Forrester Research Report Shows How Far Digital Media Still Needs to Go

Forrester is a leader in technology research.  They got that way by providing hard data and objective analysis to business leaders for over two decades.  As I’ve written about before, brands are built on trust and, for the most part, Forrester has earned it.

That’s why I was so disheartened when I saw a Forrester report made available on LinkedIn a while back.  What I found was a noxious blend of shoddy methodology and inane conclusions that were reminiscent of the Arthur Anderson – Enron debacle.

The report, US Interactive Marketing Forecast 2009-2014 (pdf), provides an Executive Summary with conclusions and then a more in depth analysis of the findings including actual data collected, which, theoretically the conclusions are supposed to be based on.

Unfortunately, that doesn’t seem to be the case.  What I found was mostly unfounded conjecture.

What the Executive Summary says

The headline of the report is “Interactive Media Will Cannibalize Traditional Media,” which is supported by five factors which they uncovered as the “dug into” marketing budgets.

Poor Economic Conditions: Apparently as they surveyed marketing professionals they found that many companies were experiencing adverse economic circumstances.  Forrester surmised that the vast superiority of interactive media under such conditions would entice marketers to more than double their interactive spend to $55 billion by 2014.

That’s a compound rate of about 15%.  ZenithOptimedia, which is the primary source for such data, actually estimates a little faster growth historically, but there’s nothing wrong with being conservative. No problem so far.

Increasingly Interactive Customer Relationships: They found that 42% of online adults and 55% of online youth want to engage brands through social applications (and presumably 58% of online adults and 45% of online youth either don’t or aren’t all that crazy about it).

More Strategic Marketing Organizations: They found that more than 40% of marketers they surveyed consider marketing the “strategic leader in their organizations” and that will give them more power to call the shots.

Nothing is said about the others who just show up for work and don’t get to say much (one assumes more than 50%). Is that an increase?

Moribund Print Inventory: Through further digging, they found that print media has seen better days.  They specifically point out that Conde Nast has closed some minor magazines, but don’t seem so enthusiastic about bringing up the woes of major web sites such as MySpace and Friendster.

Proof That Interactive Works: They found that even “laggard industries” are learning that interactive media can increase their sales.  They then point to two examples: Telecom and the Cornell University Business School, which I guess are the aforementioned laggards because they give no other instances.

What The Report Actually Says

“We didn’t control our sample”: First of all, it’s questionable whether the report actually says anything at all.  It was based on a survey of 204 marketing representatives, a sample size most commonly used by trade publications to show advertisers that somebody actually reads their publication (usually without much success).

A sample of 204 respondents gives a total sample error of 7% (± 3.5%) for the entire survey.  For individual responses, that error soars.  For instance, if they get a response from 10% of the sample (20 people) the total sample error would be 22%.  That relegates the accuracy of the study to something like “I heard a few guys talking and they said…”

Beyond the numbers, there is ample reason to assume the sample isn’t representative as the survey was distributed on LinkedIn, so we can assume anybody responding would be at least somewhat predisposed to digital marketing.

The only companies they mention by name are heavily weighted to technology companies.  Moreover, a sample where less than half of CMO’s consider themselves strategic leaders doesn’t show a high representation of marketing intensive companies.

“We define “traditional media” differently than most people”: There is also a bit of semantic confusion about what they mean when they say “traditional media.”

To the question, “Which of the following traditional media budgets will you decrease in order to fund increased interactive marketing?” they got the following responses.

Direct Mail: 40%

Newspapers: 35%

Magazines: 28%

TV: 12%

Yellow Pages: 11%

Outdoor: 9%

Radio: 8%

Telemarketing: 7%

So when they say “traditional media” they are weighting direct mail very heavily in the mix (I was under the distinct impression that it, along with telemarketing and yellow pages, was direct marketing).

Beyond that, newspapers continue to decline, magazines take a hit and most other media aren’t affected much at all, even with a skewed survey.  Also, I wrote previously, there is good reason to believe that the decline in magazine advertising is cyclical more than structural.

So when they say “traditional media will be cannibalized,” they mean mostly direct mail and newspapers.

We like to give advice about things that we know nothing about: The report finishes with some further outlandish statements.  For instance, they cite Razorfish, which was recently bought by Publicis, as an example why companies like traditional ad agencies like Publicis will decline.

They also suggest that Apple, with its sky high margins, should follow Microsoft and acquire a web portal.  So it seems that Forrester is not content to be an objective research agency, but have ambitions to be an investment banker as well.

They say that they have their “fingers crossed” for Apple.  I’m sure Apple appreciates the sentiment.

The Arthur Andersen Model

I should mention again here that I don’t believe this report is indicative of Forrester’s work as a whole.  I’ve seen other Forrester studies that were excellent.  However, that they deigned to put their brand on such shoddy work is troubling.

A research company, like a financial auditor, lives on its credibility.  The object of this report isn’t to inform, but either to persuade or to please a client (which I assume is LinkedIn).  That’s a problem and Forrester, which is a competent company, should know better. A research company should be an auditor, not a cheerleader.

Maybe interactive media will cannibalize traditional media (although outside of newspapers, it hasn’t happened yet).  It’s also not out of the realm of possibility that revenues will grow to $55 billion. I, for one, would be perfectly happy if both propositions were true.

However, that isn’t the point.  Conjecture shouldn’t be dressed up as objective research.  Further, objective observers should not “cross fingers” for anyone.

An Imaginary War

Perhaps most troubling is the undertone of the report, which propagates the myth that digital media is locked into a battle to the death with media incumbents.  Since the dawn of the internet, both have prospered and continue to converge.

The question isn’t whether old media companies will die (most won’t), but which interactive companies will survive.  As MySpace and Friendster show, yesterday’s rising star can easily turn into tomorrow’s whipping boy.

The digital media industry thrives on investment, not profits.  Irreverence isn’t a balance sheet item. You can’t eat it, wear it or live in it.  In order to become a viable, profitable business digital media needs to grow up.

The following is a partial list of outstanding issues.

5 Problems Digital Media Needs to Solve

Prove Results Beyond Direct Response: Interactive media has proven as a highly efficient direct response vehicle, but not an effective brand builder.  Companies such as Apple, Nike and Chanel are able to demand huge premiums because they own brands that people trust.

Lacking the capability to service brands is an enormous lapse that digital media need to overcome.

Understand Effective Frequency: As I’ve said before, the ability to control frequency is an enormous advantage for digital media.  However, digital planners have very little understanding of how many times a consumer should see an ad for it to be effective.

Information is worthless if you can’t use it, so being able to dictate, rather than estimate frequency levels is a missed opportunity.

Understand Targets: In traditional media, a target is essentially a preference.  If you say you want to reach adults 18-24, you mean that they’re more desirable than other people.  You try to weight your campaign to some groups without totally excluding others.

In digital media, targets are absolute.  You reach only your target and nobody else.  Unfortunately, that’s a problem.  There’s no sense in a media target that’s more precise than the viable market.  Moreover, as I’ve previously pointed out, targeting “influentials” is a dubious undertaking.

Know Your Consumers: Ironically, one of the things holding digital media back is a lack of data about who uses it.  Traditional media have a wealth of psychographic and product consumption data concerning their audience.  This is another area where interactive media needs to improve.

Know Your Clients: After nearly 15 years, marketers still choose to spend roughly 90% of their budgets outside of digital media.  Any serious analysis would conclude that the vast majority of ad dollars will go to traditional media for decades to come.  By that time, things will have converged so much that present definitions won’t make any sense anyway.

The best interactive companies understand these points very well (Google especially).  Unfortunately, most don’t, which is why there has been so little progress and an excess of hubris.

Forrester, as a respected research company, should be working to improve the industry, not giving foolish arrogance the illusion of substance.

– Greg