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Media Perspectives - Wednesday, August 4, 2010
A Critical Discourse
By Jaffer Ali
"Your relentless battering of the online ad world is really
tiresome. If you are so right why are SO MANY so wrong?"
--"Jack's pal" to Jaffer Ali
Let me begin by thanking a critic of my last column, Inside
Plato's Digital Cave, for this week's topic, and for remind-
ing me how few among us are willing to engage in critical
discourse these days, seeking comfort instead with other
metaphorical cave dwellers of like mind.
Indeed this is a problem for our generation. We seek
frictionless communication because it's more expedient;
less threatening to our temperaments and egos. But just
as friction is used to sharpen a blade, so it can be used
to sharpen one's thinking.
It is in this light that I thank and commend "Jack's pal"
for daring to brave the friction of opposing thought.
The first order of business is to assert that moral judg-
ments and intellectual challenges are often mutually
exclusive of majority opinion. Otherwise, slavery and "For
Whites Only" lunch counters would have been morally right
at certain points in history. Similarly, Einstein would
have been wrong to confront a universe steeped in Newtonian
physics. Henry David Thoreau perhaps said it best when he
wrote, "Moreover, any man more right than his neighbors
constitutes a majority of one..."
If we assume for the sake of Jack's pal that I am right
and "SO MANY are wrong" then the answer is simple, because
when online "experts" only experience a fraction of the
ecosystem with no apparent dysfunction, they are likely to
conclude that there is no problem. In fact, they become
cheerleaders for their slice of good fortune and the
industry that spawned it. From their narrow perspective,
everything is fine.
The industry trade press, populated as it is by non-
confrontational self interests, gives disproportionate
voice to a multitude of misguided memes such as behavioral
targeting, pre-roll advertising, video portal hype and
various other dubious aspects of online advertising theory
and practice. Fewer than one in ten articles offer a
dissenting opinion. So if you read the online trades, it's
highly likely you'll be lulled into "groupthink".
"Advertising spending around the world is doing better
than expected this year, but the real standouts are online,
especially paid search, mobile and social media, according
to a revised forecast for 2010 according to a report from
ZenithOptimedia."
--Jack's pal
As the above infers, Jack's pal draws comfort from the big
picture ? at least from Zenith Optimedia's perception of
it. But what do the statistics really mean? Whereas some
areas of advertising may be doing better than expected, we
cannot rest on the laurels of compared-to-what assessments
drawn in the cave. For my money, the bar has been set
unacceptably low.
It's not even mildly controversial to suggest that
magazines and newspapers are in business free fall.
National radio and television may have done relatively
well in the upfronts, but that's because there are no
scalable reach alternatives, evidenced by the lack of
trickle down to the local radio and TV markets. Ad Age
ran an article just a few months ago on how niche cable
networks were on life support due to their unsustain-
ability.
But let's take a closer look at Jack's pal's assertions.
Is search doing well? Ask Bing and Yahoo! Both are
languishing. Are CPMs (eCPMs) paid to publishers rising?
The answer is "no". Take Google out of the equation and
Jack's pal may be forced to reconsider life in the shadows.
What about "social media"? Twitter is still looking for a
viable economic model. And ad inventory on Facebook, the
theoretical 800-pound gorilla, can be had for as little
as $.07/M. That's only seven pennies to virtually guarantee
that more than 999 out of a thousand people will avoid your
ad! Sounds overpriced to me.
Jeff Jarvis recently wrote an article using Conde Nast as
the foil for his conclusion that "Advertising is f@#!ed".
Nobody likes advertising and as my good friend Jeff
Einstein says, "Everybody is equipped now to avoid it."
Business as usual has become a euphemism for unusually
bad business.
Case in point: television advertising CPMs are increasing
while effectiveness is declining. I spoke with an executive
from one of the largest telemarketing call centers in the
world and he said, "Ten years ago, a single 60-second spot
on A&E would garner 2000 calls. Today, you'd be hard
pressed to generate 200 calls from the same time slot.
And the cost for that spot has nearly tripled."
For anyone who's counting, that's a 90% reduction in
response engagement at triple the cost?a 270% decline
in effectiveness. To be sure, these spots produce an
increase in website traffic, but not enough to justify
(let alone defend) the downside. Another example of
television's diminished capacity can be found in Yahoo's
$100 million ad campaign. After the money was spent,
they admitted to no increase whatsoever in traffic to
their homepage.
As for online ad effectiveness, click thru rates have beat
a hasty retreat to statistical zero. Ten years ago, CTRs
hovered around 5% and now average less than .1%. The
decline has been so precipitous that industry pundits are
distancing themselves en masse from the metric in search
(no pun intended) of a new, more salable illusion to
promote.
"Online advertising spending will rise from $49.8 billion
and 10.5% of global spending in 2008 to $82.7 billion and
17.1% in 2012."
--Jack's pal
Even giving Jack's pal the benefit of the doubt, what
percentage of this spending is concentrated among Google
and just a handful of others? Google's estimated revenue
for 2010 is around $24 billion, and the top-10 Internet
properties account for more than 80% of total revenues.
The bottom line is a lifeboat that saves fewer than a
dozen in a sea of 250 million drowning souls.
All things considered, including Jack's pal's thoughtful
response, it would appear the digital cave of which I
spoke is even deeper and darker than I thought!
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