Digital Media's Growing Pains

Its now about 11 and a half years since I thought it would be a good idea to work in the media industry for a year or so. (I thought) I wanted to be a web developer, didn't quite understand how everything was on the internet for free but somehow companies like Google and Facebook were worth millions of dollars - but knew that it was something to do with advertising, and wanted to understand how that business worked a bit better before I did something like set up my own business in a world where the financial model made no sense to me.

As it turns out, the first thing I learnt which pretty much shaped the next decade of my career was that communications technology might be interesting, but the impact it has on people and their behaviour is far, far more interesting.

Something else I learnt, probably a few years later, was that the world of "digital" that was massively disrupting the advertising industry is only a subset of "marketing". It was a new world that was sold on the back of all the new things that were possible, but to a world that didn't really grasp the implications of what was lost in the process. The problem is that "best practice" for digital media/advertising isn't necessarily "best practice" for advertising in general.

Digital is great for short-term results, identifying potential customers close to the point of purchase and giving them the final nudge. Which are very easy to measure - you just watch your sales numbers before, during, and after the campaign and see how much of a difference it makes.

But what "traditional" media does well is the long-term, brand-building stuff - the messages that stick in the back of your mind until they resurface when you're walking doan a supermarket aisle and make you pick up the more expensive branded product instead of the cheaper alternative. (My go-to example is always the £3 packet of Nurofen instead of the 30p supermarket-brand ibuprofen.) The kind of advertising that doesn't necessarily make you run out and buy the product, but changes the way you think about it in a way that expresses itself as brand loyalty (buying the same product again- even when the last time you bought it was purely because it was discounted), "price elasticity" (willing to pay more for the same thing) - factors that only really shift as part of a long-term, consistent marketing exercise, but are very difficult to measure, quantify, and build into a marketing model.

So, when more money is being spent on "digital advertising" than all other forms of media put together, a problem arises. But its a special kind of problem that doesn't actually look like a problem to begin with.

How Advertising Spend has Changed

Just over a decade into my "year or so" long experiment and its not unreasonable to say that the advertising industry has been completely transformed by the impact of technology.

This is what the global picture looks like, in terms of where all the advertising money is going;¹

Worldwide Ad Spend by Media ($m)

What we see; Newspapers used to be the biggest advertising medium (by spend) in the world, overtaken by TV in the mid-to-late late 1990s. Then, around the year 2000, a small spike in advertising across all media² was followed by continual and rapid growth in online spending — mainly at the expense of newspapers³. In the space of a decade, online advertising had overtaken Outdoor (ie. posters) and radio.

Then, everything took a dive around 2007 - the global financial crisis hit the media industry pretty hard - Newspapers, looking pretty flat for a few years, suddenly fell off a cliff and never recovered, while online advertising continued its growth. While TV advertising remained (and remains) fairly strong, online spending recently overtook that too, and is now the biggest medium by ad spend in the world.

Now, lets take a look at the same figures but just for the UK;

UK Ad Spend ($m)

By 2008, the internet had become the biggest media channel by spend in the UK. It now accounts for more than half of all the UK's advertising spend.

What the Big Numbers are Hiding

It is worth noting at this point that these big, broad numbers hide a few things.

The first - and probably most apparent from inside the media industry - is that "Newspapers" really covers two very different things. On one hand, there's the kind of advertising that you probably think of when you think about "advertising in newspapers" - the big, colourful, maybe even full-page adverts that are selling some sort of "brand". The other is the "classified" adverts- mostly taken up by property for sale, recruitment for jobs and second-hand cars. When spend started shifting to "digital", the first to get hit was the classified ads - adverts that worked very well online, probably better than in print. The "brand" or "display" ads weren't so much hit by the online alternative for advertisers, but the online alternative for readers - as readers migrated from print to online, the advertising model (and money) changed. As the industry cliche goes, from analogue pounds to digital pennies. In print, newspapers were competing with one another to be "the paper" that a person or household would choose to buy. Online, there's no particular reason why anyone would limit themselves to a single source of "news" - why not read the Guardian for politics, the Times for international news, the Sun for sport. Or maybe you would read the front page (now "home page") of a newspaper website for the headlines, then read a bunch of bloggers for the editorial.

The second thing that the broad numbers hide is that "internet" also covers a number of different things. About half of it in the UK is Search advertising - the search results that you see with "Ad" or "Sponsored" next to them, shown to you based on the search terms (and influenced by other data that your Google account or web browser history might be holding). About 40% of it is "display" - the banners at the endges of web pages, the pre-roll videos, the sponsored or promoted posts in your social news feed. The other ~10% or so is the "classified" ads. Clearly, Search advertising is doing a "response", rather than a "brand" job. Likewise, Classified ads are obviously "response". But of the online Display advertising, a great deal of it is also doing the "response" job - easily measured in terms of efficiency and value, but less likely to do the long-term "brand building" job.

How the Media Industry has Changed

When I joined, there were a few interesting things going on. Firstly, the agencies didn't really seem to have many people who really "got" the internet. I was 30 at the time, and when I left school I had never heard of the internet - the fact that I could walk into an interview with a smartphone/PDA in my pocket and a link to my blog (about the internet!) on my CV was enough to mark me out as an "expert" - despite no experience or understanding of the advertising industry. The industry - media owners, media agencies and advertisers - really, really wanted to be able to show that they understood the new, digital world. And the people they turned to for knowledge and understanding were (and still are, I think) mostly the salesmen.

The big story from a consumer point of view was about how broadband penetration was growing, Facebook was clearly the "next big thing", but people were still wondering whether it was going to be as big as MySpace - and if so, what was stopping something else from coming along and overtaking it. (My point at the time was that Facebook was doing something different by connecting people's real world identities - you didn't tell anyone your real name online at the time - with all of their interests, and all of their real-world friends, and that was going to be a very sticky thing to pull people away from.) It was also at the point after smartphones had started to appear, but before the iPhone had really crystallised what a mass-market smartphone/pocket computer would look like. (At the time, it was a real headache from a research point of view that everyone had a different definition of what a "smartphone" was… but thats another story.) Digital was the future - obviously - and whether or not it was a future that we wanted, it was just a race to get there first.

Today, its a slightly different world. Every media has been touched by "digital" in some way - "TV" is now part of a broader "video" marketplace, where broadcasters are making most of their content available online, and "radio" is part of a broader "audio" marketplace, where radio broadcasters are up against a world of music streaming services and podcasts, "newspapers" have become "newsbrands" and while their businesses are often still reliant on the printed copy (partly because its something that people pay for, but just as much because print advertising is an easier business than online advertising), their future is probably going to be in a world where they are balancing the value of their content with the value of their audience (who can just as easily be targeted anywhere else on the web, on an individual basis).

Which brings me to my point.

Advertising on the internet has its own set of best practices. There are things that you can do online that you can't do offline, and vice versa. But "best practice" for online advertising is not the same as "best practice" for marketing in general. However, with online advertising so massively dominant in the UK, I don't believe that there are enough people worrying about this particular conflict and the implications. (Some, sure. But not enough.)

Or, at least, not as many as there are still racing to be the first on board with the Next Big Thing - whatever it might be.

1. I've deliberately left this data unsourced, because I'm not entirely clear whether the data is allowed to be published in public or not. Suffice to say, I'm confident enough that the figures that they illustrate a 'truth', and confident enough in the story that they tell that I don't feel a need to cite an authoritative source. ↩

2. I'm pretty sure that this is the dotcom boom, when a bunch of investor money got pumped into new online businesses, who pumped a lot of it into advertising their businesses, a lot of which was with other advertising businesses, which made them look good to investors who pumped more money into their businesses… ↩

3. Newspapers are pretty flat on the chart here; although newspapers' level of advertising spending stayed fairly steady, total advertising spend tends to be proportional to GDP- advertising spend overall kept on growing, but newspapers' share was declining - especially in the markets where internet infrastructure had been developed and online advertising was thriving. ↩