Borrell’s Blog

By Martin Nyberg

Digitized billboards are coming online across the country, and some day they could be a real threat to newspaper, radio, and television advertising revenues – both online and off. These electronic billboards are better than giant video Web site ads on the skyline: 330 square feet of full-color, full-motion action that can be updated in real-time by a worker at a central facility hundreds of miles away and networked together to show a coordinated, day-parted message at sub-Zip-Code levels.

This is just barely beginning. Clear Channel, for example, has well over 100,000 billboards, but fewer than 200 of them are digital so far. Given their potential, though, it’s easy to see them becoming another “disruptive technology” that could take significant ad spending out of newspapers and TV.

However, they could also be stopped in their tracks or severely limited by the same groups that have been protesting the “visual pollution” posed by billboards for years.

And I wonder about the effect that huge, compelling 10- or 15-second TV ads will have on freeway accident rates; we may be hearing from the Highway Patrol on that score. (They may be tempted to compromise, though, by the idea of instant regional “Amber Alerts” and wanted posters.)

Given the revenue effect these boards could have, I wouldn’t be surprised to see newspaper and TV outlets give such concerns an extra little smidgen of coverage.

While electronic billboards may end up operating under a variety of restrictions, they are finding success already in slow-moving high-traffic areas (shopping malls, chronic roadway bottlenecks). With programmable clothing on its way out of the lab, pretty soon there won’t be a surface that can’t carry a message. But more on that another time.

by Kip Cassino

Anyone who has watched “lifeboat” movies knows how they progress. As the days lengthen, the crew stretches rations to a few morsels of food and a single sip of water. The weak are cast into the sea as they swoon. But, eventually, the rations run out and the remaining survivors begin to look to each other as the awful remaining alternative.

To some extent, that grim scenario is playing out in the media industry. Newspapers, for example, have cut staff to levels never contemplated in years past, in order to preserve the “core product.” But beyond the cuts, it’s pretty much business as usual, even though the ad categories responsible for the majority of past revenue – the auto dealers, department stores, real estate, and recruitment – have all continued to slip as the century nears the end of its first decade. But cuts assume that things will ultimately be better … that the lifeboat will be found, and those still onboard rescued. What if that’s not the case? What if the lost revenue is not coming back?

An evaluation of the trends driving the downturn in advertising spending for each of these categories does not hold promise for a return to the past. Without getting too technical, the statistics show the opposite: that there has been a break between past spending patterns and those in place now in every one of these ad categories. Return to the past is unlikely. Nor is it likely that some major new ad category will arise to take the place of the lost revenue. A look through the lists of businesses and their ad spending patterns does not show promise in any market, large or small.

There are no quick fixes for the current situation. There are indicators, however, that – when taken together – at least show the direction newspapers must go to regain their market strength:

1. Be aware of how you got here. Newspapers are in the situation that exists now because they chose to measure revenue and ignore share. So, when revenue dropped, the reduced share caused even greater reductions – unanticipated by past results.

2. Find out where the money is going. In both recruitment and real estate, the lost share did not all go to some online intermediary. In many cases, it moved to the advertisers’ websites themselves. This means the “Upsell,” the classic vehicle newspapers have used to become the largest local online advertisers in the markets they serve, is ending. The online money is now moving to paid search engine placement, e-mail marketing, online promotions, and streaming audio/video.

3. Play to win. That means measuring share, and looking to win it. Just counting money isn’t enough. If your revenue isn’t growing faster than the whole pie, even if it’s growing you’re still losing ground.

4. Get measured. Newspapers have the reputation among advertisers as resistant to measurement. Yet measurement is, increasingly, what advertisers demand. Programs to offer reasonable metrics in this area must be developed.

Newspapers are not going away, though they may change dramatically during the coming decade. However, the longer they continue their “lifeboat syndrome,” the more painful their transition will be.

~ KC

By Gordon Borrell

Plenty of otherwise smart people seem to be rushing toward some type of application that involves cellphones (do they even call them that anymore?). If it’s on your agenda, I’d suggest you be careful. Though we are asked about once a month, we are unable to provide advertising estimates on this segment because they have to reach the $150 million level before we can track anything … and not until they reach $1 billion (about 0.35% of all advertising expenditures) do they become accurately trackable. Local advertising on mobile devices is not even at the $150 million level yet.

Plenty of people have lost their shirts following the excitement of consumer uptake for a new medium without realizing that advertising absolutely always lags mass acceptance by about 10 years. It happened for radio, which struggled incredibly in the 1920s as hundreds of stations were started, then failed; it happened with local TV in the 1950s, which was subsidized heavily by local radio stations (which created most of the TV companies) until TV started generating profits in the early 1960s; it happened with Ted Turner's CNN and Landmark's Weather Channel, which by the late 1980s were losing $1 million per month each. (I witnessed the latter debacle firsthand.)

My biggest concern is that screens are too small to allow anything but "branding" advertising (no voice, just logos), and that the vast majority of branding advertising is national, not local. My other concern is that consumers, because of the current rate plans for data access, won't tolerate much, if any, advertising. Finally, while the consumer behavior on the Web indicates a quick-in-quick-out information quest, the behavior on smaller devices on which consumers are paying for time and data downloads will be even shorter. That limits the opportunity for advertising considerably.

I've long felt that the cellphone model follows the cable model. The flow of money for cellphones goes directly from the consumer to the provider. Thus, your dealings should be with the wireless provider. Providers have every incentive to promote access to more and more "content" because it drives consumer retention and dollars.

A good historical reference is The Weather Channel. In the 1980s it was losing $1 million a month because it relied solely on advertising. The audience wasn't quite there, and the costs of packaging and delivering a 24-hour weathercast outstripped the millions of dollars we were getting in advertising. I was with Landmark Communications, the parent company, at the time. Landmark was about to shut it down, but we came upon the idea that the local cable companies were benefiting greatly from The Weather Channel and should thus pay. We asked them if TWC helped them sell subscribers. (Yes, indeed, it did.) We told them we were about to shut it down. They urged Landmark not to shut it down because it was one of the most popular channels. They agreed to pay something like a nickel per subscriber per month. Overnight, it was profitable. And they continued to sell advertising.

If there's a way to mimic this model and sell exclusive content rights to a wireless provider, then I think you've got something that will hold you over for the next 10 years, until advertising becomes more viable for wireless devices.