All traditional media companies the world over are continuing to experience massive disruption to their long-standing, previously hugely profitable business models. Two announcements, only a few days apart in the second-half of January 2013 are indicative of the harsh new reality for media.
The first indicated journalism job cuts at Financial Times (FT). The second declared Google earned $50 billion in revenue during its 2012 fiscal year.
In an amazingly frank mail to staff by FT editor Lionel Barber discussing the FT’s new “digital first” strategy, he makes it clear that “print
As an aside: Barber’s mail uses the word “print” four times while “digital” appears six times, “internet” and “web” once each and “social media” twice. (I can recall vividly that just a couple of years ago IT departments in certain traditional media companies still “banned” the use of Facebook…)
Barber’s reference to the importance of print advertising revenues highlights the widening dichotomy between digital and print advertising. While digital audiences are growing rapidly and engagement with digital news and other media products increases, it seems as if advertisers continue to be prepared to shell out significant investment for print advertisements, handing successful printed products a handsome profit margin. At the same time, they do not apply this approach to the digital extensions of the print products they advertise in.
No. They take their digital money and mainly distribute it across many varied platforms such as Google, LinkedIn, Twitter, Facebook, non-print digital products (think The Huffington Post) and others. So, while printed products live relatively protected in the physical world (due to the high cost of printing and distribution), in the digital wilderness advertising money is gobbled by many competitors.
All advertising is not created equal
Advertisers are still prepared to pay handsomely for space in printed products, because of their desire for certainty. The digital world does not only affect media companies. Marketers also have to change and adapt quickly to a rapidly transforming, often confusing digital reality. In this hard-to-track, open space print advertising continues to offer something advertisers and their agencies are used to; a tangible, measured product not affected by the vagaries of a digital avalanche of “where does what appear when?”.
In short, traditional media companies can still profitably monetize advertising in printed products, while doing so in their digital offspring to the same extent is virtually impossible. (But things are changing, as evidenced by Newsweek discontinuing its printed edition at the end of December last year.)
When it comes to the digital advertising world, advertisers have come to use other channels more extensively than the web sites, apps or other extensions of the printed products they advertise in. This is where competitors such as Google, LinkedIn and Twitter are eating traditional media’s digital lunch. It is thus inevitable that, over a 10-year horizon, advertisers will increasingly move advertising investment from print into many different digital offerings, including their own media products.
Follow the digital money
Google is such a massive, dominant player in the digital advertising world that it commands a disproportionate slice of all digital advertising investment. It does this through utility and size. In addition it has created automated, online advertising planning and placing systems that are so easy and intuitive to use that anyone can do it. (They also share advertising income with many approved digital suppliers through their gigantic AdSense system, allowing almost everyone to monetize digital offerings through advertising.)
It’s easy to say now, but media companies would have done better to invest in search and advertising automation 10 years ago, rather than trying to replicate print advertising income on digital fronts. But perhaps it’s not too late. Thinking about digital utility and automating the buying process via e-commerce might still lead to interesting innovation.
All brands are content brands
What stops a financial institution from delivering as authoritative a stream of economic news and analysis as the FT, across its own digital channels? Companies and brands can today create and disseminate their own high quality content themselves, i.e. act like media. (Just where are those retrenched journalists from the FT going to go? I’ll bet that at least some of them will land up creating media for companies and brands, even for FT advertisers directly.)
Impossible before the recent wide-spread digital revolution, it means in future companies will become ever less reliant on using external media such as the FT for “advertising”. So, while Barber correctly names Google, LinkedIn and Twitter as the FT’s current real competition, he may as well have added “our own advertisers” to this list.
When advertisers and marketers become professional media creators themselves and disseminate high quality content across their own platforms, as is happening now, at the same time promoting these own media platforms via Google, LinkedIn and Twitter, what’s really left to advertise in the FT?