Wednesday, December 7, 2011

Editor's Note:

Are you on Facebook? If you are, check out the Deal of the Day fan page. You get exclusive offers and a new deal every day. It is easy to become a fan, just Click Here and hit the like button...

Thanks for Reading!

-----------------
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 reminding 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 judgments 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 â?? 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 unsustainability.

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 costâ??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!

Original Article: A Critical Discourse

Missed an Issue? Visit the Media Perspectives Archives