How Can Media Companies Avoid Repeating Auto and Financial Industry Collapse? - Jack Myers Think Tank

As the general economy continues to collapse, every industry is assessing its own financial future, and for most the future is not a rosy one. Although the media industry appears to be proactively embracing new technologies, its continued dependence on traditional advertising-dependent models is driving many media companies down the same road as the auto, music and other traditional businesses that failed to move quickly when technology and competition disrupted their core business models. These are modern day versions of the passenger railroad companies … surviving but without a sustainable growth model. As Wall Street struggles and the stock market falls, now is the time for media companies to send a strong and forceful message to the investment community that the industry is embracing change and restructuring to avoid a repetition of the failures that are decimating other industries.

Advertising-dependent media companies are focusing their business models on cutting overhead as they hold onto transactional cost-per-thousand and cost-per-click models for as long as they can. But there are other solutions, as I will outline over the next several weeks that offer new sources for revenue growth and shareholder value.

Traditional media companies are just waking up to the increasingly obvious reality that supply is now exceeding demand and the supply/demand curve will become progressively more imbalanced. Ads are popping up all over -- in the home, out-of-home and across the virtual landscape. One decade ago in 1998, the average consumer was exposed to 2,000 to 3,000 brand images weekly, each exposure ranging from a "blink" to several minutes. Today, the average consumer is exposed to an estimated 12,000 to 20,000 branded impressions each week, averaging two to four brand exposures per minute in every 15-hour day. Just one trip to the supermarket generates hundreds, if not thousands, of brand impressions within just a few minutes. Marketers are struggling to identify strategies and tactics that enable them to command meaningful share of voice and sustain presence in this overly cluttered, cacophonous marketplace.

Marketers are:

· seeking more measurable results-based metrics;

· shifting budgets to search engine marketing;

· aggressively embracing new solutions, such as ad networks, that deliver cheaper ad impressions;

· investing in new opportunities that promise solutions to the overwhelming market clutter.

In a softening economy, marketers are also moving budgets away from advertising to old-fashioned sales promotion techniques such as couponing, price discounts and trade incentives. Traditional advertising media (including online) already capture less than one-third of major marketers' total communications budgets. So as media supply is increasing, ad budgets targeted to traditional media – and even non-traditional media – are shrinking.

There are two fundamental business models in the media and advertising business:

1. Traditional supply/demand performance-based models dependent on audience size, demographics and cost competition.
2. Non-traditional, premium relationships driven by media brand valuation with performance based on economic results and/or customized relationship values.

Today, almost 90% of all media advertising transactions (excluding search) are responsive to Model #1. While for most companies Model #2 generates only a fraction of the revenues generated by traditional transactional business models, "premium relationships" represent the most important growth segment of the media industry.

The industry's traditional foundations built on mass reach are being uprooted, and the future requires that new foundations be laid and nurtured. There are many growth opportunities for the media business. Over the next several weeks, Jack Myers Think Tank will suggest several of these opportunities and describe how each can translate into success for your company.

About Jack Myers:For more than two decades, Jack Myers has been the media industry’s 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 250 marketers, agencies, media companies and industry service providers. Jack can be reached at jm@jackmyers.com