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

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

With General Motors and Chrysler both undergoing a restructure and facing financial difficulties, it raises the question of their status as marketers for the upcoming 2009-10 broadcast season. TNS reports that for calendar year 2008 General Motors was the third leading spender on network television (behind Procter & Gamble and AT&T) at $630 million. Chrysler ranked only 43rd on the list at $144 million. Chrysler’s impact will be felt more with local television in which it was the top spender at $330 million in 2008. Simply put, automotive accounts account for about 6% of all network ad dollars and 3% of all cable dollars. In addition, automotive is by far away the top category in spending ad dollars with local TV. For 2008, carmakers spent nearly three billion dollars, roughly double the amount of what telecom had spent; the second largest category.

Under General Motors new structure, they will jettison three brands; Saturn, Hummer and Saab, while maintaining GMC, Chevrolet, Buick and Cadillac. In 2008 these brands account for 21% of General Motors ad spending. Also, they are pulling the plug on Pontiac, marking the end of 83 years for the car model. Pontiacs has been an integral part in America’s pop culture such as songs, TV shows and movies. You can also expect a drop in the number of GM and Chrysler cars appearing on movies and TV shows as the studios and networks continue to look at product placement as another revenue stream.

Part of the void in advertising inventory created by General Motors and Chrysler will be filled by imported carmakers that see opportunity. Hyundai has already capitalized on that by replacing General Motors in this year’s Super Bowl and Academy Awards, the two most expensive shows on television. Hyundai will use the occasion to re-position their cars from inexpensive entry level models to quality built sedans.

The financially precarious situation for General Motors and Chrysler coincides with the network annual upfront marketplace. However, the upfront continues to be a very lucrative business for the networks despite losing eyeballs to cable, the multiple screens available to consumers, viewers being able control their ad exposures with DVR’s and even last year’s writers strike. For the 2008-09 upfront the networks raked in $9 billion in ad dollars, a figure had that corresponded with previous years. There is the prospect that the networks may demand ad dollars from the financially troubled carmakers up front instead of the usual verbal agreement.

Another area that could be hard hit is sports marketing. Besides automotive, Anheuser-Busch InBev, the nation’s largest brewery, is planning to cut back on its advertising budget. Financial companies are another category hit hard by the economy. Prominent sports marketers are also expected to curtail their sports marketing dollars. Expect telecom, imported autos, other beer companies and other product categories to pick up some of the void.

While the automotive industry is in a tailspin, it will be only temporary. Despite their troubles, General Motors and Chrysler will still be selling cars, still making cars and still buying advertising time. It is possible that only eight million cars could be sold in 2009. Industry analysts JD Power and Associates estimates that 20 million cars will be sold by 2014 with new consumers, new, enhanced cars and confident consumers returning. A revamped Chrysler expects to turn a profit even sooner by 2012.

badgate Uncategorized Advertising, Local TV

The advertising dollars that have been allocated to local media have been steadily declining. For example, in 1997 local media counted for 41.2% of all ad volume; the percentage has steadily declined to 38.6% in 2002 and 33.7% in 2007. The influx of new technologies coupled with current economic conditions will probably mean a continued pull back in any incremental ad dollars allocated to local media.

Another factor has been the consolidation that has taken place over the past fifteen years with media companies and prominent advertisers, such as banking and other financial services, shifting their emphasis from local to national media. The concerns of big national retail outlets and their financial impact on local “mom & pop” shops persists. Industry consolidation has been the result of improved communications and technology. This has had an impact on the media allocation decisions of banks, hotels, restaurants, retail outlets and others. The current economic environment has caused some prominent retail advertisers to file for bankruptcy protection while others have closed their doors. The growth of new technology has had an impact on local television, local radio and newspapers.

Ad revenue of local television stations have been impacted not only by the end of the political season last fall, but also by the automotive industry including dealerships. The automotive industry that usually can contribute upwards of one-third of a local station’s ad revenue have had their ad budgets curtailed significantly. Other top local TV spenders have also curtailed their ad spending due to the economic downturn. Industry analysts estimate that local TV revenue could drop by 20% to 30% in 2009.

Another factor on local TV ad dollars has been fueled by technology. The growth of cable networks has had as much of an impact in audience erosion with local stations as with broadcast networks nationally. The major difference is satellite television. National ads appear across the country on both cable and satellite providers. There is however, no alternative for local advertisers with satellite providers. Local advertisers can use local cable, but because of satellite they penetrate on average only 60% of the market. Moreover, marketers are using the growing number of national and niche cable networks that are more targeted and can be less expensive than ad time on local TV, as well as other less costly outlets.

Since many local stations are affiliates of the broadcast networks, they rely on content from them. With cable and broadband video as alternatives, the networks have begun to explore the possibility of bypassing their affiliates and using their cable partners or websites as a potential distribution outlet. This would have a tremendous impact on the programs on local television. Another factor is Nielsen’s plan to eliminate diaries (and possibly sweeps) across all 210 TV markets, replacing many markets with meters. Traditionally, diary keepers are more likely to report watching broadcast stations than cable. With continual audience measurement instead of the quarterly sweeps, stations are now pressured to provide top notch programming throughout the year to maintain ad revenue.

Ten years ago, local radio was finishing a wave of unprecedented consolidation and was flush with ad dollars, mainly from Internet companies. The ad dollars dropped precipitously after the dot com bubble collapsed in 2001. The wave of consolidation was also criticized for creating “cookie-cutter” radio formats, increased ad rates and the homogenization was criticized by many who complained radio had lost its localization.

Local radio faces challenges from new technologies such as satellite radio, online radio, podcasts, music-oriented websites and perhaps the biggest threat, MP3 players. (Unlike television, HD radio has not caught on with consumers). While satellite radio has been having financial difficulties, Sirius and XM have merged with 20 million subscribers. Online radio continues to grow with content provided that is either rebroadcast from the broadcast stations or programming available exclusively online. According to Arbitron and Edison Media Research, 33 million Americans listen to a webcast each week. In 2008 The Pew Internet & American Life Project found that 19% of all web users have downloaded a podcast. Another factor is the popularity of MP3 Players and other handheld devices that offer music and other content to consumers. Over one-third of Americans have an MP3 Player including over 60% of young adults. Satellite, Internet, podcasts and MP3 Players all know no local geographic boundaries or rely on antennas. Now more than ever, younger people are hearing songs for the first time on a device other than the radio.

According to The Radio Advertising Bureau, ad revenue for local radio dropped by 10% in 2008 compared to the previous year. Revenue for online radio grew by 7% during 2008. Industry forecasters predict radio will have a difficult time in 2009 although online could continue to be a bright spot. Similar to local television, automotive has been a heavy supporter of the medium. Another heavy supporter has been local businesses. Many have been hit hard by the current economic conditions and have curtailed their marketing budgets.

Similar to local television, local radio is undergoing a transformation on how audience data is collected. Arbitron has been replacing diaries with meters across many major markets. The change in methodology has had an impact on the currency. Arbitron claims that 100 diary rating points is equal to 70 meter rating points.

Another local medium that has been going thorough a difficult transitional period is newspapers. The medium has been beset by declining circulation and ad revenue. The circulation of many daily newspapers has been dropping about 3%-5% each year. The drop in circulation impacts ad revenue which accounts for 80% of their bottom line. Ad revenue among major newspapers has reportedly dropped by 15% over the past year. Even more pronounced was the decline in classified ad dollars, which has dropped by 30%. The Associated Press reports that in a recent 2½ month period, four newspaper publishers and 33 daily newspapers have declared bankruptcy protection.

In response, many publishers have shrunk the size of their newspapers, reduced the number of newsroom employees, put newspapers up for sale, published free newspapers to get young people into the habit of reading one, allowed for ads on the front page, as well as other strategies designed to grow revenues.

Many people who have dropped their newspaper subscription are now getting their news online. Every major newspaper now has a compatible website. Unlike newspapers, their websites do not have to concern themselves with printing and distribution costs. In December 2008, Pew Research announced that the Internet had surpassed newspapers as a source for national and international news.

The continued presence of newspapers online continues to be felt. Average monthly unique audience figures for newspaper websites grew by nearly 7.3 million in 2008 to 67.3 million visitors, an increase of 12.1% over 2007. Newspapers however, face competition online from other news related media, as well as blogs from consumer journalists. Some have criticized the policy of the newspaper industry of giving free content online while charging people for the printed edition.

Things are not all doom and gloom for local media. Tens of billions of dollars are still spent on the yellow pages, direct mail newspapers as well as local TV and radio stations. There are still numerous companies that have a finite geographic area of distribution and rely exclusively on local media. Millions of people still appreciate local media’s coverage of weather, traffic and community events. Local media is still used to test market a new product or experiment with a new creative execution. Marketers still rely on local media when the national media schedule under performs in important markets. Advertisers can also test the impact of different spending levels on sales. Marketers still use local media to target a specific ethnic group. Presumably, once the economy strengthens, ad dollars will return to local television, radio and newspapers.

Similar to other industries local media is undergoing a transformation. Although marketers are allocating more of their ad dollars nationally, new opportunities have been evolving locally that are more geographically narrower than the footprint of any TV market, metro, cable system or even zip code. With the continuing emergence of digital media, many marketers also covet the amount of behavioral data to be uncovered while more effectively targeting geographically.

For example, many cable operators and satellite companies have the ability to collect second-by-second viewing data from digital set top boxes. By collecting this viewing data, marketers will be able to uncover such information as whether their ads are being watched in their entirety and can eventually be used to hyper-target with ads that resonate most with viewers down to the household or even individual television set level.

Both broadband video and web radio while providing marketers with a national (or even global) footprint are also becoming available. These local ads can be inserted on a geo-demographic basis by using consumer information (e.g., zip codes) or IP technology. Online radio and broadband video consumption will continue to grow as more content becomes available and consumers become further acclimated to it.

A medium that is having a revival is outdoor media, fueled by digital out-of-home media, placed based advertising and guerilla marketing. Local video ads can appear in movie theaters, taxi cabs, gas stations and retail outlets to name a few. In-store product placement will become more targeted with tailored ad messages for each aisle.

Another local medium that has huge potential for marketers is the cell phone. With the handheld device becoming ubiquitous, marketers by using wi-fi networks, GPS and cell phone towers, will be able to target consumers based upon proximity to points of sale; their activities and other patterns can be measured by these smart phones. After all, local media is about the whereabouts of consumers.

There are concerns about privacy and personal information being used for marketing purposes, a huge factor. Nonetheless, the next generation of media is expected undercover more granular and personal information based of the behavioral patterns of consumers. This will result in more relevant ad messages on an individual basis. You can’t get more local than that.

admin Uncategorized Advertising, Digital, Local TV, Research

Historically, a television program’s success was dependent on one criterion, the number of viewers (especially young viewers) as measured by Nielsen. While Nielsen ratings remain a very important factor in the success or failure of any program, there are other criteria that the networks have begun to consider. These factors can be the number of video streams watched on websites or mobile phones, the number of people who view the program on demand (either with a DVR or on VOD), the number of downloads on video iPods as well as other handheld devices and the number of DVD sales among others. Since all these ancillary platforms have the potential to boost a program’s revenue (and value), they are now a factor in the long term success of any program. Hence, a program’s profits as measured across all platforms can increase a broadcast network’s revenue base and their parent companies’ quarterly earnings report, just as easily as the Nielsen ratings.

This season, the networks have been slower than usual in cancelling programs, although some shows have gotten the axe. There are perhaps a dozen or more other shows, some first year and some returning, that are on the brink of cancellation due to poor ratings yet the networks have held back. One reason is that with an uncertain economy in 2009, advertisers will be able exercise their option to pull out of their upfront advertising commitment on any show that is cancelled. Another possible reason is that the 100-day writers strike wreaked havoc with the program development season and the networks have a thin bench of replacement shows.

While both reasons have merit, I think there are several other financial factors to consider on why the networks are exhibiting unusual patience this fall. One is product placement in programs; not only does this circumvent those viewers who fast forward commercials with their DVR’s when time shifting, but also has become a new revenue stream for the studios and networks. The early cancellation of these shows could wipe out the product placement dollars for the telecasts that will never air. Another is the financial loss the networks will take by cancelling a program with telecasts already “in the can”. Although this has not stopped the networks in previous seasons, the business model for television has been changing of late. In order to cut production costs for shows (which continues to increase with the advent of digital television), some networks for the first time in recent memory, have begun, in 2008, to “green light” a proposed series based upon a script instead of ordering an expensive pilot when developing their programming strategy. The current economic slowdown may also put limitations on the program development schedule and the number of pilots ordered for the 2009-10 season.

NBC’s announcement of airing Jay Leno weeknights at 10PM, in the fall 2009, is another example of the new economic model of television. The show lends itself to product placement, is less likely to be time shifted, some of the shows clips can run on hulu.com and nbc.com and its production costs are less expensive than dramas and even reality shows. For Jay Leno to succeed, it does not have to win the period, or even charge the most for a thirty-second commercial. What the program has to do is earn a measurable profit for the network and its parent company.

The changing television model could best be explained by one of its biggest stars NBC’s Tina Fey. On winning an Emmy Award for 30 Rock this past September, she said “30 Rock is available to be viewed on NBC.com, Hulu.com, iTunes, Verizon phones and United Airlines, and occasionally on actual television.” While television remains the dominant medium with viewers and ad dollars, increasingly decisions on whether to cancel a program or renew are going to be based upon other factors than just television ratings.

badgate Uncategorized Advertising, Digital