[opendtv] Re: News: Nets taking smaller piece of the advertising pie

At 11:39 AM -0400 8/30/05, Manfredi, Albert E wrote:
>Not sure I buy this. Advertizers will eventually figure
>out that on the Internet, much of their product ends up
>being treated almost like viruses. Pop-up ads and cookies
>are now regularly blocked, adware is cleaned out, and
>Microsoft sends out monthly updates to clean out so-called
>malware. What remains is typically quite easy to ignore,
>much like ads in newspapers or magazines.

I think Bert is taking a rather narrow view of what Internet 
advertising is all about. I agree that some of the more intrusive 
forms of Internet ads are ineffective, although from a statistical 
viewpoint it may be difficult to prove that they are less effective 
than TV ads.

The reason money is flowing into Internet advertising is that it 
provides something that is lacking with most other forms of 
advertising: the ability to track actual ad consumption and to 
follow-up the leads generated. Magazines - especially vertical trade 
books - do this to an extent with the "bingo cards" that you can fill 
out to request more info on advertised products. TV, radio and 
newspapers do not provide even this level of accountability.

And then there is the issue of where exactly this money is being 
spent on the Internet. Companies are spending large amounts of money 
to create an Internet presence that is used for multiple purposes:

1. Product information and collateral
2. Product support
3. Competitive analysis and product positioning
4. Promotional ads inside the company portal

While not all of this comes out of advertising budgets, it all comes 
out of marketing and support budgets. I am certain that some of the 
dollars cited as Internet ad expenditures are not the banner ads that 
we often ignore, but rather, are other, more effective uses of the 
Internet to promote products.

And then there is the reality that even pop-up ads still create 
impressions, even if we do not click through.

>We'll see where the wind blows in a few years. This sounds
>like more Internet hype to me. The more intrusive
>advertizing becomes, the more concerted the efforts to
>eradicate it. Consider, for example, the do-not-call list.
>I think we'll see an equilibrium, and it will be ads that
>are not overly intrusive that will survive. The others
>will either be actively blocked or banned by legislation.

What advertisers and ad agencies are looking for is accountability. 
The ability to verify the effectiveness of their advertising 
expenditures and to develop leads that can be turned into sales. The 
Internet provides sophisticated tools to do this, while traditional 
media rely primarily on folk lore - a vague correlation of "ratings" 
to cost per thousand impressions.

The truth is that each medium has its place - TV and radio 
advertising are not going to disappear, because they do work in many 
situations;

We do not typically tune away from radio ads like TV surfers do - if 
we want to avoid ads in the "mobile environment," we typically listen 
to a CD, Satellite radio, or an iPOD.

And we do not typically tune away from ads in live television 
programming, especially sports. We can expect that ads will continue 
to proliferate when there is an interested, "captive audience." 
Where TV ads are more likely to disappear is in pre-produced 
entertainment programming where it is relatively easy to avoid them, 
or simply to buy the DVD of a complete season when it comes out.

>
>As far as TV ads, the networks I'm sure are aware that as
>their frequency increases, their viewership drops. Viewers
>either stop watching or time shift and FF though the ads.
>Equilibrium is reached, and I would be surprised if TV ads
>will lose out compared with the other forms, long term.

I am sure the networks are aware that viewership is declining. I am 
not certain that increased ad frequency is the reason. I strongly 
suspect that some accounting type has run the numbers and determined 
that increasing the ad frequency improves profitability given the 
remaining audience.

For what it is worth, Bert is right about ad frequency running off 
the potential audience, at least in the world of radio. Several of 
the big radio congloms have recently cut back on the number of 
minutes in their ad breaks, with the result of increased ratings. i 
suspect that this is largely due to competition from Satellite radio, 
which now has more than 6 million subscribers.

One could try to draw parallels between cable TV and broadcast TV, 
but they are hard to find. Most cable channels have ads, and many at 
higher frequencies than the broadcast networks. Premium cable 
channels - sans the ads - have been successful, but the high 
subscriber fees have limited the reach of these channels. With cable 
we pay subscriber fees and STILL get the ads.

As to the long term prospects for TV ads, the future is already 
clear. Systems that can provide advertisers with better 
accountability and highly refined targeting are likely to take the 
lion's share of ad budgets, versus traditional shotgun techniques. 
Cable is already a long way down this road, as they have a subscriber 
relationship and can provide data on who is watching; the next step 
is localization and personalization. Satellite is not far behind.  It 
is broadcasters who seem uninterested in closing the loop with 
viewers, despite the fact that the technology now exists for them to 
do almost everything that cable and DBS can do. But to do this 
broadcasters need to develop a platform and use available back 
channels to get close to their customers.

The decline of broadcasting is directly related to the desire to hold 
onto a very lucrative, but declining business model, rather than 
re-investing profits to build a new business model that can compete 
in the future. A classic case of protecting the goose that laid the 
golden egg, rather than trying to compete.

Regards
Craig
 
 
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