Thursday, September 11, 2008

Q4 2008: 4 thought starters

I am very interested to see what eventuates in Q4 of this year. Generally the last quarter of the year is a pretty robust period, but in 07 it moved from hunstoppable growth momentum to barely a whimper, with 2007 Q4 revenue only up 19% on 2006 Q4 revenue.

Compare this with a 67% increase form 2006 (compared to 2005) and similar increases in the previous years and this figure would have caught the attention of the main players.

Don't get me wrong, 19% YOY growth is nothing to sneeze at, but when you're used to 50%+ growth YOY it shows that the industry is maturing and the momentum off the back of the migration of spend from offline to online is slowing.

Here's 4 things I'll be keeping a close eye on across the next 3-4 months.

1. Emergence of the specialist

This applies for all areas of digital. Agencies. Publishers. Sales houses. Search. Display. I think specialisation and service level will become a key differentiator in a very competitive industry. Knowing your product. Understanding your audience. Understanding the brief. All fundamentals but generally missed most of the time. Agencies are going to want publisher partners who can address business problems and conceive solutions, not sell banners and medium rectangles. Clients are going to want agencies who really understand the digital space - from internet to mobile to emerging technologies, in game, video, social media etc

I also think media owners/publishers will need to do more to skill up their sales teams to truly understand their audience and their key points of difference. Portals are usually generalists in terms of their understanding of audience and context - there is an opening for specialists (like Gizmodo, Sportal, Cnet) to work with larger portals specialist areas (sport, tech, health, parenting) in terms of site representation and content syndication. The portals bring the audience to the content, the specialists extract the revenue it deserves. Being 'great at one thing' is severely undervalued in AU.

Edit: By the above what I am saying is we should start thinking about specialists selling specialist content. For me, it makes more sense for me to buy a parenting environment off someone who has experience in the area (they don't need to be a parent but they need to understand parenting) rather than a 25 year old single guy. It makes sense for a specialist who understands technology to be offering solutions to an advertiser wanting to reach this audience, not a salesperson who doesn't understand that environment. Just like it might not be feasible for an agency person to give you definitive info on ALL elements of digital media ... it's equally not feasible for one salesperson to sell 10 different environments with 10 different audiences and mindsets.

Google has employed Industry Marketing Managers whose job is to stay on top of all industry trends - essentially become an analyst - and they feed these insights to their clients. The result, more trust.

2. Service is the differentiator

Market tolerance of adops mishaps, under deliveries, misleading ad network buys, ambiguous creative specs, lack of knowledge about audience data, content etc will not be as tolerated as it's been before. The excuse 'we're such a young medium, it's a steep learning curve' is such a cop out - we need, as an industry to ensure we can deliver what we sell. As a result, revenue will move towards providers who have the above issues sorted out and have their back end in check. Everyone is going to have to work harder to earn their slice of the digital pie, and as a result we might see the first signs of some consolidation or even better, vastly improved service.

3. Forced mid-tail embrace

Mid tail consumption in AU is obvious - approximately 8% of pages viewed on the Internet belong to the big 5, and about 11% belongs to Google. What are people doing with the other 80%? They are using mid tail sites. Problem is, the dollars haven't flowed into this critical area - namely due to the market presence of the big guys, plus a lack of a great vertical network, time constraints etc. This might all change. Reason - most of the big players have increased their rate cards to levels that perhaps are above what is reasonable. This will force marketers to look elsewhere, namely the mid tail - which is far more cost competitive and generally gives you access to more engaged and credible audiences.

4. The hard TV/online cross-sell

For the 2008 Olympics, advertisers on the Olympics didn't have the choice regarding taking an online package, it was a deal mandatory. I can see this becoming more common across key in demand TV programming - inclusive deals that cover both TV and online. It's a good way for the cross media players (namely 7 and 9) to leverage their TV muscle to generate additional revenues for their online assets. With James Warburton now Chief Digital guy at 7 Media Group, I think it'll be the 7/Yahoo group that lead the charge across their key programming in the front half of 2009.


denise said...

Ben - I like your style!

The industry in general (but am speaking particularly on publishers, representation houses and long tail sites), are simply finding it incredibly difficult to recruit, train and then importantly, 'retain' good staff to achieve many of the great points you raise.

From your blog to the decision makers ears!

Ben Shepherd said...

I think one of the reasons for this is most players in AU want to be all things to all people - and perhaps their staff don't want to spend their careers being generalists.

The magazine industry have been very good at adapting to this model and offering real value (aside the DPS, full page etc they sell) to agencies and clients ... the strength of the specialist in terms of service and extraction.