Insights from the Monaco Media Forum
Just came back from the Monaco Media Forum, the yearly gathering of the media & advertising industry big shots & cool startups. It was quite an insightful summit with many smart people in attendance. I thought of sharing some of the insights I took home with me. I think the most important are:
1. The media industry is still an industry in denial.
2. After 15 years at the top, the CTR as the metric of record is finally starting to die, like it should.
3. The distinction of media vs. creative shops is not the right one to do in online advertising. The right distinction is between a shop that is focused on analytical drive towards measurable performance and one that is focused on deriving unique, out of this world and memorable experience. In both cases, media and creative should be intertwined.
An Industry in Denial
Bigwig media execs are still feverishly looking for a way to revitalize the ‘pay for content’ model. There have been several vivid examples I’ve witnessed, the first of which was when the president of Fox movies was interviewed on stage and completely downplayed the role of media ‘piracy’. He actually stated he believes it’s possible to put that genie back in the bottle. In the meantime, he succeeded, it seems, in persuading his teenage daughter to not download media, in exchange of which he agreed to stop preaching her and her girlfriends. I’m not sure how scalable this model is though.
Another great example was the heated debate ran with Mathias Döpfner, Chairman and CEO of Axel Springer, and Ariana Huffington from HuffPost fame (see here: http://www.youtube.com/MonacoMediaForum#p/u/31/ar6pCxwtUBk). The point Mathias makes on stage is actually one I have a lot of empathy to. Namely, that advertising alone cannot support the current mechanisms of quality content production. Thus, we need to work on changing people’s habit back to paying for content. As some of you may noticed, this argument suffers from the common mistake philosophers like to call “the would’a/should’a/could’a fallacy”. Yes, to create quality content requires investments. Yes, advertising alone is probably not enough. However, the logical conclusion is, sadly, not that we’ll see more people paying for content but rather we’ll see less of what is currently considered quality content produced through the mainstream publishers. In fact, it’s actually even worse for the Axel Springers of the world. The way they describe their business (see minute 39:50 in the video) is “Getting talent to create great content”. Alas, if there’s one thing we’ve seen happening in the last 15 years is how the effective the Internet and the web have been in going sector after sector and breaking middleman business models who are focused on distributing and arbitraging other people’s work and assets. In most cases, this is due to the fact that the traditional distribution channels are really in the business of lumping together A quality and B and C quality products together. In it’s basic form, a newspaper does just that. A product that lumps together Thomas Friedman and Rosalie Radomsky (The NYTimes wedding reporter) for the sake of distribution. For hundreds of years, the economics of content distribution required it. But not anymore.
And that is precisely the headstone. The question is not really whether people are willing to pay for content. It is whether they’ll be willing to pay for the current content products being sold. The answer to that is probably negative. To illustrate, a couple of months ago, one of Israel’s premier writers, Ron Mayberg, was let go of his newspaper. He was promptly encouraged by many(including myself) to open up a blog. Out of necessity, he decided to open a site that is based on a $100/year subscription. Within a few weeks he got probably a couple of thousands of subscribers. What he has done for lack of choice, the next generation of journalists will do as the natural choice. At that point the model of the Axel Springers will become really shaky.
The bright point was that it was evident these guys finally have started to understand that people are not criminals by nature, but rather that the ‘pirate’ distribution channel was much more convenient than the channels they provided. Success stories like spotify and the iTunes/App store have finally drove that point home. There is another lesson, though that the App store has been teaching us that I’m not sure they appreciate. That is, in a world where movies and tv don’t have a monopole on entertainment, the price of entertainment hour goes down rapidly. If the price of an entertainment hour seeing a movie is about $5, for a typical iPhone game it is probably around 5-10c. That is a major shift in the economics of content and is not going anywhere.
The CTR is DEAD
That took a while, and probably will take a decade more, but finally the CTR is dying as the metric of record. Part of it is new tools and the weaving of different media sources through exchanges, and part of is probably the rise of social media and the increased measurability of ’softer’ metrics like engagement and buzz. Finally marketers understand that most people don’t click on ads, and those that do are of very specific demographics, and as such, optimizing for CTR will actually take you away from your target market, in most cases. A marketer today should ask herself: “What is my goal?” – Is it traffic growth on my site? Convesions and revenues? Brand engagement? Buzz? and optimize her campaigns towards those goals, requiring from her partners and tools transparency and correct attribution of all activity, not just post click. An example of what seems to be a great tool in the buzz department is Microsoft’s new LookingGlass tool. LookingGlass shapes up to be one of the top social media dashboards in the wild. Yes this is a Microsoft product aimed at social media, and it’s great.
The Identity Crisis
Are you a media agency? A creative agency? Focused on direct response? big brands? I would claim these are the wrong dimensions to identify yourself by. Ask yourself, are you a Bill Gross (the head of PIMCO) or a Picasso? These are the two models for the new media world. Are you all about performance and analytics? Wil you feel great working with a bunch of ‘quants’ trading media and optimizing creatives? Or would you only feel great taking customers through an emotional experience, custom built to push specific buttons? Because that is where the world is going, and it’s really hard to do both. Media and online advertising are quickly becoming a WallSt. inspired profession, sitting on the bridge between the science of options pricing and psychological engineering. However, as companies like Apple constantly show repeatedly building unique campaigns on sites like the NYTimes, there will always be a place for a ‘greater than life’ advertising concepts. They will just be done by other people.
The media industry is still an industry in flux, and will probably continue being for years to come. However, if you identify who you are, what you want to accomplish, and be realistic about what you can expect from users and consumers, this is one hell of an industry to play at.
