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Future Ad Spend To Be Determined by 5 Factors

2009 October 13

Diane Mermigas, Editor at Large at Media Post offered this brilliant insight last Friday.  As many have forecast that we have hit the bottom in ad spending, Mr. Mermigas points to the facts that:

1.  The fortunes of advertisers are tied to the American Consumer, and things aren’t looking so good for the consumer in the short term with “real” 17.5% unemployment

2. With declining ratings for broadcasters and readership for printed media, there is no real universal connection-specific measurement and value standard.  We know we need to reach people, but where are they and how do we quantify our gut feel?

3.  Content revenue models will take some of the sting out of falling advertising revenues.  But who will earn those fees and will those fees generate enough income so that media companies can still profit from declining ad revenues?

4.  There is no equilibrium in the destruction of old media value and the creation of new economic value right now.  Revenues from online, mobile and other digital formats do not even come close to making up for the loss of traditional revenues.  If you are a media company (any media company) and haven’t yet figured out how to make money off of your digital content you are in good company.  No one has figured that out yet.

5.  As media related transactions accelerate they will do so with much lower valuations based on lower projected incomes.  To quote Ms. Mermigas,

“This process will force companies to reconsider their allocations and reassess how consumers and other businesses spend. Revenue projections will reflect cyclical economics and disruptive systemic change, such as digital adoption. One of the difficulties of determining a valuation for a potentially merged NBC Universal and Comcast is trying to assign reasonable projections for NBC TV network, station and online advertising spending over the next three years.”

What does this all mean?  Companies need to explore the entire media landscape before committing dollars to marketing efforts.  Whereas media mix used to refer to Print, TV & Radio, today that definition must be expanded to include so many other channels available through Social Media.

The media world has changed dramatically in the last year.  How has your marketing plan changed?  Are you still broadcasting your message through a megaphone, or are you encouraging engagement and a real connection to your customers.  Have you made it easier for customers to contact you if they have a question or problem?  Are you resolving problems online so the public is aware of your efforts?

These are big questions that need to be answered BEFORE allocating any  media dollars.

From Business Spectator – August 6, 2009

“Overall ad spend is likely to dip 7 per cent this year, but for those not in the digital space, the dip is likely to be more in the order of 11 per cent.”

In this video Harold Mitchell talks to Business Spectator’s commentary team: Alan Kohler, Robert Gottliebsen and Stephen Bartholomeusz about ad spending.


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