Advertising and Media Innovation: Optimedia, IDG, American Express Publishing

Advertising represents less than 30 percent of the average marketer39s total communications budget The other 70 is invested in consumer sales promotion trade promotion and price incentives event marketing public relations cause related marketing direct marketing consumer research and other performancebased marketing programs Unlike advertising most of these investments have a direct connection to returnoninvestment metrics Media companies and agencies are focusing significant resources on defining the ROI valuations of media spending but traditional advertising models remain entrenched as the core foundation of the business Several companies are looking toward greener pastures and evolving their businesses away from traditional advertisingmedia models while embracing alternate forms of marketing communicationsAntony Young president of the Optimedia US division of Publicis points out quotmarketers have many places to put their budgets and there is not enough debate about how those budgets should be allocatedquot He told Jack Myers Media Business Report quotwith what39s happening with the economy we see a lot of 39advertising in a recession39 studies that say you need to keep spending That will not cut the mustard with corporate marketing and brand executivesquot An ANA study last month reported 53 percent of marketers expected to cut back budgets in the next six months on top of those who have already done so quotAgencies like Optimedia and media sellers need to be able to better understand what elements of communications are driving brand responsiveness in the short term amp8211 with a higher level of focus on outcomes rather than outputsquot In the past 18 months Optimedia has tripled the size of its Strategy Resources Group and more than 70 percent of the company39s staff are strategyplanningresearch executivesAT IDG publisher of Macworld Computerworld and PC World only 40 percent of total revenues are generated by the traditional magazine business compared to 80 percent just five years ago Bob Carrigan IDG president advises quotthe tail is now wagging the dog We used to use databases to drive subscriptions Now we use magazines to drive databases We actually make significantly more money per user from event and online related activity against a name than from a magazine subscriptionquot This year IDG will host more than 750 events globally including 250 in the US including Macworld where Apple chairman Steve Jobs makes his famed annual appearance IDG generates attendee revenues and sells high value sponsorships quotusing databases to put the butts in seatsquot explains Carrigan This model has translated into increased profits for IDG as the share of business from digital database marketing and events has increased American Express Publishing39s president Ed Kelly reports that 40 percent of profits are generated by nonmagazine businesses including books events and membershipaffinity clubs This compares to an estimated magazine industry average of 10 percent of revenues generated from nonmagazine business However unlike IDG Kelly tells Jack Myers Media Business Report that the company39s online investments are not yet profitable due to expensive infrastructure costs and intensive costperthousand competition Amex Publishing has however used online to support more than 600000 members of affinity clubs with members paying up to 80 annual fees Only half of all club members are subscribers to Amex39s publications which include Travel Leisure Food ampamp Wine and DeparturesOptimedia39s Young has established a significant competitive advantage through the company39s database of 60000 consumer interviews conducted over the past three years Young explains the research enables media and communications planners to evaluate consumers39 marketing communications touch points in 44 business categories quotThis offers a much higher level of confidence about where budgets should be allocatedquot he says quotOur strategy is about being clearly focused on driving results and not just about executing plansquotYoung exclusively shared with Jack Myers Media Business Report that seven of the top 10 most influential touchpoints in terms of purchase and brand performance for marketers are promotional or instore activities such as instore sampling coupons on packaging instore promotions free standing coupon inserts and free gifts quotWe see shopper marketing increasing in importance and the need to recognize these as media alongside television and print advertisingquot Young advises Among paid advertising media television was the strongest in terms of influence on purchase followed by specialist magazine ads Internet search consumer magazine ads newspapers TV sponsorship and then radio ads Internet display ads performed poorly in terms of sales influence Consumer opinion sites ampamp blogs rated slightly more effective than newspaper advertising Seven of the top 20 touchpoints were independent sources of information endorsement or recommendation eg familyfriends recommendation doctor recommendations comparison websites print articles demonstrating the declining reliance on brands and paid advertising quotAs an industry we are needing to be more clever in recognizing this movement and reflecting this in our strategiesquotYoung suggests the economy will challenge agencies and marketers in two areas First he says quotis a much greater urgency to prove returnoninvestment That will require CMOs to reestablish their own credentials within their own organizations They will be held more to account to define marketing39s outcomequot The second area Young outlines is a quotfocus on the question of efficiencies Optimedia has focused on putting strategy at the heart of the agency Of course we execute media buys and plans as the core of our business but more and more there is a call to be more strategic about how we approach communications Often silos prevent that discussion When we talk about efficiencies it39s about cutting across silos and having more of a strategic discussion Clients aren39t asking Optimedia to buy a media plan more efficientlyquot he advises quotThey are asking about the total marketing mixquot Carrigan uses IDG39s massive databases on behalf of its clients for lead generation and aggressive online promotion quotNames are like goldquot he exclaims quotWe collect names earn their permission and introduce them to white papers web casts and other content that we blend with our editorial information It39s a gigantic businessquot He acknowledges quotprint will be a viable business for many years but it is not what it used to be We can continue in our legacy business but we need to innovate and grow new businesses that leverage our past experiencequot Carrigan compares IDG39s evolving business models to Apple39s development of the iPod and iPhone and Microsoft39s expansion into the gaming space quotWe can build different businesses that leverage the best of our company and take us in new directionsquotCarrigan and Kelly will join Meredith Publishing president Jack Griffin on the opening panel of next month39s American Magazine Conference httpwwwmagazineorgEVENTSconferencesamericanmagazineconferenceindexaspx which I will be moderating About Jack Myers For more than two decades Jack Myers has been the media industry39s leading analyst researcher and advisor on relationships among marketers agencies and media sellers providing business development services and custom insights on relationship best practices to more than 200 marketers agencies media companies and industry service providers Jack can be reached at jmjackmyerscom

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Advertising and Media Innovation: Optimedia, IDG, American Express Publishing

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