Nurlan Urazbaev's SCREENS.tv Digital Signage Blog
Nurlan Urazbaev
BroadSign International
What the Wall Street meltdown means for digital signage (0 comments)
“Madison Avenue is bracing for the worst ad slump since 2001 as a drop-off in consumer spending is likely to lead marketers to rein in their budgets”, reports the New York Post on September 21. “The anticipated drop in spending in 2009 comes on the heels of a slight decline in 2007 and a more noticeable dip so far in 2008, according to industry data,” writes the New York Post’s Holly M. Sanders. Most major press relayed a similar sentiment in the wake of last week’s meltdown on Wall Street.
The New York Times quoted the CEO of WPP: “In the last couple weeks, you could smell the fear in New York,” said Martin Sorrell, chief executive at the WPP Group, which owns agencies like Grey, JWT and Ogilvy & Mather, as “institutions that were regarded as invincible have gone down or had to be bailed out.””
The downturn in ad spending had started well before the “Black Sunday”: “… the Nielsen Monitor-Plus division of the Nielsen Company reported last week that ad spending in the first half of 2008 fell 1.4 percent compared with the same period a year ago. The laggards included ads in national magazines, down 3.1 percent; national newspapers, down 8.1 percent; and spot radio, down 10.1 percent,” says The New York Times.
Reports forecast that traditional media is going to be the segment worst affected by the financial crisis followed by online display advertising, which has already suffered a 6% drop in the first half of 2008, according to Nielsen. Display ads on the Internet have been largely dependent on financial and insurance advertisers.
The New York Post writes that last week’s turmoil triggered memories of not-so-distant past: “No one wants a repeat of 2001, when the dot-com bust and an economic slowdown caused ad spending to plunge 9.8 percent, according to figures from ad researcher TNS.
During that recession, widespread cutbacks led to layoffs at many agencies, including some closings, shrinking budgets for many TV and cable outlets and the failure of several print publications,” (New York Post, September 21, 2008)
However, in 2001 the media landscape was quite different. Internet’s paid search advertising was not yet as proven and accountable as it is now, thanks to Google AdWords. Outdoor was less prominent and not yet regarded as ‘the only true mass medium left’, and the digital out-of-home ad space was almost non-existent. There are clear indications that these media may benefit from today’s difficult times, as marketers will cut budgets and look for more cost-efficient media placement options.
“It’ll be more pragmatic. More measurable. More digital.” — Nick Law, exec VP-chief creative officer North America of digital agency R/GA told Ad Age (“How Creativity Can Carry Your Business through a Recession”).
If we look at the categories falling under ‘more pragmatic, measurable and digital’, and I would add, ‘targeted’, they all continued to grow at an impressive rate throughout the economic troubles that began in early 2008.
“Despite the overall decline, ad spending for cable television, syndication TV, and outdoor advertising remained fairly healthy. Cable TV grew 8.1%,” writes crainsnewyork.com. Paid search was growing too, according to Nielsen Online. Outdoor was boosted by digital billboards, and in-store digital media (digital signage in retail) was expanding, notwithstanding the lack of standardized buying criteria and measurements.
Online display ads, although digital and targeted, were an exception from the above group due to their exposure to financial ad budgets, and, some say, their intrusive nature. A good example of the exception that proves the rule.
Ad Age’s analysis of what the meltdown means for the advertising industry included this abstract:
For agencies: “… there will be further retrenchment in the financial-services and automotive sectors, with some expecting telecom budgets to be hit hard, too. Across the board, the pressure on shops will intensify to prove return on investment. Expect less-brand-based and more-sales-led metrics.
For media: “…By now, if you are in the media, you know the story: fewer dollars to broad-scale media and more for targeted, accountable media and other marketing disciplines, such as direct and customer-relationship management. Some marketers will double down with their most trusted media partners to create big, provable multimedia programs…” (Ad Age, September 22, 2008, bold and italics mine)
Although it is a fast-growing sector, digital signage is still a minor portion of the Outdoor/Out-of-home media which, in turn, is a modest part of today’s media mix. But that is changing.
The recession will inevitably force marketers to scrutinize ad spending and eliminate a lot of marketing waste. At the same time, it presents a rare opportunity (that occurs only once in every few years) for digital out-of-home networks to demonstrate their unique value as the most flexible, targeted, cost-efficient and accountable medium. The medium that closes a sale.
No Metrics = No Buys: The War of Metrics Has Begun (1 comments)
As of this upfront period, the U.S. division of Starcom MediaVest Group (SMG) – one of the largest media communications companies – will only be buying media that can produce more advanced metrics.
According to MediaWeek, “Starcom USA will no longer do business with unrated networks that are not measured by companies or rating services that can offer documented data on viewership.”
“In prior years, standard industry practice has been to negotiate TV buys from unrated networks based on estimates from those networks and disparate sources,” Starcom said in a statement. “The availability of second-by-second data from companies such as TNS, in its alignment with Charter and DirecTV, allow for national performance metrics for these previously unrated networks and reveal never-before-seen insights into behaviors of those networks’ audiences.”
The move is significant (if it had been in the 80s, I would have said: paradigm shift), as Starcom USA is probably the largest media agency, and when it sets the bar for accountability and ROI higher, others will certainly pay attention. It will also prompt the channels with less adequate metrics to try and comply in the nearest future.
Since the Internet started providing reports on referring sources, targeted impressions, click-throughs and sales conversion data (for e-commerce), it has been enjoying double-digit growth in ad revenue and, along the way, has pushed the standards for accountability for other media. This, along with traditional media fragmentation, led to advertisers’ increasing disenchantment with network TV and the gradual shifting of the budgets towards online, outdoor and now to digital out-of-home (digital signage).
It looks like Starcom is determined to break the 60-year-old advertiser-agency-media relationship system, which has been centered around network TV and newspapers, while everything else was essentially an afterthought. The wise joke: ”I don’t know which half of my ad budget works” is not amusing to national advertisers any more, and agencies are finally hearing this, embracing the most measured medium: digital. Starcom recently discontinued a contract with Donovan Data Systems (DDS) – a near-monopoly software platform for tracking media buys and billings – citing DDS’s inability to efficiently process digital media transactions.
The agency’s divorce from DDS sent shock waves throughout the advertising community and put extra pressure on DDS to catch up with its smaller rival MediaBank in introducing digital media management capabilities.
In a separate development, Advertising Age reported recently that digital services in 2007 accounted for 12.3 percent, or $4.7bn of worldwide revenue for advertising’s Big Four — Omnicom, WPP, Interpublic and Publicis. “Put another way, writes Ad Age, “digital’s share of revenue at each of the top holding companies is higher than digital’s estimated share of worldwide media spending.” Or, “put another way”, as marketers shift money from TV and print, the Big Four have become more aggressive in increasing their digital spending than the industry on average. Starcom MediaVest Group is a subsidiary of Paris-based Publicis Groupe.
As organizations like OVAB, OAAA, Arbitron and Nielsen are spearheading the development of metrics for digital signage, we can expect similar budget shifts towards our field within the next couple of years. Meanwhile, TV channels are working to offset the losses and bring their own measurement instruments closer to par with the Internet. The war of metrics has begun.
