ChaosScenario

Can they make it to profitability?

In a recession what's real in terms of sustainable business models comes to light. I lived through the dot com boom and there were any number of companies that were "changing the rules" or creating a new economy. Economics, unfortunately, is a lot like gravity. It's pretty difficult to change the rules.

YouTube and Facebook have changed the world online. It's hard to remember how hard it was to post a video online before YouTube.  Facebook has successfully created the first global scale online community and seems to becoming one of those sites that just about everyone visits and engages with on a daily basis.

The problem is that neiter one is profitable. Although YouTube has seen tremendous growth its still yet to come up with a way to monetize that growth into profitability. The number of ads that Facebook would have to display based on their own tool is staggering. Both are in desperate need of a new advertising model that can either show direct correlation to sales or one that proves that brand awareness can be built on these site more effectively than through other vehicles, say TV.

At the peak of economic growth, like in 2007, companies are willing to invest in what hasn't been proven. In the depth of a recession, however, the hard questions get asked and just like during the dot com boom, many companies cease to exist.

I don't think this will happen to either of these companies. However, something has to change with both of them in order for them to be sustainable for the long term. I'm just not sure that anyone, including those inside the company, know what that something is.

- Paul Herring

Conflicts of Interest

The skeptic is not one who doesn't believe anything without proof. He's just one who believes that people tend to act according to their own self-interests. Like the marketplace itself, this is neither good nor bad. It's just a force of nature.

Consider the following examples:

• Google CEO's Eric Schmidt said that journalists should rely on online advertising. Did Schmidt make this assessment because it's right, or because 98% of Google's income is comprised of advertising revenue, and to state otherwise would be heresy?
• College professors and administrators tout the benefits of a college degree. Perhaps they teach because they believe it's true. Maybe they believe it's true because they teach. What's clear is that without a steady stream of believers, they would have to find employment elsewhere.
• Politicians want to prove they care about you by spending money on things that you care about -- and that the other guy doesn't care as much about you because he doesn't want to spend it on those things.  To maintain their position, however, they need you to forget that it's your money anyway, and their decision to take and spend your money removes your ability to choose what to do with it.
• The voters who elect them are no different, of course. They will happily cast their lot with the person or people who appears to promise the most while taking the least -- from them. That these promises must be paid for by someone else appears to be of little consequence.
• Companies want you to believe that owning their product or enjoying their service is better than the alternative, even if the alternative includes keeping your own money. Of course, their livelihoods depend on your being convinced of this.
• Companies also have a strong desire to pay you as little as they can without causing you to leave, and you have a strong incentive to get the best compensation package the market will bear.
• Unions want to convince you that market forces (including the freedom to choose where to work) are insufficient safeguards against abuse. Pay no mind to how increased union rolls fattens the pockets of the union bosses.

Powerful people can always mitigate the forces of self-interest, but it's useful to examine what their interests are before subscribing to their demands. - Cam Beck

Related video

Magazines vs. TV vs. Online

Which medium is the most effective? It's a question that every type of marketing agency is asking every day. Many people, media publishers and agencies default to the medium they have the most experience in.

One of the most recent studies getting coverage from McPheters & Company gets what will be a controversial heading "TV and Magazine Ads More Effective Than Ads on Internet". The study, commissioned by Condé Nast and CBS Vision, a major publisher and a major television network (insert red flag of potential bias) concludes that:

Within a half hour, magazines effectively delivered more than twice the number of ad impressions as TV and more than 6 times those delivered on-line.

Among web users, 63% of banner ads were not seen. Respondents' eyes passed over 37% of the Internet ads and stopped on slightly less than a third.

Though TV doesn't deliver as many ads per half hour as do magazines, net recall of TV ads was almost twice that of magazine ads; magazines in turn had ad recall almost three times that of Internet banner ads.

I don't question these results. I do believe that many Internet users have trained themselves to ignore banner ads. Also, I do believe that both television and magazines can be an effective advertising medium. However, I think the study doesn't consider a number of things, including:

Cost - What's the cost per impression for each of the three scenarios. Sure, maybe my banner ad only gets noticed say 1/3 of the time. However, if my banner ad cost is 1/20 of a television or print advertisement, then which is the better investment?

Placements and technology - These days, anyone who buys on-line media will not buy just banner ads. Typically there are sponsorship, custome placements in certain sections of sites and on-line promotions. In addition there are a number of different types of networks that can use technology that's not available offline to serve the ad to the right audience at the right time.

Rich media and video - Not all banner ads are created equal. Rich media ads and video ads tend, in general, to get a much higher response rate than regular banner ads and sometimes higher than their offline counterparts.

Optimization - If your on-line media buy isn't working, you can modify and optimize your buy on a periodic basis, even monthly. You can't do that with a print and television ad nearly as quickly if at all.

Maybe the problem here is that we're asking the wrong question. Maybe it shouldn't be which medium is most effective. We should take a look at the brand and product we're trying to promote and customize an approach based on our customer. With a budget large enough to do TV ads or even print ads, an integrated campaign using all three components together should be considered. Its just not a simple matter of plugging and playing into the "most effective media".

- Paul Herring

Friday Fun (Slightly Politically Incorrect)

The last post left me a little unfulfilled, so I wanted to make it up by posting one of my favorite Johnny Cash videos, courtesy of Sesame Street.

Have a great weekend! - Cam Beck

Cleaning House: Spammers Raining On Our Parade

Due to an enormous influx of spam, we've turned on the CAPTCHA requirement for comments.

We hope this change will be temporary. We apologize for the inconvenience. - Cam Beck

From Wikipedia:
What is CAPTCHA?

Update:
Apparently the spammer is able to get by CAPTCHA, so we're going to require authentication for a little while until we get this problem fixed. Thank you for your patience!

News flash - engagement = attention!

Not sure if you heard this or not but there's a new study just release from Tivo and third party researcher, Interscope. Get on the edge of your seat, here it comes. People tend to pay more attention to engaging ads, even if they record shows and fast forward through advertisements.

Shocking! So in the end, creativity wins? So if I really make my 30 second spot stand out, it will get noticed?

OK, I won't be too snarky about the study. It does show that a commercial spot should get attention within the first few seconds in order not to be skipped. That should change the way that some 30 second spots are put together.

It does remind us, though, how very important creativity is in producing engagement. You can have all the technical parts correct, have done the research but if whatever you produce doesn't reach the consumers emotions, it's incomplete.

- Paul Herring