The web disruption of traditional media is more powerful than anyone imagined it would be ten years ago, or even five years ago. Newspapers have been the hardest hit. It marks the tail end of a fifty-year decline that is now being accelerated. It has and will hit all media and advertising to varying degrees depending upon their stage in life cycle and response to new opportunities. I've condensed many conversations I've had with consumers and media folks over the past few years. Here goes...
Power Shift to the Consumer
If a consumer knows what he wants or needs, he can search for information on the web and gather more information in an hour than he could have in months before the web. That’s power shifted to the consumer. For the business selling goods, it’s a direct channel to the consumer without the requirement to lure them in through traditional advertising.
This in from Pew Center research 8/6/2008, Deborah Fallows:
The percentage of internet users who use search engines on a typical day has been steadily rising from about one-third of all users in 2002, to a new high of just under one-half (49%). With this increase, the number of those using a search engine on a typical day is pulling ever closer to the 60% of internet users who use email, arguably the internet's all-time killer app, on a typical day.
The Disillusionment Phase
If consumers are still influenced by advertising, I mean wowed by it, moved to buy something they didn’t know they wanted or needed, then it’s only for a short while. Holes have been punched in the veil. Many consumers have escaped and more will as time passes. This is the ‘disillusionment phase’ for all players—a splendid one for consumers. The web represents utility. With direct connections of consumer and source, higher utility value is created.
If I owned a major consumer products company spending millions on advertising I would…
Cut my traditional media ad budget in half immediately (half again within a year). Then apply part of those resources into building a digital marketing and sales framework with a small team of say six people. Include a designer, writer, usability expert, engineer and two developers. Work them like dogs. Apply some of the shifted resources to our employees in the form of idea incentives, say through an internal prediction market, but with real cash. Invest in the best ideas with the remainder of shifted resources.
Check out this recent study regarding search engine marketing and brand awareness and equity. Search presence counts big time for consumer products and will only increase in importance over time.
And if I owned a newspaper…
Lots of shedding that feels like shredding. Newspapers are manufacturing businesses focused on the value chain links of production, manufacturing and distribution. Trouble is the product is an information product that is tooled for past consumption behavior. Not much future in that. There will be a massive thinning of the herd so to speak. You have to go where the consumer is going. That means newspapers have to do something similar to what I described for the consumer products business.
How do newspapers shift if the income for digital is so much less right now than what they are structured for creating newspapers?
Change the structure. That means major downsizing and reallocation. You can’t put a full-grown chicken back into the egg.
But some consumers still want a high-quality newspaper. Won’t it be self-fulfilling demise if publishers cut back on quality by shifting to digital?
The quality standard is based on a past-looking definition. Change the definition to a forward-looking one. That probably means changing the production value chain link and ultimately the product to the new definition, which can be high quality. It seems apparent though that demand for any printed product, high quality or not, will continue to diminish in the near future.
The digital income is trifling compared to print, which means loss of jobs.
Businesses and people adapt. Loss of jobs, people finding new ones, shareholders losing value, investing and rebuilding are the risks and adaptations experienced in a market economy. Media has by its nature for the past one hundred years served two customer sets, consumers and advertisers. Maybe they still will do that, albeit quite differently. Media and advertising players have controlled the equation of abundance and scarcity. That’s changing.
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