for Extra Terrestrial Intelligence) Institute has raised sufficient funds to get its radio-telescopes back online following a hiatus of 4 months due to a funding shortage. 

“We are grateful to our donors,” said Tom Pierson, who co-founded the SETI Institute with Jill Tarter (the inspiration for Jodie Foster’s character in “Contact”).  “We believe we will be back on the air in September.”

The Allen Telescope Array (ATA), a series of 42 linked radio-telescopes funded by a $30 million gift by Microsoft’s Paul Allen, will be aimed at Washington, DC.  The telescopes have monitored the universe constantly since 2008.

The hope is that the powerful array can detect signs of intelligent life - particularly from the bi-partisan 12-member debt committee tasked with working out the $1.5 trillion deficit reduction agreement.

As to whether valuable time was lost in the four months that the ATA was offline, Pierson said it's hard to say. "You never know when or if a signal is going to be detected, so if you miss a few months, how important is that? It's impossible to know," he said. "We view this mission as one of profound importance, answering man's most fundamental questions -- are we alone?"

If you've been feeling other-worldly as of late, be assured that you are not alone.

De-cluttering Twitter

I have a confession to make: I like social media, but I get incredibly frustrated using some of the the networks.

If you’re a social networker like me you know that, as your networks grow, you need to wear hip waders to sort through all the chatter.  Keeping in tune with the updates on LinkedIn is a snap.  Facebook can be a challenge as your network gets above 200 or so.  But, Twitter makes you want to scream.

I now follow 350+ Twitters because each of them offers something of value.  I’d like to follow even more, but at 350 I feel like I’m constantly experiencing the Doppler effect on a high-speed train.  I can’t keep up with the hundreds of tweets I get hourly as it is.  A good 80% of them are chatter I don’t want to read, or repeats of something I don’t need.  But, how does one weed them out to find the pearls?

As a marketer I’ve questioned the value of advertising on Twitter - particularly when one is going after those with a high Klout score (do you know yours?).  How does one grab attention with the constant ticker tape of tweets?  (There’s a reason that advertising is placed on the inside of subway cars - not on the outside).

Then I came across a post by one of the bloggers that I follow - John Battelle.  Appears I am not alone.  Battelle understands the issue clearly - the upside for Twitter in addressing clutter, and the magnitude of difficulty in developing the technology to de-clutter Twitter feeds.

John’s follow-up posting makes a good read, too.

If (when) Twitter solves this problem, they’ll be off to the races.

Getting a Buzz from Potatoes

Something to inspire!

Situation: You handle sales and marketing for a commodity product that’s been around for hundreds of years, defies attempts to differentiate it, is bashed by the medical establishment, and is suffering from declining sales.

Question: Given the choice, would you look for a job in another industry, or attempt to turn things around?

If you’re Chris Voigt, Executive Director of the Washington State Potato Commission, you turn things around.

Source: USDA

Voigt chose to change public attitudes by going on an all-potato diet for 60 days in 2010, and promoting it via social media.  The video shows what he did, and what he accomplished.

<p>60 Day Potato-Only Diet from Washington St. Potato Commission on Vimeo.</p>

Results

• A Yr/Yr survey showed the percentage of people who believed potatoes are bad for your health declined from 24% in 2010 to 18% in 2011.
• For the grand sum of $366.90 Voigt established two websites, and let viral marketers take care of the rest.  This is less than 0.1% of the Washington State Potato Commission’s annual marketing budget.

Do you have a potato in your hands?  Hot or otherwise?  Then take a lesson from Chris Voigt.  As Trout and Ries have advised for 40 years, no product is a commodity unless you treat it like one.

 

e-Books Rule

The demise of Borders has everything to do with the changing dynamics of book distribution, but is no reflection on our appetite for reading books.  Based on a survey of 1,963 publishers by BookStat, estimates of book revenues were $27.9 billion in 2010 - slightly less than 2009, but a 5.6% increase over 2008.

 

Some Highlights

• 2.6 billion books sold in 2010, including 114 million e-books (but does not include sales of the growing sector of self-published works)
• Printed book sales were flat, but e-books rose from a 1% share of the market in 2008 to 6.4% in 2010.
• E-books represent 1.8% of children’s book sales which, as a category, declined 7.6% against a rising tide.
• Revenue from religious books increased a hefty 11.1% (have we turned from Ben Bernanke to a higher power to turn the economy around?)

Read the data summary here, where you will also see this impressive cubic representation of publishing categories, formats and distribution channels.

Some considerations:

• Book reading is not dead.  Far from it.
• The market for books is (arguably) elastic.  Reduced e-book prices have not hindered sales, as was feared.  The increase in sales of e-readers and tablets may well be increasing the demand for books - something there’ll be a better handle on when 2011 data is published.
• As in the recording industry, the battleground here among publishers and e-book e-tailers (Amazon, Apple, Google) is distribution.  Where the ultimate spoils will go is still undetermined.  
• E-books would not enjoy their pricing and uptake advantage were it not for on-demand distribution and archival via the cloud.   
• With storage and network speeds a factor in the distribution of on-demand music and video, is it any wonder that, for the price charged, e-book distribution is a nice business to be in?   Data storage equivalencies:
  • 1 hi-res photograph = 1 large e-book novel
  • 1 downloaded music album - 200 books (they each retail for about the same) 
  • 1 HD video rental at $5.00 = 25,000 books 

 

Are You Mobile?

I couldn’t resist reproducing this chart put together by the folks at Gist - the social contact manager - that was recently acquired by RIM.

Spend a few minutes soaking the data in.  Interesting questions - and implications - arise, like:

If 3 of 5 workers don’t need to be in the office anymore, then why do almost half (46%) say they are most productive at the office?

If IT managers at 87% of firms supply mobile devices, then why do more than half of employees purchase their own?  What headaches will IT experience with regard to compatibility and security?

Enjoy!

LNKD Takes It on the Chin

As referenced in one of my recent blogs, the problem LinkedIn has been facing in its high market valuations stems from comparisons of its revenue model to those of Facebook and Twitter.  As this chart comparing ten tech stocks shows, two analyst downgrades within 3 weeks and S&P's downgrade of U.S. bonds have combined to kick LNKD into the basement.

(Disclosure: I do not hold any position in LNKD.)

While the revenue model may be similar (based in good measure on display advertising) both the usage and the expected eyeball traffic are very different.  

LinkedIn's potential and financial performance should not be judged by the same standards applied to Facebook and Twitter.  

Unlike the broad market appeal of Facebook (especially) and Twitter, LinkedIn caters to a niche market - business networking and job-seeking.  Aiming at a narrower market is not a bad thing.  It just means fewer potential eyeballs.  Further, LinkedIn has no need to be a forum for posting photos of the family vacation, or ranting in 144 characters about the economy. 

Investors want bang for the buck.  But they should carefully examine LinkedIn’s potential for growing revenue relative to the cost of securing and maintaining it long term.  LinkedIn will never be the size of Facebook - by any nominal measure.  They need to examine the return, and the prospects for maintaining or improving that return long term - just as they would for any stock.

Likewise, advertisers want bang for the buck, too.  Their interests are best served when they identify their targets, and use media that deliver terrific payoffs in reaching and influencing those targets.  They should understand the payoff matrix that LinkedIn delivers for their ad dollars, and decide on that basis.  

A huge leap in the share price of LNKD didn’t suddenly make it a ‘must buy’ for advertisers.  The past week’s decline doesn’t render it a poor advertising choice, either.