May 22, 2019
Zero Marginal Media Costs - The Marketing Windfall
by: Jaffer Ali
(Originally Published: April 13, 2016)
Jeremy Rifkin coined the term, The Zero Marginal Cost Society*
. His premise was that costs in the 21st Century were declining across the board and a sharing economy was about to crush traditional capitalism.
This missive suggests that digital media has reached such a stage where traditional media economic models must give way to a new reality. It is my contention that we are experiencing digital media costs are so close to zero, let's call them zero. These costs extend from content creation to distribution. Not only are the marginal costs of digital content and distribution costs near zero, but the fixed costs of the infrastructure are also near zero. A pimple-faced teen with an internet connection using Amazon's cloud can create a scalable media infrastructure.
So what does this mean for marketers?
For one, it has NEVER been a better time for marketers. The low cost of creating and distributing digital media has created an almost unfathomable oversupply of potential online advertising impressions. Online page views are basically following Moore's Law...something I call "Moore's Law of Media". This makes sense when you know that data and information is doubling every 12-18 months and data in a 21st Century version of media. More data equals more media.
With an average page impression carrying at least 3 ads per page, we have exponential growth in advertising supply. But all estimates of the increase in advertising dollars spent are in the range of 12%-20%. Are you seeing a marketing opportunity yet?
With an oversupply of advertising and a near zero marginal cost of creating new content (User generated content and curated content), online publishers cannot possibly maintain CPMs or CPCs. In 1922, Walter Lippmann wrote about how journalists and media owners created a "pseudo-environment" within which people act upon fictions instead of reality**.
Presently, marketers are operating in a pseudo-environment of media scarcity. This is cleverly supported by publishers. One CEO from a marketing company told me that Facebook sold 100% of its inventory. My first thought was that he was an idiot (and that has not abated) and the second thought was how successful powerful online media companies have been in creating this pseudo-environment.
The actual online environment is overwhelmingly different, following Moore's Law of Media mentioned above. The real windfall for marketers can only come if they see through the pseudo-environment and acknowledge how they can benefit from media oversupplies and media costs being driven to zero. In other words, it is a much better time to be using and/or buying media than selling it.
* Zero Marginal Cost Society
, 2012 Jeremy Rifkin
** Public Opinion
, 1922 by Walter Lippmann
Original Article: Zero Marginal Media Costs - The Marketing Windfall
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