Ballmer: All Media Will Be Digital By 2018

The Washington PostIn an interview with The Washington Post, Microsoft CEO Steve Ballmer riffs on the future of media, claiming that in ten years, all media will be delivered over the Internet.

"In the next 10 years, the whole world of media, communications and advertising are going to be turned upside down -- my opinion," Ballmer said. "There will be no media consumption left in 10 years that is not delivered over an IP network. There will be no newspapers, no magazines that are delivered in paper form. Everything gets delivered in an electronic form."

Ten years is an awfully short amount of time, but Ballmer's premise for the quick turnaround is that if content producers and advertisers want TV to be more interactive with better targeted advertising (and they do), then the content will be delivered over an IP network.

People should be able to watch their favorite sports games and interact with those watching it at the same time, just as a video gamer with an Xbox Live can play against someone in another country. Ballmer added that there will be far more producers of content in ten years. We're starting to see that today, "but we've just scratched the surface," he said.
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Source: Washington Post

Spending on Alternative Media Jumps 22%

Spending on alternative media hit $73.43 billion in 2007, a 22% increase over the previous year, and will continue to grow, according to PQ Media's Alternative Media Forecast: 2008-2012, released today. The research firm tracked 18 digital and nontraditional segments, with a combined 16.1% of total advertising and marketing dollars in 2007, up from 7.9% in 2002, yielding a compound annual growth rate of 21.7%. The forecast predicts a 20.2% increase over the next year, to a total of $88.24 billion, and a compounded annual growth rate of 17% for 2007-2012, reaching $160.82 billion. By then, alternative media will represent 26.6% of all advertising and marketing dollars.

'Where the money is going' The upswing is as much a result of the effectiveness of new media in a fragmented market as it is from a lack of confidence in traditional media, said PQ Media President Patrick Quinn. "Traditional ad budgets have been going down, but spending has remained stable. This shows where the money is going," Mr. Quinn said. "There is a lack of standards in these new areas," Mr. Quinn added. "Digital out-of-home advertising is getting recall rates as high as or higher than traditional mediums, but there are few studies on this. They're going to need more and deeper metrics: The bar is being raised across the board."

Alternative advertising, including online, mobile, entertainment and digital out-of-home advertising, saw spending rise at a compounded annual growth rate 25.8% to $39.22 billion in 2007, accounting for 17.7% of all ad spending that year (compared with 7% of all ad spending in 2002), and grew at a compounded annual growth rate of 26.2% from 2002 to 2007. Online and mobile advertising spending --including search and lead generation, online classifieds and displays, e-media, online video and rich media, internet yellow pages, consumer-generated ads, and mobile advertising -- reached $29.94 billion in 2007 (up 29.1% compared with 2006), a compounded annual growth rate of 31.4% over the 2002-2007 period.

The category received heavy infusions from brand marketers trying to reach key demographics that have migrated online and to wireless thanks to wider broadband adoption. Entertainment technologies Entertainment and digital out-of-home advertising -- including local pay TV, digital out-of-home media, video on demand, interactive TV, and digital video recorder, video game, home video and satellite radio advertising -- increased at a compounded annual growth rate of 15% from 2002-2007, and rose 16.2% over the previous year to $9.28 billion in 2007.

The growth was driven by rising adoption of entertainment technologies, including ad insertion technologies and ad platforms to reach young audiences. Alternative marketing -- including branded entertainment and interactive marketing -- hit $34.21 billion in 2007, a 17.9% rise over the previous year, and grew at a compounded annual growth rate of 17.5% from 2002-2007. This brings its share of total marketing expenditures up to 14.5% in 2007, compared with 8.7% of total spending in 2002. Branded-entertainment marketing -- including event sponsorship and marketing, paid product placement, advergaming and webisodes -- also saw and increase of 14.7% to $22.30 billion last year, and climbed at a slower compounded annual growth rate of 13.4% from 2002-2007.

The deployment of new-media strategies focusing on better interactivity, entertainment and engagement than traditional media was the driving factor. Thanks to strong gains in segments that reach affluent and influential consumers, interactive marketing -- including e-direct marketing, word-of-mouth marketing, and e-custom publishing -- saw big increases in 2007 of 24.4%, reaching $11.9 billion, compared with the previous year, and a compounded annual growth rate of 28.6% over the 2002-07 period. "The top-growing segments all share the same similarities," said Mr. Quinn. "They tend to be influential or youth demographics, the coveted 18- to 34-year-old, mostly male demographic with a strong digital component."

Source: AdAge.com

Digital Media Prospers, Traditional Suffers In Recession

A FULL-BLOWN RECESSION WOULD PROBABLY take a substantial bite out of traditional media, according to a survey of industry analysts and independent researchers. But digital media will benefit from these draw-downs as financially strapped marketing executives shift dollars online, seeking more transparent measures of ROI. In many cases, a recession would simply accelerate a long-term trend that is already underway.

Of course, the $64,000 question is: are we actually headed for a recession, defined as two consecutive quarters of negative GDP growth? While this issue is beyond the scope of this article, recent headlines are discouraging. On Monday, JP Morgan Chase bought Bear Stearns for a negligible $2 per share, and last week Standard & Poors said banks still stand to lose up to $285 billion from bad sub-prime mortgage loans, further tightening the global credit crunch. On the consumer side, the Conference Board's monthly Consumer Conference Index fell to 75 in February, down sharply from 87.3 January--reaching its lowest level since November 1993. And manufacturers are reporting lower sales in the automotive, technology, and packaged goods categories.

Some ad agencies are already feeling the squeeze, according to a global survey by ICOM, a network of independent agencies. The ICOM survey found that six out of 13 American ICOM member agencies said their clients were already cutting back budgets, with an average reduction of 34%. Most of the burden fell on print and broadcast.
So what would a recession mean for traditional media? TV and consumer magazines should be able to hang tough, say industry observers--but it's not a pretty picture for radio and newspapers.
TV
TV may eke out some growth in 2008, according to Vincent Létang, a senior analyst with Screen Digest, a global media research firm based in London. Létang predicts 1.5% growth in U.S. TV ad revenues in 2008, thanks to big boosts from the Olympics and the presidential election. But the hangover will come in 2009, he added, as the weak economy and lack of big events drive marketers to freeze and maybe even slash broadcast budgets. As revenues stagnate, Screen Digest sees TV's share of total U.S. ad spending falling from 43% in 2008 to 41% in 2012.
Magazines

In the event of a recession, consumer magazines will continue to vary in terms of success, according to Samir Husni, the chair of the journalism department at the University of Mississippi, also known as "Mr. Magazine." "Luxury magazines are fairly recession-proof, and can really weather any market, because the upscale advertisers don't get affected nearly as much," but "the mass magazines are going to see a slowdown in terms of ad pages." To make up the revenue shortfalls, many magazines will raise their newsstand prices, a trend that's already in motion. While this will produce a short-term slump in newsstand sales, Husni said magazines typically rebound within 6-12 months.

On a somewhat surprising note, Husni also expects the recession to spur the launch of new magazines. Pointing to past recession launches like Fortune, Esquire, and Entertainment Weekly, he explained that the weak advertising environment lowers the competitive bar for entry to the magazine business. That is, while big publishers struggle to maintain expensive operations, new titles can sneak in and carve out a niche. "Then when the market recovers, they ride the upward trend with everyone else."
Newspapers
In the event of a recession, the outlook is considerably gloomier for newspapers and radio, where revenues are already declining because of long-term secular trends, which were in evidence well before the economy began to sputter.

After slipping 1.68% in 2006, total U.S. print newspaper ad revenues tumbled an alarming 9% during the first three quarters of 2007 compared to the same period in 2006, to $30.5 billion (fourth-quarter figures aren't yet available). "And that was in relatively good economic times," observed Ken Doctor, a newspaper analyst with Outsell, Inc., who said "a recession would simply compound the structural change of readers and advertisers moving from print to online."
Newspaper woes are due mostly to competition from the Internet, where online classifieds, for example, provide a superior platform for matching individual buyers and sellers of goods and services. Thus, print classifieds--a traditional mainstay of newspaper revenues--fell over 15% in the first three quarters of 2007 compared to 2006, to $10.2 billion. Meanwhile, national and retail categories are posting single-digit declines, as online search and display ads give big advertisers a more precise view of ROI. Between this earlier trend and new data showing a decline in retail consumption, Doctor forecast "a deepening, accelerating slide in newspaper revenues," although he wouldn't venture a prediction in percentage terms.
Radio

In a recession, radio is in the same boat as newspapers, although maybe not the sinking end. Despite impressive reach--with nearly 94% of the U.S. adult population listening to radio at least once a week--radio recently seems to be losing its charm for key advertisers, for reasons that have nothing to do with the economy at large. According to the Radio Ad Bureau, total revenues fell 2% to $21.3 billion in 2007, and Marci Ryvicker, a radio analyst with Wachovia Capital Markets, predicts that even with political ad spending, revenues will fall at least 1% in 2008.
The big blows for radio are coming in the local ad market, where--like newspapers--radio suffers in comparison with interactive media: total local revenues fell 2% in 2007, to $15.1 billion. "In general, the traditional local ad market remains under attack from more targeted media," Ryvicker observed, adding that "we anticipate the reallocation of ad dollars to new media to continue for the foreseeable future."
Internet

As indicated, analysts expect digital media to win big during a recession. True, Internet revenues plunged 27% during the 2001 downturn, but they reason that the Internet has proven itself as an advertising medium in the intervening period (Google, for example, saw total ad revenues rose from $66.9 million in 2001 to over $16.4 billion in 2007). In the event of another downturn, analysts expect marketers to turn to the Internet's superior targeting and metrics to maximize ROI.

But there's some disagreement about where, exactly, all the cash will go. In a recent note, Forrester Research predicted that cost-per-action marketing (principally search) and online direct marketing (including email) will be the biggest beneficiaries. That agrees with a survey of marketers by the Direct Marketing Association which found that, even as 47% of marketers anticipate a recession, 50% said they would spend more on email marketing, 44% plan to spend more on database segmentation, and 35% plan to spend more on search optimization.
Forrester also predicted more spending on social applications that allow advertisers to launch low-cost word-of-mouth, viral, and buzz marketing campaigns. Forrester says these kinds of social campaigns are more likely to get the consumer to consider a product than traditional brand advertising--a key advantage when consumers are guarding their pocketbooks.
Forrester sees less of the new money going to online branding, principally display advertising. But some executives say this ignores growing interest in the Internet as a branding tool. Sarah Pate, CEO of AdMission, boasted that "the accountability of many of the new branding models has already brought more budget from some of our larger national consumer clients for 2008."
Can We Do That Measurability Thing?

Well before the current economic woes set in, some traditional media strove to adopt digital measurement techniques that would allow them to compete with the Internet. But it now looks like the new metrics will have only limited availability through most of 2008, meaning the Internet will still run the table on measurability, at least for the time being.
TV advertisers have been guardedly optimistic about Nielsen's C3 commercial ratings, promising to measure audience exposure to commercial pods, but in February Nielsen sent a letter to clients conceding that there were systemic problems in the delivery of these ratings and advising of further delays. A series of phased improvements at 20-day intervals will take at least until July to get the system up to speed. Meanwhile, the Media Rating Council continues to audit Nielsen's C3 system, meaning media buyers are using unaccredited ratings as currency for ad buys.

Radio broadcasters hung their hopes on Arbitron's Portable People Meter, a passive electronic measurement device that will eventually replace the old-fashioned paper diaries filled out by listeners from memory. But problems with the PPM panels have kept Arbitron from meeting its target sample sizes, prompting the company to delay deployment in the country's biggest markets by 3-9 months, including New York, Los Angeles, and Chicago, all now scheduled to get PPM ratings in September 2008.

Magazine advertisers have also pushed publishers to begin producing more rapid and precise measures audience and circulation. The Magazine Publishers of America recently responded to these demands with its plan to solicit proposals for a new audience metric derived from Internet surveys about readership. But this project is in its infancy, and is unlikely to bear fruit before the end of the year. Meanwhile, the Audit Bureau of Circulations has succeeded in signing up most major publishers for its new Rapid Report service --but a recent note from ABC urging publishers to turn in data in a more timely fashion suggests the service is struggling to fulfill its mission.
For Newspapers and Radio, Online Growth Isn't Enough
In the event of a recession, the rising Internet tide may well lift all boats, including Web revenues for newspapers and radio. But it's unlikely that growth in these areas will offset losses due to structural and cyclical downturns, as their contribution to total revenues remains small.
Ken Doctor of Outsell, Inc. noted that most big newspaper publishers' online revenues have dwindled from the robust rates of 20%-30% a few years ago to a more modest 8%-15% per year. The slowdown is bad news, he went on, because most publishers still derive less than 10% of their total revenues from online advertising.

Meanwhile, according to Wachovia's Ryvicker, the majority of big radio broadcasters get at most 1%-2% of their total revenues from online business. Non-spot revenues, including online, grew 10% to almost $1.7 billion in 2007. However, online radio revenues accounted for no more than $500 million of that, or just 2.3% of the total. Furthermore, broadcasters remained locked in a battle with recording artists over royalties for songs played online, which could jeopardize future growth.

Source: MediaPost

Americans Say Traditional Journalism 'Out of Touch,' Rely on Internet Instead

Fully two-thirds of Americans - 67 percent - say traditional journalism is out of touch with what they want from news, and for nearly half of Americans the internet is now the top source of news, according to a new We Media/Zogby Interactive online survey, MarketingCharts reports.
Though most Americans (70 percent) think journalism is important to the quality of life in their communities, two-thirds (64 percent) are dissatisfied with the quality of journalism in their communities.

Republicans (79 percent) and political independents (75 percent) are most likely to feel disenchanted with conventional journalism, but the survey found that 50 percent of Democrats also expressed similar concerns.

Those who identify themselves as "very conservative" were among the most dissatisfied, with 89 percent who view traditional journalism as out of touch.
Websites were alo cited as more trustworthy than more traditional media sources - nearly one-third (32 percent) said internet sites are their most trusted source for news and information, followed by newspapers (22 percent), television (21 percent) and radio (15 percent).

Among other major findings of the study:
Nearly half of respondents (48 percent) said their primary source of news and information is the internet, compared with 40 percent who said so a year ago.

Younger adults were most likely to name the internet as their top source:
55 percent of those age 18-29 say they get most of their news and information online, compared with 35 percent of those age 65 and older.

Seniors (65+) are the only age group to favor a primary news source other than the internet, with 38 percent of these seniors who said they get most of their news from television.
Overall, 29 percent said television is their main source of news, while fewer said they turn to radio (11 percent) and newspapers (10 percent) for most of their news and information.
MarketingCharts has more findings from the study.

Agencies to lose in digital revolution

Changing consumer habits, driven by the shift from analog to digital media, are revolutionizing the ad industry. But that could spell bad news for agencies, according to a new study by Accenture.

According to 70 industry leaders surveyed by Accenture, agencies have the most to lose in the new order, even more than broadcasters. When asked who would fare worst in the transition to digital advertising, 43 percent said agencies, compared to 33 percent who answered broadcasters. Cable operators were third with 10 percent. No respondents chose search companies or digital ad specialists.

The challenge agencies face stems from the rise of performance-based advertising and the technology tools needed to execute highly targeted campaigns, rather than mass-media pushes fueled by a singular "big idea," according to Charlie Symmons, senior manager in Accenture's media and entertainment practice.

"It used to be content was king; now it's very much context is king," he said.

For that reason, Accenture sees a threat to agencies from technology companies, which can provide the tools that allow clients to better know their customers. This could displace agencies' value to their clients, the report warns.

Accenture interviewed 70 advertising "decision makers" around the world from February through April this year. Respondents included executives from agencies, media companies and technology providers.

The consulting firm found 50 percent of respondents believe digital media would be the primary form of content and advertising delivery in the next five years. Over 80 percent think it will happen within a decade.

With that shift to digital, the survey found that advertising is undergoing a fundamental shift to become more accountable, Nearly four-fifths of respondents expect advertising will become more performance based, while 87 percent believe analytics will play a critical role.

Yet traditional advertisers are pessimistic they have a good grasp of the tools needed to operate in this landscape. Over 70 percent said the industry is not "technologically prepared for the resulting changes in performance measurement."

"People felt the complexity had grown over the last few years," Symmons said. "It's harder to target and track and develop campaigns."

While ad agencies were not expected to gain from these shifts, 46 percent thought search companies and 19 percent said digital ad specialists had the most to gain.

Source: Adweek

Online newspapers grow, but revenue growth slows

Roughly 59.6 million people visited newspaper Web sites in July, according to new figures from the Newspaper Association of America released Wednesday. That's 37.1% of all active Internet users in the U.S., and the number represents a 9% increase over the same month in 2006.

In fact, it's the second-largest monthly audience on record since 2004, when NAA started tracking Web audiences. (The top spot is held by May of this year, when NAA reported 60.3 million visitors.)

This good news for newspapers comes alongside a new report on the total print and online "footprint" of newspapers, based on analysis of Scarborough data, which found that 77% of adults read a newspaper in print or online every week during the third quarter. The duration of online visits is also on the upswing, with users spending an average of 43 minutes per month on newspaper Web sites during the third quarter of 2007, versus 40 minutes in the same period last year.

The historic and current figures are all available in the Newspaper Audience Database or NAdbase report produced by the NAA, which contains other data detailing newspaper readership, including the following statistics: 85% of individuals from households with annual incomes over $100,000 read a newspaper in print or online each week; so do 84% of college graduates. Also, 82% of individuals who bought something online in the last year.

Despite this flattering portrait of newspaper print and online audiences, most newspaper companies saw the rate of growth in online revenues slow in the third quarter, compared to the same period last year. At the Tribune Company, for example, interactive revenues grew just 9% in the third quarter compared to 28% in the third quarter of 2006; that also represents a decline in absolute dollar terms.

McClatchy's online revenues grew just 1.4% in the third quarter of 2007, down from 16.3% in 2006 3Q. Dow Jones' online revenues grew 8%, versus 13% last year. E.W. Scripps' newspaper Web sites (separated from TV station Web sites) grew 19%, down from 40% in the third quarter of 2006. Finally, Gannett's community newspaper Web sites grew 7.5%, compared to 21% last year.

Source: Media Post

Nielson: word-of-mouth is the most effective ad platform

For consumers, slick ads aren't the deal-breaker. It's what other people say about products that earns their trust. Word-of-mouth marketing is still valued among all other advertising platforms, says a recent Nielsen Internet survey.

Seventy-eight percent of consumers say they trust other consumers' recommendations over all advertising/marketing avenues. Next in the trust line: Ads in newspapers, at a 63% score. Consumers' opinions from online blogs came in third at 61%. Brand Web sites were at 60%.

Of the 13 different ad platforms Nielsen surveyed, new digital platforms--including some of that group's biggest categories--took the last three spots. Search engine ads only generated a 34% trusting score; online banner ads were at 26%; and--dead last--was text ads on mobile phones.

Traditional media, on the whole, did much better than new digital platforms. Television and magazine were in the middle of the pack, each with a 56% score; Radio was at 54%; and brand sponsorships, at 49%.

Nielsen conducted this global twice-a-year study among 26,486 Internet users in 47 markets from Europe, Asia Pacific, the Americas and the Middle East.

Source: MediaDailyNews

"Don't turn that dial" still working

According to a recent poll by American Media Services, 63% of American adults report listening to the radio every day.

Despite iPods, satellite radio and other new media fighting for people's ears, 72% of the respondents report that they listen to radio at least as frequently as they did five years ago, if not more.

The AMS phone survey of 1,017 adults in September was not without surprises: adults 25-34 report listening to radio more than other adults, with 79% saying they listen every day.

Internet ad spending up 23.6% in first half of 2007, Nielsen reports

The Nielsen Company today reported that advertising spending for the first half of 2007 was down 0.5% over the same period last year, with Internet spending showing the strongest performance (+23.6%) of any category.

According to preliminary figures from Nielsen Monitor-Plus, the leading provider of competitive advertising information, advertising spending was mixed across media with gains in some categories and declines in others. In addition to Internet advertising, other categories that showed an increase during the first half of this year were: National Magazines (8.4%), National Sunday Supplements (6.5%), Outdoor (5.1%) and Spot TV Markets 101-210 (3.2%).

"Even in this soft market outdoor ad spending continues to show strength. This traditional medium has embraced technology and is offering more and more digital and interactive advertising opportunities," said Brian Lane, Senior Vice President of Client Strategy & Product Development for Nielsen Monitor-Plus. "National magazine ad spending is also on an upswing with increased rate card ad revenue reported for the first half of 2007."

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