Apps You Can Eat and Other Predictions for 2011

1. In 2011, the social media frenzy has its morning after.

Recalling the era of driving traffic to company web pages, marketers will hit the wall using precious ad dollars to drive traffic to fan pages.

2. The untethered web accelerates the shift of ad dollars to online from traditional media and turns out to be especially good for…you guessed it, the web

The untethered web – smart phones, tablets and the like – will be especially good for the growth of audiences online, but not necessarily for the digital incarnations of traditional media such as magazines and newspapers. Those will fail to get the uplift in paid or subscribing audiences they hoped would come from touch screen technology. In the end, audiences will demonstrate that they place unique value on the quirky labyrinths of the web, and celebrate access to it away from the computer.

3.  Pre-roll video ad distribution remains lumpy, capping the upside of the sector in 2011.              

Pre-roll video, dependent as it is on video content, will remain “distribution-challenged” with a few black holes such as Hulu exerting enough pull to trap media planning while the market looks for alternatives to running video advertising for the sake of running video advertising.

4.  Content mills will become agents and providers for traditional media. Demand Media misses out on its IPO, but is acquired by – let’s say – Gannett.

Ultimately, content mills help replace the value lost over the years by traditional media companies unable to afford newsrooms and bureaus. The new, pay-as-you-go model props-up newspapers, especially, with the added benefit that editorial costs can be amortized.

5.  “Behavior targeting” ad networks lose out to “audience targeting” DSPs, proving once again it’s simply an image business.

6. “Internet-Shminternet”

Addressable TV is wheeled to the launch pad and it is a big, honkin’ rocketship with twin engines that breath smoke and fire.

7. Meanwhile, Congress enacts a “do not track” registry similar to “do not call”.

And, meanwhile, Jimmy, the Foursquare Mayor of Al’s Pizza and Sub shop in Smalltown, USA, is cashing-in a Groupon coupon for a large pie with everything on it before he drives to meet friends near-by thanks to GPS on his Google Android.

“Do you want (us) to save this location to your favorites, Jimmy? How was the pizza? Google love pizza.”

 8. Standard online ad units are increasingly replaced by non-standard ad units

2011 marks the start of the internet’s creative revolution as a new generation of savvy digital users moves from cubicle to creative suite with a goal to give their brands a leg-up in a way that delights consumers – meaning, the end of inter-@#$%!-stitials.

9. By the end of 2011 there will be apps you can eat, followed in 2012, by a great app binge and purge.

10. The Boston Red Sox will win the World Series.

What Do Demand Media’s Accounting Practices Say About its Business Model?

Demand Media is getting slapped around because of questionable accounting practices by which they propose to amortize the cost they pay people to write stories over five years. Henry Blodget appears to have kicked-off the story at Business Insider, and it’s getting coverage in Media Post and Adotas.

The argument from Demand Media is that the content they create today will have value that lasts five years. Therefore, as companies do with the costs of infrastructure – buildings and the like – they will distribute the cost for creating that content this year, over five years. The net effect is an improved bottom line in each of the five years. Blodget offers a simple explanation in his post.

While interesting, the accounting particulars don’t seem like the material issue here. More interesting are the implications for Demand’s business model. The unique idea behind the content mills has been search-driven, timely features and reporting. Instead, the accounting implies that what is searchable today will be searchable tomorrow, timely and relevant. Demand, the numbers say, is forever.  

Blodget describes this as “theoretically reasonable”, though he derides the proposed accounting practice. It is reasonable. Plenty of content lives online forever as anyone who blogs regularly and sees the search results linking to articles two and three years-old can attest. There is no shortage of relevant and enduring content online.

In which case, what problem are the content mills fixing? From its manifesto Demand says it is building a different kind of Media Company, one that listens fervently to the things consumers really care about (which recalls a similar manifesto from a long time ago), such as fixing a “cranky garage door”.

A quick check on Google using “cranky garage door” and there are 16,600  returns, most of them irrelevant (it is an imperfect search world after all) but many spot on, notably this one which at a glance offers the most comprehensive guide to fixing a garage door that any ambitious do-it-yourselfer could hope for. The post was made in 2002 and updated last month. Demand should cite it as a reference in its response back to the SEC; unless the technology of garage doors changes dramatically the value of content to help individuals repair them will last forever.

So, does more need to be said at this point about cranky doors? Sure, why not? But it explains that content mills aren’t really in the business of creating new, they are in the business of creating more – which can only be because they choose not to regard the legions of people who have been informing legions of other people, online, for nearly two decades. Or, they have determined that the only way to profit from the internet is to make a new one, perhaps drawing some of those legions to themselves at the rate of $10 per article, so they can brand and remarket it as their own. Either way, we recognize the model: it’s called traditional media.

Thanks to the inspired accounting of Demand Media, however, traditional media may have been given a new lease on life.

Privacy is not Free. Consumers are not Cheap.

Corey Kronengold raises several important points in a post at DIGIDAY where, in essence, he argues a point made by others that privacy is not free: if consumers want content that is free they need to relinquish some privacy in order to enable the advertising that will pay for the content. Otherwise, last one out turn off the lights.

Maybe. Maybe not.

Consider this: maybe consumers should argue that they are not free, nor are they cheap, and if advertisers want to reach them they will have to pay the full value of the connection that comes through their publisher proxies.

Research that Burst released this week documents that consumers are well aware advertisers are following them around the internet based upon their observed media behavior (visits to travel and food sites, etc). No surprise, most them don’t like it or don’t care. This would be the group of consumers that advocates of “privacy is not free” would like to reach with the message that audience tracking is good for them.

The economics behind that message, however, are broken. The value of an audience erodes very quickly when it is separated from the content that helped define it – equivalent to driving a car off the dealer lot. Typical third-party audience prices online confirm this. Accordingly, the full value of the Internet marketplace as it relates to consumer, publisher and advertiser is being smothered today by audience targeting, itself confirmed by the fact that the internet meets or exceeds every media metric set by its competitors offline except for ad spending. This is why. Look no further. Media value is a prisoner online, cut-off from its roots, which are content.

Corey writes:

“Our ability to create or identify the value of those [independent of content] audiences sustains the long tail of the web where the inherent value of the content might not support its own existence.”

Like the Great Wall of China, the only observable feature of the Internet from space is the long tail. If, as Corey proposes, the value of content in the long tail is incapable of supporting its own existence the internet has a problem, worth billions. In actual fact, however, there was a long tail and content and consumers of that content before there was advertising; meaning, as usual, that advertising is really the weak force in the media equation. The strong force is the connection between content and audiences. It is strong enough, in fact, to radiate energy worth a $1.00 – $2.00 CPM even after audiences have spun-off from one destination to another in internet space.

Agreed. Privacy is not free. But privacy is not part of the media value equation, as in, media value = audience reach – audience privacy. If it were, TV would have been dead a long time ago. If it were, magazines would have converted subscription information into a vital, renewable resource. Sadly, we know, the opposite is true: renewals are down.

Renewals are down because content is free and content is the binding and disruptive media agent. Splitting the privacy atom online releases a puff of smoke, a bag of audience marbles that ricochet across the floor and a rash of consternation. Splitting the content atom releases – well, so far, Google is a pretty good example.

Consumers See the Advertising, but Where is the Connection?

Our company, Burst Media, has just released a research study showing that consumers are very much aware of advertising that seems to follow them around online based on their media behaviors. Reporting on the research in its Online Media Daily newsletter, Media Post noted that over 78% of online users are conscious of advertising that appears “tailored to them based on previous visits to other sites”, and a large portion of those people – 34% – don’t like it. The rest are divided between don’t know/don’t care (38%) and, sure, seems like a good idea (27%).

The important number is the 78%. It confirms that online users get the fact that advertisers are tagging them for follow-up. It’s not a secret. They notice the ad messages protruding into their world and they step around them, as they are experienced at doing. It’s life. Everywhere you go, advertising seems to follow. What are you going to do? Sometimes it’s good. Sometimes it’s bad. Most times, the survey says, who cares?

Welcome to another generation of consumers inured to commercial messaging. How could this happen in an age of extreme media engagement?

Kirk McDonald, President of Digital Time Inc., reportedly offered one answer to that question in remarks he made to attendees of the iMedia Agency Summit going on in Phoenix, Arizona. iMedia described it this way in their report:

Consumers use content to make connections. That fact, according to [Kirk] McDonald, is the most critical piece of the marketing industry today. In front of a slide depicting people whose faces had been replaced with a bull’s-eye, he stated, “We’ve been getting off track — we’ve been turning consumers’ hopes, dreams, and personalities into algorithms. It’s not about the equation — it’s about the experience of consuming it.”

In today’s media economy, which offers boundless opportunities to reach consumers when they are “consuming it,” the only rational reason for not leveraging the value of it – the content – is price. But, indeed, price is such a driver of advertising decision-making at every level today that the new media opportunity – the chance to reach your best customers when they are most pre-disposed to what you have to sell – has been shanghaied. It is cheaper to buy consumer connections as remainder stock – as factory outlet inventory.

(You can sense the irony of that as it relates to the brand marketing world.)

iMedia described the close to Kirk McDonalds address this way::

Substituting “marketer” for “journalist,” McDonald closed the keynote with a quote from Time Inc. founder Henry Luce: “I became a marketer to come as close as possible to the heart of the world.”

Looking out at the audience, McDonald reminded us one last time that the most exciting thing about all of this is the people.

Actually, the only thing about all of this is the people. The most exciting thing should be about the connections. Instead, for a majority it’s simply “Oh look, more advertising.”

Forrester Reports that Internet and TV Use are Now Equally Popular

As a companion piece to the post in this space about TV viewership vs. internet use (“Media Vegetables”), there is this report in the Wall Street Journal, via MediaBistro’s Morning News Feed, that according to Forrester internet use now equals TV use among U.S. consumers. The report says people now spend equal amounts of time with both media: 13 hours.

Consumers are still warming-up to various internet protocols such as blogs (only 18%) and social media (35%). It appears from the story in the Journal, therefore, that the utility bringing the Internet up alongside TV is email: 92% of U.S. consumers use email.

Does that count as using the Internet today when comparing behavior to TV? How about, 92% of consumers use email today, vs. (I’m making this up) 26% that still rely on stationary and envelopes?

Media Vegetables

Articles such as Dave Morgan’s recent Online Spin, “CBS Audience Five Times Bigger than Facebook” are always a good tonic for the raging hormones of the Internet. Dave was struck by a presentation he saw from legendary CBS researcher David Poltrak comparing the audience sizes of CBS and Facebook. According to Poltrak, in the month of October CBS attracted almost 240 million viewers. Facebook attracted 151 million unique users. But CBS’s viewers spent 210 billion minutes with the network in October while Facebook’s unique users spend 42 billion minutes with the social network.

That sounds about right. I recognize me in all of that just as I did last year at this time when Neilsen’s A2/M2 Three Screen report revealed that consumers were watching an average of 4.5 hours of television per day, compared to an average of 4 hours per week spent with the Internet. The television is never on during the day in our household but, by golly, at night the news, a couple of sitcoms, a movie, perhaps a cooking show or sports event will chew-up 4.5 hours of TV time before you know it. Then maybe someone will check quickly online for the weather before heading off to bed.

It all should remind us that the Internet is not TV – to repeat, not TV. I hate wasting time on the Internet. It happens, but it’s painful: there is a sense of loss, probably because any time spent online requires the engagement of the user; therefore, any time lost is more keenly felt. Not so TV, which is an effortless medium. It requires no engagement. It makes no demand on the user. Hence, you can be regarded as a potato while being an avid television viewer. Avid Internet users, however, are un-potato like. They are shut-ins, perhaps. Drop outs maybe. But, they are not vegetables.

Which may be a good way to launch into the media value proposition of 42 billion minutes vs. 210 billion minutes. One is mineral, one is vegetable.

Tiger Woods and the Theory of Relevancy

According to Ad Age, Carnegie Mellon’s Tepper School of Business has determined that Tiger Wood’s endorsement of Nike has helped it gain 4.5 million golf ball customers and earn $60 million more in profit over the life of their agreement. And that’s just golf balls. The research did not look at other products, which it appears are harder to measure, but it concludes the estimated $200 million in endorsement fees Nike has paid Woods since 2000 have had positive affect.

The study was also able to determine that Nike lost 105,000 golf ball customers in the wake of Woods’ sexual misadventures. Had Nike walked away from Woods, however, the study says the damage would have been greater. Tiger Woods’ relationship to golf – as opposed to business consulting (i.e. Accenture, which punched his ticket following the scandal outbreak) – is the difference maker. Ad Age quotes Marc Ganis, President of SportsCorp, who says,

…other non-golf brands were “using the goodwill of association and positive image associated with Tiger to sell products that Tiger really had no role in developing.”  

When the scandal broke, those endorsers were “better off [moving on to] positive-imaged athletes,” Ganis says further in the story.

It took a whole business school to compute the ROI of Nike + Woods, which is akin to using a particle collider the size of a metropolitan area to smash an atom. But, such can be the requirements of knowing the nature of invisible things. In the end, the theory holds: relevancy matters.