Why Almost Everything You Hear About Digital Media is Wrong
There is a digital media revolution underway. It seems that every time you turn around, some little snot is telling you that you don’t “get it.” You need to adapt or get run over by the Darwinian forces underway. It’s “survival of the fittest” and you’re just too fat, stupid and lazy to realize it.
Then you take a look at the facts and it’s tough to see what they’re talking about. TV viewership remains at or near all time highs, traditional media companies are not only profitable, but with very respectable margins and after 15 years, digital media, in all of its forms, makes up a fairly small portion of marketers’ budgets.
There is, however, something interesting going on and I’m pretty sure that it’s important. The problem is that it’s not happening in the places we would normally look.
The Media World: 1997 vs. 2010
We’re told that the Internet has changed everything. “All budgets are now being shifted to digital” is a constant refrain touted by triumphant advocates, confident that they have seen the future and it is, indeed, them. It’s one of those things that has been so often repeated that it’s taken as gospel, a homily beyond question or reproach.
However, even a cursory look at the data reveals a much different story.
As two charts above comparing 1997 and 2010 show, digital has taken a big bite out of newspapers, but after 15 years, the rest of the media world is largely unaffected. The details vary slightly by region, but the story is generally consistent across the world.
There’s an underlying logic at work here. Newspapers depended heavily on classifieds and the Internet is a vastly superior direct response medium. However, direct marketing is a small proportion of overall budgets, so most of the media world has been left largely unchanged.
Many would have us believe that we can just chalk this up to the fact that marketers don’t “get it” yet. However, I find the notion that highly competitive, profit driven companies filled with lots of very smart people, would somehow overlook truths uncovered by a few self appointed digerati high priests a bit hard to take.
The Mystery of Missing Media Budgets
Our story doesn’t end there, however. There is something else going on in the data, but it’s so subtle that it’s easy to overlook. There is, in effect, some money missing.
Media spend and GDP are intrinsically related. The more an economy produces the more it promotes. The Ad Spend/GDP ratio has consequently been relatively stable historically (except in emerging markets, where it tends to go up).
So it is surprising that, since 2002, GDP has been outpacing media expenditure, especially given that most of that span was made up of boom years. In good times firms are more optimistic so media spend usually slightly outpaces GDP.
The gap widened during the crises and may narrow a bit in the future, but the fact that the overall trend is consistent across cycles is a good indication that something is truly afoot.
The Three Pillars of the Brand
In order to get an idea of what’s going on, we need to look a bit deeper into what marketers seek to achieve and then work back to how their goals manifest themselves into the strange spending patterns described above.
Earlier, I introduced the concept of the brand pathway, a 5-stage model that clarifies brand objectives. Unfortunately, there was some confusion and many thought I was describing a linear process, which I was not. So I’m going to simplify it by condensing it into three pillars of the brand.
While there are innumerable ways to evaluate a brand and they all have their charms, these three metrics taken together will give you a pretty good idea of both the short and long term health of a business.
Awareness: Many people are skeptical of awareness and it has been, to a large extent, overused. It’s not an end in itself as much as it’s a means to an end. Nevertheless, it’s an important indicator, companies go to a lot of trouble to monitor it on an ongoing basis and there is growing evidence that brand promotion affects product performance.
Marketers have learned through decades of experience that mass media, especially TV, is the most efficient way to build awareness quickly. That explains why they continue to invest in traditional media at roughly the same levels that they always have.
What’s digital media’s role in awareness building? To date very little. It’s still primarily a direct response vehicle. With convergence, that may change, but mostly by blurring the lines to the point where the distinction becomes irrelevant.
Sales: From a financial point of view, sales are the primary goal of any marketing program. There are, however, several ways to increase sales while hurting the brand, such as discounting and “flooding the channel.” So simply tracking market share in isolation is not a good idea.
Certainly, digital has had some success in producing sales. As I mentioned above, it is largely due to the Internet’s superiority as a direct response medium that newspapers have seen drastic declines in revenues and profit margins. Moreover, the success of e-commerce giants like Amazon and e-Bay can not be denied.
However, even in this area digital needs to be put in context. A recent Forrester report forecasts that by 2014 e-commerce will make up only 8% of total retail in the US. 8% is significant, but by no means dominant.
Moreover, there have been other things going on as well, like the Wal-Mart led revolution in logistics and the growing sophistication of shopper marketing. So even in this area, where digital has had great success, it has been only one of a variety of factors changing the retail environment and probably not the most important one.
Advocacy: Marketers have long known of the importance of “word of mouth,” but until fairly recently didn’t have a good understanding of how to monitor it. That’s changed due to evaluation tools like the Net Promoter Score and social media. Social listening software is advancing quickly and is increasingly becoming standard in conventional marketing operations.
A greater role for advocacy in marketing probably also accounts for the missing media money. Non-standard media placement such as sponsorships and events have become progressively more popular and are notoriously hard to monitor. I don’t have data to prove it, but it seems a fair bet that’s where the extra budgets have been going.
This is an area where digital will likely be game changer, although it’s still not clear whether spending will focus on marketer publishing or paid media.
Disruptive Innovation is Crappy Innovation
As I explained in an earlier post, disruptive innovation is crappy innovation. Crappy, that is, because it tends to do old jobs poorly. A truly disruptive technology changes paradigms by doing a new job entirely. (That’s what makes it so disruptive).
It’s also why so much of what we hear about digital marketing is wrong. The discourse all too often focuses on how digital stacks up against traditional media performing traditional tasks. It shouldn’t be surprising that, in this context, digital often comes up short.
The fact that so many people keep trying to square this circle shows an appalling lack of imagination and good sense. The true impact of digital technology in the marketing arena lies years in the future, possibly more than a decade. What will that impact be? To be honest, I don’t really know and I’m deeply suspicious of anyone who thinks they do.
As Heraclitus once said, we never step into the same river twice. Digital marketing, of course, is a different river altogether.
– Greg
Update: A few have people asked me about sources and data. The data given comes from ZenithOptimedia’s Global Adspend Forecast, which is probably the most comprehensive and accurate source. If you would like to purchase a copy for yourself, you can find it here.
As for the data itself, I used the global data because it seemed to be the m0st broadly representative. Trends, however, can differ somewhat by region. For instance, in the UK newspapers have declined 15.8% but Internet advertising is a whopping 28.4%. In the US, magazines have done significantly better than global trends, etc.
That said, after years of observing data in a variety of regions, I have a high degree of confidence that the trends as I have presented them are largely indicative of the media market as a whole.
Nice post G. For me (as a punter not an ad guy) online activity relating to products is chiefly a search and research tool (for non digitally-based products that is). A lot of brand advertising online feels like junk mail despite its quality as it is uninvited and too obvious in its approach and agencda. Like being chatted up in a supermarket – just seems the wrong time and place. Need a subtler intro – sponsorship my be that subtler intro and perhaps that’s part of what’s going on in other places. Toodle pip
Yeah. There’s a lot out there with that kind of a “teenager in the back seat with Betty Sue” type of feel.
I think that probably the worst crime that all the bullshit digital gurus perpetrate is that they make everybody else feel that they’re getting left behind. We’re all supposed to be confused. Very little is figured out yet.
That’s what makes it fun!
– Greg
Hi Greg,
As always a nice and thought-provoking piece 🙂
Looking at shift of Global Media Share 1997-2010:
– The Internet is obviously the fastest growing segment
– It’s eating into the share of Newspapers and Magazines
I do agree that the as a direct-response medium, especially for news and information, the Internet is a vastly superior medium. I do understand that digital is still a vastly different media from print, TV, radio and out of home advertising and should be treated as so. Given these indicators, wouldn’t it make sense to focus more on digital?
Sure, advocacy and sales are the obvious and measurable aspects of digital, but a lot of emphasis should be spent exploring the effect of digital on awareness and branding.
I totally agree with you that there’s a lot of “gurus” out there with BS about being “left behind”. Digital marketing is still very new, and there’s so much more out there to learn. However, not everything we hear about digital media is wrong; we should be able to discern, filter out the BS, test out new things and learn more.
Timothy,
Thanks for a very thoughtful comment.
Digital is definitely taking a bit out of newspapers. I’m not so sure about magazines. Magazines shares have grown some places, fallen in others. As I wrote in the post, the details vary by region (i.e. magazines have done very well in the US). Globally the fall in newspapers is almost exactly equal to the rise in digital and that relationship is fairly constant.
As for digital’s potential for branding, you’re right. There do seem to be endless possibilities, but nobody has been able to make it work consistently (mainly because of cost and reach). The fact that digital has had trouble in that areas and much greater success in others is probably the most salient point.
– Greg
Good post, Greg. When you think about how long traditional media has been around, it’s proven track record, and how many systems there are for measuring it effectively, I suppose it’s no surprise that companies are spending most of their budget there. For much of digital, it’s still hard to measure success and get good numbers to compare.
I do think that digital will grow. Even TV viewing is moving off the traditional television and online. There is a lot of focus on the social side of digital and advertising. Social takes a lot of work and it’s unclear if the reward is commensurate with that. As companies start to explore using digital methods to entertain people or piggyback on digital entertainment and information, we may see more growth in digital. TV, magazines, etc. work because people are spending their spare time there and accessible. Now, people are spending more and more of their spare time on digital pursuits, but we don’t have mature ways for marketers to participate there.
Neicole,
You make very good points. Digital IS growing and faster than anything else. The interesting thing is that it is being put to new uses, not old ones (except consideration phase, which I glossed over).
The most salient point is that there is a paradigm shift under way. That’s a hugely misunderstood term. The old problems will still be dealt with by largely old solutions. The exciting thing is the new problems that we can solve.
That’s what makes it fun!
– Greg
The other day i was having coffee with a friend, of which i consider him a traditionalist, i say that in relation to traditional media consumption. He reads magazines, he reads newspapers, he watches television (the normal way) his awareness level comes from the traditional sense.
Mainstream is still like this. That’s why in thirteen years there hasn’t been a significant change.
I on the other hand am all digital. I don’t read magazines, nor newspapers and i don’t watch television the normal way.
I use to…
13 years ago i watched normal television, i read magazines (had around ten subscriptions) and i read the newspaper(s) for interesting stories.
Today i don’t do any of that in the traditional sense… but my friend still does…
Is there a difference in what we see? when it comes to traditional media and digital media?
Digital media doesn’t change the attempt on awareness, it’s changing the attempt on penetrating timely awareness.
Companies want to bring their awareness to both of us…
Digital media also i believe shifted when social media penetrated it’s presence in the sense that information coming to me through other people, social made us all advocates….
Spiro,
Very good points. Technology moves very fast, audiences move very slowly (even on the internet). It’s that simple fact that is often missed in the digital community. You see all of this wonderful technology, everybody in your (local) social network is as excited about it as you are and you just can’t see how the world hasn’t been turned upside down.
However, that is not marketing. Good marketers are able to understand consumer markets. That doesn’t mean going down the and asking the first guy you find what he thinks. He probably thinks a lot like you do (which is probably why he ended up down the hall from you in the first place!).
I was in a meeting a few months ago at one of the world’s biggest digital agencies. They had recently been acquired by one of the big ad conglomerates and we were discussing the changes. He told me, “all of the sudden we realized, we’re just a rounding error here!”
Probably that the biggest challenge for digital people to overcome is to understand the analog world they want to change.
– Greg
Your last paragraph is very true….
Let’s say i want to make my friend like me. I don’t believe there is anything different to traditional media and digital media in the sense that you want my attention.
My friend watches a sitcome on TV and he sees television ads.
I watch that same sitcom online and i see banner ads.
The analog world that I want to change is based on curation.
For example, that same sitcom my friend is forced to watch it when it airs…
i on the other hand can watch it when i want to,
newspapers, magazines are curated for you, twitter and facebook are curated by you.
I curate my day, i curate my news, i curate what i view, my friend can’t do that while in the traditional sense….
the ill effect of those talking about do or die are trying to put the carriage before the horse….
And, of course, sometimes we just channel surf, because passive entertainment is relaxing:-))
– Greg
lol, true that… i just feel like digital media has given me control, for example, i got my intake of Japan disaster just like everyone else has, but imagine those poor souls watching CNN, driven by their intent to make you fear then pop there you see a commercial for life investments lol
i’m bombarded with groupon ads….lol so either way as consumers we lose…
Sure! Lots has changed. New technology allows us to do plenty of great new things. However, we also keep doing old things and they get better too (take a look a a ten year old TV set).
I think they key thing is that you have to keep learning and discovering. The world is a very big, very complicated place, with lots going on.
– Greg
You definitely make some valid points here, and I agree that the trends towards spending in the Digital arena are in many cases driven by people who stand to profit from more spending in Digital Media. However, your post does not cite any data sources for your charts, so I’m wondering where your data comes from and how current and reliable it is.
David,
Sorry, the source is there, but didn’t show up on the chart very well. The source is ZenithOptimedia’s Global Ad Expenditures. When I get a chance, I’ll redo the charts so that it shows up better.
– Greg
Greg,
Thanks for such a timely and pertinent post. I thought you might be interested to glance at the recent panel (http://www.comscore.com/Press_Events/Presentations_Whitepapers/2011/Advertising_Beyond_Click) from DLD on “advertising beyond click” (the white paper is interesting too.) The idea of a new ‘currency’ to measure effectivness of brand advertising is an interesting one and well presented there by Christoph Schuh. More recently, I tried to press him to expound a bit more (but then again, within the confines of a conference) as to how this currency be ‘constructed’ and whether it has potential to have that necessary ubiquitous nature that any currency needs. Sure, you can do closed case studies linked to certain campaigns to prove brand lift and such, but how this can be implemented on a truly wide scale – to help transform digital into branding channel – remains to be seen.
Greg
Thanks, Greg. I’ll check it out.
– Greg
Thank you for an excellent, thought-provoking post. There is so much hype about social media on the web that it’s great to see someone cut through it all and reveal reality as it actually is.
Thanks, Kyle. I’m glad you liked it.
– Greg
Greg – This bit is so very true: “The true impact of digital technology in the marketing arena lies years in the future, possibly more than a decade.”
Just when emails had started out there was this great piece I read that said that (am paraphrasing here) when radio transmission was discovered, people were amazed that you could send out little blips across the Atlantic without needing wires… nobody then imagined that in less than a few decades, they would be sending across entire symphonies… the fullest impact of the Internet has yet to be discovered…
Interestingly, newspapers and magazines, too, in the earliest stages of mass-circulation (when large numbers could be printed and mailed out as ad-vehicles) led to just about as much confusion (Advertising, Society and Consumer Culture – Hovland & Wolburg, ISBN 9780765615473) as the Internet today.
Let’s wait for the dust to settle, I’d say. Till then, we’ll just have to put up with those hucksters who pop up whenever an advertiser says he needs to be on the net!
Truth well told!~
Thanks Shiv!
– Greg
Must clarify – the link between the chaos on the Internet and the Print of Old is my own deduction – the book mentions more the legal clauses that came into place almost a CENTURY after the invention of mass media. And that, to my mind, is the problem today – control of the Internet through external agencies, the ‘audit bureau of (Internet) circulation’ (clicks & page views, time spent per page included), the verification of content, etc.
Some of this is already in place, but other controls are being strongly criticized. In France, for example, the ISP is also responsible for the illegal download of materials – how can you transfer data to a user without also checking on whether or not there is a monetary transfer for the same? The EU regulations are also more path-breaking on issues related to Internet banking, it being almost impossible to extract information without passing through numerous checks and controls – something that is incomprehensible to the US counterparts.
I’m sure it is just a matter of time before all these issues are resolved, and if not, there will be enough checks and controls built into browsers, service providers and even data retrieving and transfer systems that will be accepted by users willingly, even at the cost of losing out on browsing speeds or more.
As you said, time alone will tell, though I would like your thoughts on what all is already possible!
Shiv
Shiv,
You’re absolutely right! Open Standards and Net Neutrality are probably the most important issues the digital world is facing today. Tim Berners-Lee wrote an article in Scientific American that gives a great summary. You can find it here: http://www.scientificamerican.com/article.cfm?id=long-live-the-web
– Greg
Awareness.Advocacy and Sales are indeed a hallmark of any purcahse cycle and all communication channels that have an assurance to comply most are clearly the favourites .In ten years if Dgital has carved a 13% share of total global spends then it is indeed a wonder and therefore reasons to ponder and look beyond Ostrich approach that it is not likely to move forward qiwith greater traction and therefor grow more rapidly as the momentum is their .
All mediums across channels therefore complement the totality of spends and therefore none in Isolation work,yes some work better than the others. A static ,quick redemption and short lived media vehicle print requires a bit high frequency and large budgets that help braw response and therefore very often gets combined with other medium to achieve sales objectives .
The same holds good for digital combine it withTV the results are instant,Measurable tools like targetting by behjaviour or alternatively by affinity and interests that some digital platforms like google /Tribal Fusion offer makes the industry now very attractive .The full force of Digital will be felt in next five years ,Tradionalists need to adapt to this change fast .
Rajiv Singh GM MiddleEast Tribal Fusion
Rajiv,
I think the low figure for digital spend simply represents the power of decades of accumulated wisdom. As media converges and those skills are increasingly applied to digital media, it may well be that digital natives are the ones finding that they need to adapt.
– Greg
Great article and comments. The three pillars of the brand are a very useful conceptual tool.
While the internet is indeed a great direct-response medium, I’ve been hitting problems figuring out how to use it to build awareness – especially since I have neither marketing expertise nor any kind of budget.
On the whole, it seems to me that banner ads are bound to be less effective than TV ads unless they are positioned to get in the way of whatever the user is doing, just as TV ads interrupt a show. If they are just page elements, they are more like highway billboards: the eye skates over them, there is a vague awareness that they are there, but they have to be very, very arresting to make any kind of impression. Even then, without a click-through they don’t get to do much. I can’t remember the last time I clicked on a banner ad.
I am in an industry segment that has gone almost entirely digital as far as promotion is concerned. So much so that there are no longer any print magazines to carry display ads or advertorial pieces; in the print days the latter was the most effective means of building awareness of a product in this segment. Readers flipped through, saw an unfamiliar brand name, skimmed the piece, and maybe became interested. But, the digital successors of the consumer magazines I knew are not browsable. Searching works, of course, but that only gets you in front of readers who already know the brand. In most cases, the landing page is not tuned for discovery, and the material linked from there rotates out quickly. Four and five-star reviews are great so long as people get to read them, but how do you get readers to search on a brand name they’ve never heard of?
This is the dilemma I’m facing. I’m re-reading the classic “Guerilla Marketing” and trying to adapt its strategies to my case. Any other advice and insights from the group would be very welcome.
Thanks,
Graeme
Graeme,
It seems that microsites are what’s commonly used for awareness building on the web. In some cases, movies for instance, it can be successful. Web video is getting stronger, but you’re right. TV and magazines remain the best awareness mediums.
– Greg
Having only ever working with digital media it is fascinating to see such a swing that has only really affected Newspapers. I had imagined that TV might also have taken a big hit with the likes of Youtube/iPlayer et al.
I can’t access the data – looks like your URL is broken… but I imagine it is only looking at digital advertising, not SEO spend, social media spend etc?
Charlie,
Sorry about the broken link. I fixed it and you can find the latest expenditure forecasts here: http://www.zenithoptimedia.com/publications/forecasts/advertising-expenditure-forecasts/
It is interesting how well TV has held up (and for that matter, magazines). What I think gets lost is that digital enables other media more than it competes with it. The overall effect is additive.
You are correct in assuming that owned and earned media have been increasing in importance (which accounts for the “missing media money” in section 2). I developed the idea further in another post, which you can see here: https://digitaltonto.com/2011/how-digital-leakage-is-redefining-marketing-services/
Thanks for your comment and have a heppy new year.
Greg