Classic Jack: One Year Ahead of The Times and Ad Age

In the context of two articles published by The New York Times and Advertising Age on Sunday January 13 it39s appropriate to share below these two commentaries published exclusively for Jack Myers Media Business Report members on February 27 2012 plus similar commentaries on the same topics published earlier this year I remain focused on providing Jack Myers Media Business Report members with advanced insights and market intelligence that consistently remain well ahead of traditional trade and consumer press sources For membership information visit wwwjackmyerscom The Times and Ad Age articles wereAfter Rocky Year for StartUps Investors Are PickierSolving the Content Creation ConundrumFROM JACK MYERS MEDIA BUSINESS REPORTFebruary 27 2012Digital Economic Collapse and VC Funding Shifts are on the HorizonFebruary 27 2012 As always there will be new entries into the marketplace that will disrupt the already volatile status quo Of greater economic concern for the thousands of VC companies that litter the digital landscape is the economic restructuring of the media industry that will redirect VC39s to other business categories as their funds decline in value as their investments consolidate with unproductive valuations and as uncompetitive investments are forced to shutter or shrink It is increasingly apparent that there will be a fundamental restructuring of early and midstage companies that have yet to achieve profitability as investors can no longer justify additional capital For now venture capital is still flowing but the spigot is closing For some companies it might close in the next several days and weeks as the demand for profitability and return oninvestment intensifies Tech has become a commodity available to customers at a fraction of its real value due to an overpopulation of competitors all marginalizing the business Some standouts have staying power but the possibility that they might collapse under their own success is just as real Equity capital is becoming attractive again and most legacy media companies are performing reasonably well shifting the emphasis of value investors away from the venture market and toward legacy media companies that have strong established businesses with digital growth layered onFROM JACK MYERS MEDIA BUSINESS REPORTFebruary 27 2012Investor Focus Shifts to Content and ContextFebruary 27 2012 Venture capital investors in general are locked into rigid patterns and decadesold decisionmaking opening the doors for a new wave of investors who have a fresh vision of the future and of opportune growth markets These investors will be more interested in the content and context oriented business models that capitalize on the cheap availability of technology to drive distribution deliver advertiser value measure performance and generate consumer engagement and loyalty The technology infrastructure to support advertising and media businesses for the next decade has largely been builtout Yes there will be advances but the technologybased venture opportunities in this business have been largely played out Many VC39s will simply shift their focus to other business categories but those who remain loyal to the media community will look toward underserved markets that technology has enabled Digital media and advertising businesses will be most appealing in the future to VC39s when they focus on communicating effectively with actively engaged consumers by delivering valued and engaging content amp8211 especially video social content and mobile organizing content based on both the individual and group needs and interests of targeted and welldefined audiences targeting currently underserved markets such as local neighborhoods interest groups ethnically cohesive groups discreet consumer pockets integrating content across multiple platforms using video social marketing commerce direct marketing event and experiential marketing resourcesAnd in my first Jack Myers Media Business Report of 2013 I added these commentaries on technological overload and marketers39 growing focus on content and earned mediaFROM JACK MYERS MEDIA BUSINESS REPORTJanuary 7 2013TECHNOLOGICAL OVERLOADTerry Kawaja39s Lumascapes chartsamp160include an estimated 1500 venturefunded companies As Terry39s groupings clearly demonstrate there is excessive overlap and redundancy in almost every categoryVenture capitalists typically have four walls around the box they ask companies to fit into a qualified and mostly youthful team a proprietary technology a clearly defined marketplace need and potentially hockeystick revenue model and an exit strategyWith the average VCfunded company now taking nine to ten years to reach an exit that requirement has clearly become moot with expectations unmet The abundance of VCfunded companies in every part of the digital media space battling it out with minimal competitive advantage makes it apparent the third wall has come crashing down The vast majority of media entrepreneurs who first introduced their ideas to VCs have been bounced out of the companies they founded and are now known by the seemingly positive but increasingly demeaning term serial entrepreneur Few have even one success under their belt So wall one is still followed but mostly irrelevantSo that leaves us with wall two a proprietary technology This of course is preposterous Unless the business is designed to own and sell patents there is little protection offered by proprietary technology In fact the greatest financial drag on digital companies has been the need to maintain technological leadership and relevance Yes proprietary technology is valuable but its lasting impact on the business and revenue growth is negligible unless the resources are available for continued aggressive technological development implementation sales and marketing That39s the advantage Google has and the conundrum Yahoo finds itself in today along with the vast majority of the companies included in Terry39s Lumascapes Companies have been funded based on models and assumptions that bear little connection to the real world and they now find themselves at a standstill unable to expand without significant added capital unable to clearly define or market a unique selling proposition unable to merge or consolidate because 2 2 would need to equal about 16 to satisfy investors and unable to scale back to gain profitability because the goal has only to do with achieving an exit for investors who are under water amp8211 and little to do with building a viable small and sustainable businessThis represents an incredibly opportune marketplace for buyers a reality that Sir Martin Sorrell of WPP has understood and that agency holding companies will focus on in 2013 and 2014 Marketers and media companies should move now and quickly to identify and acquire or partner with the best of breed in the categories in which they will need to compete effectively in 2013 and for decades into the future There is an ecosystem waiting to be exploited There are 8000 to 12000 media and advertisingrelated service companies today in search of an exit Those included in Lumascapes are the most successful but not the only ones in need of a new forwardlooking business model They39ve been built on misguided principles and false hopes and with billions of dollars in venture funding that is now drying up They are part of the first ecosystem in history that has been funded primarily with little or no promise of support from the industry they serve Some of these companies have been built on technology but by management teams and advisors who actually understand and support the short and longterm fundamentals of marketing and media These are the golden nuggets that will drive the business forward and are the gems acquirers should seek outA failure to comprehend these fundamentals is the basic reason that Facebook Twitter and hundreds of other quotsuccessfulquot companies are struggling to create a business model from scratch We are grateful to the system that has enabled this and we39re confident many of these companies will be rewarded for their success even if it materializes more slowly than expected But for those seeking to move forward in 2013 it39s essential to recognize the future of technology is not the quotnext new thingquot Success in the future depends on understanding the new marketing advertising and media ecosystem that technology has created its implications for your future and how to most economically and effectively apply existing technologies to assure continued business success and revenue growthHAVE YOUR EARNED WEAPONS READY FOR THE CONTENT REVOLUTIONGE has been at the forefront of this movement underwriting multiple contentbased campaigns the most visible of which can be viewed at wwwfocusforwardfilmscomamp160 amp160Johnson ampamp Johnson armed itself early with an investment in Baby Centeramp160Unilever PampampG CocaCola and many other companies have investments in relevant content but the core underpinnings of the content revolution will leave most marketers and media companies including some that believe they are investing appropriately struggling to comprehend why they failed to prepare and how their management so grossly neglected the need to arm themselves with the basic competitive tools required to communicate in the future The television industry has done a good job of responding to the expansion of digital distribution Unlike print media and until recently radio TV networks responded early to the competitive threat and have engaged built invested in and produced for digitalYet they39re still not as prepared as they39ll need to be to prepare for the inevitable erosion of network program ratings the continued challenges to local broadcast station superiority the affiliate model and the accelerated fragmentation of viewing options All of these issues though have been wellcharted and come as no surprise What companies have not been preparing for although the indications are very clear is the reality of earned media aka unpaid media distribution and exposureBranded entertainment and product placement are the most visibly effective models following on the same approaches the print industry has taken with custom magazine publishing and special newspaper sections and supplements But most of these content initiatives are clearly and definitively designed as advertising and with marketing messages an integrated and integral component of the communicationA new approach spearheaded by GE is brandingthroughassociation rather than integration Similar to the advantages gained through sports sponsorships and concert promotions the key difference is that the vast majority of future brandingthroughassociation models will rely on earned media requiring little or no paid media exposureCinelan the company behind the GE initiative specializes in engaging wellknown documentary filmmakers to produce short form films that respond to brand quotbriefsquot and also respond to consumer interests and passions as well as the passions of the filmmakers themselves Thirty of the Cinelan filmmakers who include several Academy Award winners produced 30 threeminute films under the Focus Forward umbrella and available for viewing at the Focus Forward site as well as YouTube Vimeo and other distribution platforms The films along with 90 additional films produced through a Focus Forward film competition have generated millions of views and shares all earned GE39s brand association is a logo at the beginning and end but the company has no branding or product integration within the films themselves Many of the films have premiered and been exhibited at leading film festivals worldwide including Sundance and TribecaWhile there are obvious costs related to content development and production plus distribution costs new economics are evolving that enable marketers to recoup some of these costs through backend rights noncompetitive advertising integration and international exploitationThis is just one of many future models that digital creative distribution and production technologies are enabling and that will progressively erode the basics of the traditional paid media model TV networks and content studios will not disappear In fact my forecasts argue that broadcast and cable network TV will continue to expand with advertising revenues remaining strong through the end of this decade But all media and marketers must begin to arm themselves with new message creation and distribution strategies that respond to audiences that are far less likely to conform to traditional patterns and far more likely to consume media from highly fragmented and disparate sourcesI refer to it as Soundtrack Economics Video viewing will evolve into a Pandoralike model constantly on Always in the background Occasionally elevated to quotlikequot status and shared Breaking through with ad messages will be difficult amp8211 even impossible amp8211 without creative contentbased strategies and tactics yet to be conceived It39s incumbent upon the marketplace to begin arming for this inevitable futureDisclosure Jack Myers is a partner in Cinelan which developed and implemented the GE Focus Forward program

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Classic Jack: One Year Ahead of The Times and Ad Age

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