A recent report from the Pew Internet & American Life Project says that about 93 million American internet users (68 percent of them) have had computer trouble in the past year (consistent with problems caused by spyware and viruses) and this has caused many users to stop opening email attachments, stop visiting websites that they fear might unknowingly download unwanted programs and even change browsers to avoid future problems.
And you wonder why Microsoft headed for the exits before buying Claria?
You can look at the Pew results and throw up your hands and bemoan what a mess the web has become for most users. Or you can see the diamond in the rough that I do.
It wasn’t so long ago that traditional media brands were so stunned by the internet that they panicked in a major way, none worse than Time Warner which raced ruinously into the arms of AOL. How can we compete with a medium that gives its content away free, updates it by the minute or at worse by the hour, and not only has unlimited room to tell an advertiser’s story but can let the audience make an immediate purchase?
Fast forward five years and Pew points to the answer. Trust.
Consumers have painfully educated themselves that there is indeed no free lunch on the internet, and have learned that along with those free smiley faces and shareware software apps can come a downpour of spyware that can take control of their online experience and produce enough pop ups to cover a 50-inch LCD in about 2.5 seconds. They have also learned that the porn industry is (surprise!) sleazy and will steal their money just as fast online as it always has offline. And that if it sounds too good to be true online, the results are generally the same as offline. Come on folks, no matter where they are from, who they used to work for or how many high ranking government officials they claim to be related to, no one is going to give you $25 million.
What happens in this kind of environment? People gravitate back to the brands with which they are already familiar. Brands they know they can trust not to screw them. Look at what is happening at most newspaper websites? Traffic is up, ad sales are up and people are registering in record numbers. Even the august Forbes brand says that pretty soon online revenue will surpass its offline revenue.
Ad inventory at brands that consumers trust is so tight that CPMs are skyrocketing. As they should. Although Amazon, Yahoo! and (come on, let's even pull for the healing) AOL have established themselves as pure online brands that most people trust, you never can tell when a tiny little backwater chat room -- where, say, just for example, adults were purportedly using web cameras to send indecent pictures to children and lure minors into sexual encounters -- can produce a tidal wave (aren’t you glad I didn’t say tsunami?) of negative publicity.
Consumers don’t expect that sort of thing to happen on NYTimes.com or WSJ.com (although the Los Angeles Times website certainly learned a hard lesson in letting down its guard). If a consumer wants to see what the product really looks like or where he can buy it, where does he go? To “Sam’s Shopping Blog” or directly to the manufacturer’s site where he can be certain that the information is accurate (although undoubtedly presented in the usual breathlessly positive posture). Why? Because the consumer trusts the brand.
This is not to say that consumers don’t use the net to get beyond most marketing propaganda to find out the true dealer cost or the lowest possible retail price, or to find out that most people who bought this product thought it sucked and would never buy it again. This is the great equalizing effect on commerce of the internet, and it is a joy for us all. However, consumers expect reliable information from brands they trust whether it is local news or if that sweater comes in blue as well as hunter green.
The inevitable effect of all this is that known brands will continue to attract a greater share of the online audience and will reap the rewards through more advertising. Companies with big ideas for the next generation of the web will line up at the doors of trusted brands because they will want to be associated with companies that consumers trust.
And so it will once again be cool to be a traditional brand. Ironic isn’t it?
Read Dawn Anfuso's account of the new Pew Report about spyware and consumer behavior.
Kent Kirschner, the owner of The Media Maquiladora, a Latin American specialty agency with offices in Sarasota and Mexico City, says the problem is starting to get even more pronounced as multicultural agencies begin to come to the digital party. "Margin compression is a phenomenon affecting all aspects of the industry," he says. "The rise of CPC, CPA, and other performance-based pricing has compelled all marketers to think that our profession now should be held to a different measure. Our creative and strategic work is now almost inevitably met with skepticism if there isn't some direct and easily identifiable performance metric attached to it. So clients value what we do less and drive us to wring more and more out of our media partners and our teams. In many cases, they don't pull their own weight in developing appropriate data measurement systems to identify the impact of our work."
It's not only measurement that impacts an agency's margin and daily workflow. Real in-house innovation must continue to be what differentiates agencies from each other -- and the host of widely available tools on the market. "The internet continues to drive the price point for traditional agency materials down to zero every day," De Vries says. "There is a community on the web that is in favor of sharing repeatable work so that more money can be spent on real innovation. To help eliminate what they consider mundane tasks, they offer free design templates, CMS platforms with extreme performance, and in some cases even free logo work."
Peter Gerritsen, well-known ad man and now Transworld Advertising Agency Network (TAAN) head, feels the same way. "The squeeze of economic conditions on the advertising community, and on marketing budgets, has created an environment of cost-control at any price, even to the detriment of quality," he says. "While this is short-sighted, it has become the lead in negotiating compensation. In many areas, it has become not about the value of doing it best, but how little it will take to just get it done. The advertising industry has commoditized many of the steps required to produce communications. A commodity is measured by cost, not by quality. Expertise is measured on outcomes and value. The experts command premiums for their work. Agencies need to position themselves as experts in defined businesses. Deep expertise is better than commoditized capabilities."
Agencies are now forced to do what they always do when it comes to margin compression: share the pain with their publishing partners. The good shops send out a brief to 20 sites, collect creative ideas from them, and collate the best five into a plan that fits from the standpoint of budget and practicality. Usually, the largest sites get on those plans simply because the agency wants to create the least amount of friction when closing a deal. Want to reach young men? Look no further than ESPN.com.
Agencies that are charged with performance simply go to networks, which find them the cheapest "targeted" inventory they can. Agencies don't know where their clients' ads are running, but how else do you get geo-targeted, contextually targeted, user-targeted, and re-targeted inventory for less than a $10 CPM? But what have the agencies really done? They don't know how they got the performance, or how to find it again. They don't own any part of the value chain of that process: the sites, the targeting, the data, or the analytics. Scary. Sounds like something the client can get directly -- for 15 percent less.
Gerritsen values the media mix more on performance than delivery. "The value is in the insights and the delivery of successful outcomes," he says. "How this is delivered may not be through internal resources, but as a trusted method of information exchange between media, agent, and marketer. It's not necessarily about who owns the data, but rather, about the creative use of the information to produce success. I don't like the term 'aggregator.' It doesn't demonstrate any value, just the ability to cobble together a pile of stuff. The value of the best networks and exchanges is the shared responsibility to balance costs and benefits to all participants."
For agency owners like Kirschner, there is no question about maintaining control of publisher relationships. "Despite the fact that there is such a proliferation of options in the digital space today, it has never been more important for agencies to maintain direct relationships with publishers," he says. "While networks and exchanges offer convenience and supposedly compelling pricing, the reality is that the publisher at the end of the loop ultimately wants to see a campaign succeed, and he or she has the direct experience and audience knowledge to ensure that happens. There are many tools available that allow these personal relationships to scale within a large media department, so the appeal of networks and exchanges diminishes."
I currently work for a company that is trying to help small to mid-sized agencies tackle some of the technology aspects of buying and selling digital media. In most sales jobs, it takes a while to get a meeting with a decision-maker. Frankly, I was surprised at how quickly CEOs, CFOs, and digital media VPs agreed to meet with our company at first. Sure, we have a captivating sales pitch, but the reason we get so much uptake is that there is real pain out there on the agency side.
The online media industry is far from being sorted out. Until a standard set of practices and tools gets established (which might never happen), agencies are going to need reliable, trusted partners to help them profitably navigate the digital landscape. Agencies will forever be evaluating new platforms, networks, exchanges, ad servers, data providers, and myriad other tools and services. But, for the agencies we talk to every day, it's not the tools that make the agency -- it's how the tools are used that ultimately makes the agency successful.
As De Vries says, "Agencies that were built on a manufacturing model (paying inexperienced employees to send mailers all day long) now need to focus on innovation instead because that's where the money is now. It's hard to innovate every day in an agency."
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