As the recession began to take hold during the summer of 2008 the advertising community was insulated by two quadrennial events, the Presidential election and The Summer Olympics. As the longest Post-War recession continues, into the summer of 2009, ad dollars are plummeting. Local TV, newspapers and radio are losing upwards of 20% of its ad revenue versus a year ago. While there are no blockbuster events like The Olympics or political campaigns to offset the sluggish economy, there are two initiatives taking place that are unique and could give the sluggish advertising industry a mild shot in the arm.

Historically, one of advertisings largest product categories has been automotive. The industry has undergone a massive overhaul with two of Detroit’s “Big Three” filing for bankruptcy protection and coming back leaner and (hopefully) more productive companies. Automotive has been by a wide margin the top product category with local TV stations and despite a reduction of nearly 50% in spending in first quarter 2009. To give a shot in the arm, the government has initiated over the summer The Car Allowance Rebate System, better known as “cash for clunkers” program in which consumers can trade in their gas guzzling old cars, receive $3,500 to $4,500 in cash to trade-in for a more fuel efficient car. 83% of all “clunkers” are either SUV’s and trucks while the new car gets on average nearly ten more miles to the gallon.

Many local car dealerships are advertising the “cash for clunkers” plan with excellent results, wiping out their entire inventory for some. In July 2009, Ford Motor, reported a sales increase of 2%, its first year to year increase since November 2007. That same month General Motors reported its first increase in ten months and Chrysler’s sales grew by 30% when July 2009 is compared to June 2008. The program has been so popular that the government has extended the program into September.

While the short term the program has been incredibly successful, its long term success is questionable. Will this program only provide a temporary spike in sales similar to 0% financing or employee pricing or will it jump start the ailing automobile category and thereby help the advertising industry. If it does jump start the auto industry how soon would carmakers and auto dealers increase their marketing budgets pumping dollars back into the advertising industry?

The debate over health care reform can also pump some much needed dollars into local TV, local radio and newspapers. Already the Campaign Media Analysis Group estimates that various advocacy groups have spent $52 million on the topic. At the onset most of the dollars were targeted in Washington, in an attempt to influence lawmakers. With Congress now in recess, the dollars will spent in various strategic markets and states across the country
With the health care reform bill being a lengthy 1,100 pages long, the law will be dissected by citizen journalists and bloggers and others. The debate will move from the traditional top down advocacy advertising that had been prevalent in years past to a new media, in which activists and voters are empowered and their opinions will be widely distributed and known. Hence, instead of dollars further spent on local TV, radio and newspapers, the recipients will be twitter, social networks and other platforms of the web 2.0.

badgate Cars Advertising, Cars, health care, Local TV, TV

In the early days of the Internet, the cost and availability of broadband access, led to the so-called digital divide. The digital divide was the gap between those geographic areas that benefitted from high-speed Internet and could afford it, with those mainly lower income areas that did not have access to the fledgling web.

Since that time the U.S. has fallen behind several nations in broadband penetration and connection speed. Strategy Analytics reports that the U.S. in 2008 ranked 20th among all nations in household broadband penetration with 60%. By comparison, South Korea ranks first at 95%, the Asian nation benefits from a highly urbanized population and a government supported broadband strategy. In fact, many of the leading countries in broadband penetration tend to be small and mainly urbanized such as Singapore (88%), the Netherlands (85%) and Denmark (82%). However, residents in larger geographic nations (albeit with a small population) such as Canada (76%) and Australia (72%) also have a higher broadband penetration. The report estimates that the U.S. will drop even lower to 23rd place in 2009.

Moreover, according to Wired magazine, the average broadband connection speed in the U.S. is less than five Mbps, much slower than the average connection speed in Japan which is 63.3 Mbps. Japan’s broadband penetration is also higher than the U.S. at 64%.

One of the campaign promises of President Barack Obama was to provide broadband penetration in underserved regions across the U.S. to strengthen the economy and provide jobs. As part of the economic stimulus package, $6 billion was allocated to improve the availability and infrastructure of broadband.

Even if broadband becomes ubiquitous, it is doubtful that everyone would subscribe. A survey by the Pew Internet & American Life Project released in January 2009, found broadband penetration is about 60% however, a total of 91% of all U.S. homes do have broadband access. The report also found that about one-third of Americans, if given the opportunity, would still not subscribe to a broadband connection due to the cost. Many dial-up subscribers would prefer not to spend more than their current monthly cost for a high-speed connection. A few analysts estimate that for broadband to become widespread, a monthly fee of no more than $10 would be required. Hence, since cost remains a factor the digital divide while smaller still exists.

Meanwhile as more eyeballs migrate to the Internet, several media companies are grappling with a strategy that would better monetize content from the web. In July 2009, The Walt Disney Co. announced plans to introduce movies, television shows and video games on a subscription basis. Disney management indicated that consumers would be willing to pay a subscription fee if they believed they were getting value. The New York Times has reportedly been mulling over the possibility of charging subscribers a discounted $2.50 monthly fee to access their website. Non-subscribers would pay $5.00 per month. Other newspaper publishers are also exploring various revenue opportunities with their websites, including The Hearst Corp. and E. W. Scripps. Both are reportedly looking at their website as a potential revenue source. The Wall Street Journal, owned by News Corp., does charge for some of its content. News Corp. chairman Rupert Murdoch indicated that this online strategy will extend to other corporate properties including Fox the New York Post among other global holdings.

Online videos are also eyeing the web as a revenue source, as people continue to migrate to the Internet to watch programming. According to The Wall Street Journal, TNT’s The Closer, one of cable’s most watched original programs, is testing the idea of providing the same commercial load online as it does on television, a fourfold increase in ad time. The networks contend they cannot give away premium programming with limited commercials and operate a sustainable business. Despite a potential pushback from online viewers, many networks would like to see broadband video, at the very least, resemble television economically.

The largest cable operators Comcast and Time Warner are also exploring a business model to make cable programming accessible online. The plan is to use a password to protect the content for existing paid subscribers of either cable or satellite companies.

Consumers continue to spend more and more of their dollars and time on media and technology. In Veronis Suhler’s most recent annual study on media, it reported that for the first time (and despite the recession) people spent more time with consumer supported media (e.g., subscription, etc.) rather than with free (mostly broadcast) media.

As consumers spend more dollars on subscription based media, the strategy of providing universal broadband access could derail. The cost could be too high unless it was subsidized by the government, an unlikely scenario.

Additionally, as online content providers experiment with a subscription based model, only those with the financial means will be able to afford to access the new premium rates. This separation will introduce a second digital divide or Digital Divide 2.0.

admin Uncategorized Digital, New York

Whether it was the sluggish economy or a change in strategies of marketers, but in 2008 the amount of network TV commercials that were 15-seconds in length reached 39.8%, the highest to date. As one would surmise, the percent of the standard 30-second was 51.3% the lowest to date. In recent years the percentage of 15-second commercials has been inching upward and if the trend continues (and the economy does not rebound soon) could easily surpass 40% in 2009.

While marketers continue to use 15-second ads as part of their strategy, how effective are these commercials in today’s television landscape. The last comprehensive study on the effectiveness of 15- second commercials was conducted by the CAB in 2000, when 15-second commercials accounted for “only” 31.9% of all network commercial lengths. The study reported that 15-second ads were losing their effectiveness, due primarily, to ad clutter. The number of commercial and commercial minutes has increased over the past nine years. In fact, Nielsen just released a report that stated the number of commercial minutes in prime time on broadcast TV by 3.5% and Spanish language TV by 11% from 2007 to 2008. Logically, the more 15-second ads there are; the more commercials (not just commercial minutes) there are on television.

Fifteen second ads have been with us for the past 25 years in response to the (then) spiraling costs of thirty-second costs on network television. A fifteen-second ad message was, at the time, 60-65% the cost of a thirty-second commercial. The industry was awash in points-of-view, the do’s and don’ts of when and how to use fifteen-second ads as well as awareness studies. In the mid 1980’s most awareness studies reported fifteen-second commercials were between 60-80% as effective as the standard thirty-second spot. By contrast, the 2000 CAB study, reported that fifteen-second commercials had 48% the unaided recall of a thirty-second ads. As one would expect, the recall scores for fifteen-second ads were lower when they aired in longer commercial pods.

As we all know the television landscape has changed dramatically in just nine years. There are more tuning sources, ads are appearing on various screens of various lengths and technology designed to give consumers control over their ad exposures has now reached 30% of all homes. It is time for the industry to re-visit the impact of fifteen-second and various other lengths on viewers across all screens and major tuning sources (including cable and Spanish language networks). While the television industry is waiting for the mounds of information that digital set boxes and interactive TV will provide marketers, they, similar to People Meters, measure tuning, not viewing of commercials and they don’t measure the attentiveness or effectiveness of advertising.

Television remains a vibrant medium. Usage remains at near record levels, there are more choices than ever before and, collectively, marketers spend $70 billion annually. With time-shifting and even place-shifting, ads of various lengths are now appearing on various screens. It is time for industry once again to measure the effectiveness on the length of ad message.

admin Uncategorized Advertising, Digital