Saturday, February 9, 2008

Future revenue for TV networks

As part of the convergence, which is sweeping though many media and communication companies in these times, where traditional voice communication, TV, and Internet services are being blended together, the power and importance of the media as an advertising channel is changing. As advertising is a key revenue driver in the media food chain, this could spell major chances in the coming years. Marketing managers are loosing power and acceptance to push global brand and agendas directly to consumers. We have entered the so-called you-cracy, where the consumer sets the agenda. Today users classify most of the direct non-segmented and, in many cases, irrelevant advertising as spam, no matter if it is sent as email or it is the local advertising folder from the local super market. It has to be relevant and close to our hearts.

There are several ways to achieve relevance. Search machines like Google and Yahoo are tracking our search words and click-streams, which reveals what we are looking for, and can therefore connect us to a company with the right and relevant product. Furthermore, it is a large advantage that advertisers only pay for their advertisement when customers actually follow the link that is presented together with the search results.

Another way of creating relevance is Viral Marketing. Here the concept is very different. On the contrary to the search model, in Viral Marketing the advertiser will embed the logo or message into a host message which is expected to be appealing to the target group of consumers, in a way that people will begin to send the movie or picture to other friends or colleagues, and thereby spreading the message to millions of consumers over a few days. People pass it on to others because they like the funny scene or apparent message. It’s a way to keep our personal network alive. We do not really relate to the company logo in the corner, even though it sneaks into our minds, and that is what advertised are looking for: Top of Mind. Whether it is seen on a popular community site, or in a peer-to-peer mail, the message is replicated from mind to mind like a virus, living in a host cell. When we receive an email from a friend, we are simply too curious not to open the mail and see the video or whatever it is. In some cases consumers will send links to Youtube or other shared content sites. This increases the possibility for the original creator of the message to track it, because the owner of the site could potentially log the traffic then the server hosting the viral message is accessed by the consumer. But where the search engine has a quite precise picture of the how even individuals are acting, the Viral Advertiser will in many cases not know exactly who is relaying and receiving the message.

All of these attempts to catch our attention have one objective: To make us pay attention to the message of the advertiser.

Today, the Internet has a very strong value proposition when it comes to advertising: It offers the possibility to give an individual and therefore relevant experience, and it can fulfill our need for information on the subject being advertised through interactivity. Therefore the Internet is becoming the prime channel for marketing and advertising in these years. Until recently, the Internet has served more as a parallel channel, leading the audience to the old prime channels like commercial TV. Analysts say that this is beginning to chance, and the Internet is becoming a prime channel of advertising in some developed countries and that the trend is spreading rapidly. If this is true, the importance of the TV and Internet channel will revert, and TV advertising the serve to lead consumers to the Internet sites. Furthermore, the large brands has to evaluate to what extension they can be stretched from the classical presence in TV mainstream contexts to the new advertising channels. Many teenagers simply turn off the classical TV. Teenagers are moving away from TV today as presented by Promon at the TV 2.0 seminar end 2007. Centralized one-way communication does simply not interest them. Therefore, large advertisers are now beginning to move to community sites like MySpace and Facebook together with the Viral marketing. If the implementation of the digital TV standard in Brazil does not take this trend into consideration, the service is likely to lack a significant amount of users in the future.

We can already see a very concrete result of this change. In October last year the advertising revenue of Google in the UK passed the revenue of the largest commercial TV channel. This should raise some eye-brows at Rede Globo here in Brazil. The country’s largest TV network and the fourth largest worldwide. Globo has excellent content, and the lions part of the advertising market, but what will its strategy to survive be faced to this dramatic change? Today only a tiny fraction of Globos revenue comes from advertising on the Internet, but the numbers of Brazilians with access to the Internet is now growing towards 40 million. Still far from the population of 180 million, but we should also remember the people currently connected to the Internet have a much larger purchasing power than the remaining part. Already at the TV 2.0 seminar in Sao Paulo end of 2007 I asked managers from Globo if, or when, we could expect Google to pass Globo in Brazil. The question raised some eye-browes, but the answer is still unknown.

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