Ten Marketing Trends: VC Collapse, Creative Agencies Strike Back, Arbitrage and More

Last week, I shared my Top Ten 2012 Tipping Points for Marketers. Here are my top ten implications of these advances and shifts in media, advertising, marketing and entertainment that will boil over in the next 12 to 24 months and require marketers to take action. The obvious trend of increased focus on social marketing is pervasive and integrated throughout pretty much every aspect of the shifting landscape of media, marketing and advertising. Similarly, increased interactivity integrated into all forms of marketing communications is a given, and is a trend that has been obvious for years. Last week's report included the acceleration of interactive and addressable TV, even on the heels of the collapse of Canoe Ventures (and possibly because of it). Combined with mobile marketing growth, faster online connection speeds, cloud marketing and other forces, all marketing is moving toward interactivity, which is more a powerful reality than a trend. Please share your comments and trends you see emerging and gaining traction in 2012 at www.jackmyers.com or by e-mail to jm@jackmyers.com. Some links in this report require a password to access subscriber-only content at JackMyers.com. Please contactmaryann@jackmyers.comfor your access code.

1.Creative Agencies Strike Back

Media agencies have been in the forefront of capitalizing on and monetizing the digital explosion. As pointed out in last week's report, search and social marketing are pulling promotion and direct budgets into traditional and non-traditional media execution. The media groups of the major holding companies, along with large independent media agencies, have profitably launched and/or acquired specialized groups to support their client needs. Publicis' VivaKi has increasingly defined itself through its digital focus. Public relations agencies have adapted to accentuate their social media expertise. Promotion agencies are struggling to build digital marketing capabilities. Creative agencies, while expressing an interest in digital, have remained mired in the outmoded emphasis on :30-second network television commercials. There are numerous exceptions, such as Ogilvy's Ogilvy Entertainment division and IPG's RGA Group. IPG's McCann World Group moved Nick Brien in as CEO from sister company Mediabrands to foster a shift to digital marketing. Most creative agencies are making similar shifts. But they remain spiritually, emotionally, and creatively locked into legacy business models that will be progressively less relevant unless they accelerate their digital focus, and that's exactly what they will do in 2012 and beyond. Just as media agencies offer creative capabilities to support their digital media strategies, creative agencies will begin actively hiring digital media experts who can develop the big media-based creative ideas, and assure that the agency creative teams remain at the head of the table. It will be a battle among corporate brethren – and fun to watch as it evolves.

2.Video Increases its Market Share

In 2000, local and national television media accounted for 10.7% of marketers' total communications investments. Online video was non-existent. By 2010, television's share of marketers' spend had increased to 13.2%, a gain of nearly $19 billion in annual TV ad spending from $58.7 to $77.5 billion. Video advertising in online originated video content amounted to only $350 million. By 2020, traditional television advertising is forecast to grow to $108.4 billion, representing 19.3% of marketers' total communications investments. An additional $14 billion is forecast to be invested in advertising associated with online originated video content. With cinema, digital out-of-home video, and mobile, video advertising will surpass 25% of all marketing communications budgets, reinforcing the role of creative agencies and the need to move well-beyond the traditional :30-second commercial.

3.Marketers Look Beyond the Newspaper and Magazine

In the 1970s, newspaper companies captured as much as 20% of all advertising investments, a share that will decline by 2020 to only 4.0%. The importance of local marketing has not declined, but the forces that made newspapers the most attractive and productive marketing tool have diminished as co-op, coupon, trade promotion and print budgets have shifted to more effective solutions. Marketers will return their focus to the local community. Some, such as American Express, have developed innovative local business strategies and capitalized on the vacuum as competitors have emphasized national and regional marketing. Local community newspapers and pennysavers, along with Val-Pak direct mail coupons, are the last frontier of print media that have yet to be disintermediated by digital. That unique position is eroding as competitors from Google to Yelp, Savored, Angie's List, and Thrillist to Groupon and Living Social capture a growing share of local merchant spending. The erosion will accelerate as hyper-local digital options and solutions expand. Local digital media such as AOL's Patch have yet to get it right in understanding the commerce dynamics of local media. The integration of local merchant-related content and commerce with social media and location-based marketing will motivate marketers to move budgets back into community-centric marketing.

Marketers are also actively beginning to underwrite documentary films, recognizing their emerging role as the new investigative journalism. GE's FocusForwardFilms.com initiative empowers documentary film makers around the world to tell their stories in three-minute films about innovation and invention contributing to human advances. Typically, these are stories that would have been told by journalists. Funding, distribution and creative resources are now more accessible for video-based story-telling, and marketers will look toward these opportunities for brand association. (Full disclosure: I am a producer of the FocusForwardFilms initiative.)

4.News America, Valassis, Catalina and Other Promotion Companies Figure It Out

Their clocks are getting cleaned by Groupon, Living Social, Thrillist, Daily Candy and every VC-funded johnny-come-lately company with a digital coupon distribution scheme. The legacy leaders have been incredibly slow to react, blaming steadily decreasing revenues on tough economic conditions. Their problems are more endemic than economic. Historically, promotion has increased during recessions. Consumer and trade promotion is important to marketers, but there are more cost efficient digital promotion opportunities, and they will continue to move dollars in those directions. In 2012, the traditional leaders in coupon distribution will aggressively shift their focus to digital and mobile businesses, or they will be out-of-business by 2016. Whether they've already missed the boat remains to be seen.

5.Arbitrage Business Models Move to the Forefront as Media Becomes Less Transparent

In 2010, I reported on the inevitable shift away from fullytransparent media relationships between media agencies and their clients, as well as between media buyers and media sellers. The expansion of Demand Side Platforms (DSPs), Media Exchanges, Vertical Networks, Supply Side Platforms, addressable media capabilities, enhanced targeting, and VCMMAR (Very Cool Marketing and Media Analytics Resources) are resulting in a restructuring of the underlying foundations of media buying and selling. In 2012, agencies will become more aggressive in building out the resources that enable them to bypass some of the traditional requirements for fully transparent media buying. European agencies are not required to maintain as stringent transparency policies as in the U.S. With General Motors, Unilever and major international marketers consolidating their global media planning and buying, agencies are likely to reduce fees in order to gain more opportunities to leverage media relationships to not only their clients' advantage but their own – by taking more risk and expanding their arbitrage business models.

6.Powerful Media Brands Re-Emerge

Broadcast and cable networks will factor the brand equity potential of new series into their development considerations. Magazines will evaluate the potential of each of their properties based on their multi-platform and cross marketing potential. Radio and TV stations, newspaper publishers and all media will review their talent line-up and measure them based on whether or not they can be branded. Content will continue an inexorable shift from mass to highly targeted audience reach. Mass media is reasonably safe, as a realistic concept, for another two decades, perhaps three. Premium media value, however, will be concentrated among those assets that offer audiences and marketers both wide popularity and a loyal, engaged and interconnected audience. That model strongly supports the economic value of those companies that own valuable and sustainable media brands at their core. Not all will grow, and there may be one or two companies that structurally collapse for reasons other than the value of their content. Companies that are layering new digital businesses on top of their non-branded legacy businesses will struggle if they fail to either (1) shed all or most of those legacy assets or (2) deliver mass audiences at cheap costs-per-thousand. Content brands that will be the beneficiaries of premium pricing and revenue growth will be those that enable the activation of:

· Consumer promotion (including coupon and offer delivery),
· Database development and enhanced direct marketing assets
· Gaming and virtual assets
· Multiple Video Windows
· Direct commerce opportunities
· Enhanced targeting and retargeting tools
· Results measureable by multiple analytic tools, audiences' emotional connections and engagement.

7.Digital Economic Collapse and VC Funding Shifts are on the Horizon

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 VC's 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 mid-stage 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- on-investment intensifies. Tech has become a commodity, available to customers at a fraction of its real value due to an over-population of competitors, all marginalizing the business. Some stand-outs 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 on.

8.Investor Focus Shifts to Content and Context

Venture capital investors, in general, are locked into rigid patterns and decades-old decision-making, 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 built-out. Yes, there will be advances but the technology-based venture opportunities in this business have been largely played out. Many VC's 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 VC's when they focus on communicating effectively with actively engaged consumers by:

· delivering valued and engaging content – especially video, social content and mobile;
· organizing content based on both the individual and group needs and interests of targeted and well-defined 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 resources.

9.Connecting In-Person with Consumers Gains Importance

Experiential and Event Marketing captured 2.0% of total marketing communications budgets in 2000, a total of $10.8 billion. By 2010, marketers had increased their investments in touching consumers in-person to almost $18.5 billion – 3.1% share of their budgets. Between 2012 and 2020, I forecast marketers will increase their event and experiential budgets an average 3.4% annually. The form and function of these promotional budgets are likely to shift, however. Marketers will move these funds progressively to:

· Virtual Presence Marketing -- resources that enable marketers to engage directly with consumers within virtual games, social networks, and digital location-based communications;

· Consumer Connected Media Brands – media properties that have the power to attract audiences to live events, in-home parties, social activities, bars, and other venues where marketers can directly connect with and engage their consumers in a positive environment.

10.Transformation of Marketing and Media Research

In last week's report, I wrote "With the increase in digital data streams measuring an array of consumer transactions, there has been far more information, but still too little knowledge gained about its relevance for marketing decisions. That's all changing…. 2012 represents the tipping point year in the marketing intelligence business as marketers, media and agencies shift the focus of marketing research away from transactional currency to return-on-investment intelligence. Research-as-currency will, of course, remain relevant, but its value will be increasingly diminished as it is relegated to the bottom of the media ecosystem where commoditized purchase decisions will be made primarily through electronically managed online systems." Measurement is shifting frominformationto knowledge and intelligence. We have an overload of information from an overwhelming avalanche of data points coming at us from all directions. The demand will grow for analytic tools that sort through the data and are able to effectively convert information to actionable knowledge, with evidence that it works.

These are just a few of the many implications resulting from the trends that are moving past their tipping points. Every day, these marketplace shifts are becoming more relevant to every executive decision. The decisions you make, and how determined you are to embrace these shifts, will be the defining realities of your future career.

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