Media Brands Quietly Dominate Future Ad Industry Priorities

Originally published January 2011

Happy 2011. It's time for the advertising and media community to rethink the relevance and long-term economic viability of current organizational models. The disconnect between the valuations of many traditional media companies and the inflated values of a few emerging digital players is economically irreconcilable. The media and agency boundaries that have been created -- between digital and traditional media; among print, electronic and out-of-home; between local and national; between established and emerging media -- are artificial and increasingly irrelevant. A far more relevant focus for both media agencies and media sellers is to restructure their organizations and priorities around the comparative relevance and value to their clients of:

• Targeted audience aggregation, reach and frequency of message exposure;
• Association with trusted content brands that sustain loyal and scalable audiences.

Two types of media suppliers and agencies are evolving and will dominate the landscape into the foreseeable future:

• those that focus on targeted audience aggregation and commoditized online transactional monetization of those audiences;
• those that focus on the unique value of loyal audiences and provide marketers with opportunities to associate their products and services with those audiences (scalable and sustainable), with an emphasis on premium pricing.

If there is a single dominant trend that permeates and overwhelms the media and advertising business as well as Wall Street perceptions, it is the exponentially and never-ending increase in the supply of advertising inventory and the resultant diminishing economics of traditional reach models. As I look forward into this second decade of the 21^st Century, it's clear the supply of advertising inventory will continue to grow as digital distribution options increase. This bodes well for:

· marketers that view media primarily as a tool for cheaply reaching consumers with ad messages,

· media that deliver sustainably large audiences at low cost of distribution and content,

· and companies that aggregate scalable and targeted audience reach and enable efficient online media transactions.

Ironically, a less apparent but more important trend is the increasing value to marketers of media brands that have relevance to and are trusted by their audiences.

While increasing media supply is a dominant industry trend, the most important trend for the long-term economic health of the industry is the growing power of media brands. Oprah, American Idol, Martha Stewart, Iron Chef, The Next Top Model, Jersey Shore, Jon Stewart, Rush Limbaugh, The Huffington Post, CNN, Fox News, Rescue Me, Mad Men, NY Yankees, Notre Dame, NFL, HBO, Nickelodeon, Hanna Montana, Amazing Race, NCAA, The Biggest Loser, Dancing with the Stars, Grey's Anatomy, NCIS, How I Met Your Mother, 30 Rock, National Geographic, Saturday Night Live, Glee, ESPN, TNT, Discovery, History, HGTV, most consumer magazines, BabyCenter, WebMD, the list goes on and on. Marketers themselves are becoming media companies and developing media assets around their brands.These assets are under-marketed, under-monetized and undervalued.

The online network/exchange/real-time-bidding model that permeates online display advertising buying and selling will extend to all forms of commoditized media within the next few years. While industry forces have fought this model for decades, the economics of electronic trading are too compelling to resist for much longer.

Premium relationships will capitalize on marketers' escalating investments in several non-traditional marketing categories.

SOURCE: Jack Myers Media Business Report 2010

A focus on these capabilities requires significant changes in the organizational structures of both media sellers and media buyers, changes that the industry has been slow to make. They require investments in human resources, which only become available as traditional negotiating relationships shift to automation. As marketers' budgets shift, Wall Street valuations can be expected to slowly but surely evolve with them and media companies and agencies will accelerate their investments to support these shifts. While Facebook may be a valuable central portal for social media connections and its excessive valuation may be justified, it is trusted and scalable media brands that marketers, consumers and investors will gravitate toward.

The past five decades of media and advertising history have revolved primarily around mass audience aggregation with simplified targeting based on age and gender. The best efforts of the magazine industry and media groups to sell engagement metrics have gone mostly unrewarded. Behavioral targeting and addressable advertising have not grown as quickly as many industry experts anticipated. Cable TV networks, with greater targeting opportunities and often with lower commercial loads than broadcast networks, still generate costs-per-thousand below the CPMs of their broadcast brethren. Return-on-investment has been a favorite buzzword, but only recently have actual metrics begun to be incorporated into media decision-making.

These realities change as marketers focus on connecting and building relationships with consumers through trusted media brands. Contrary to most – if not all – other forecasters, my long-term projections for broadcast network television revenues are bullish, averaging 5.6% annual growth from 2012-2115 and 4.5% annual growth from 2016-2020. I am also reasonably positive toward consumer magazine advertising, forecasting average annual growth of 3.2% from 2012-2015 and 1.1% from 2016-2020.

Supply will accelerate as video distribution options expand, as smart phone and sophisticated mobile technologies grow, as wireless and cable "last mile" capabilities improve, as TV Everywhere becomes a reality, as out-of-home and point-of-influence/GPS options increase, and as marketers digitally exploit their own packaging and retail real estate. Technological advances enhance the opportunities for marketers to connect with consumers through the media brands they value.

Yes, there is a glut of advertising inventory. But for every action there is a reaction. The reaction to the growing supply of advertising inventory is the increasing focus by marketers on developing close, strong and sustainable relationships with a selected core of media properties that are most valued by their consumers.