C Squared is known in the industry as being quick to offer products and initiatives in response to developing changes in the industry. Many of these structural changes can be summarised into 5 separate trends. We have given our view on each of the five below:
Fragmentation
A familiar word for decades - where the number of media owners have exploded [such as magazine titles] so that consumers have more options and hence spend less time with individual media brands and channels. Some research has even shown that young audiences are “consuming” many types of medium all at the same time (reading a magazine, instant messaging, gaming with the radio on the background….). This all means that it is harder and costlier for advertisers to target people and harder for media companies to sell their inventory – meaning they must be more creative in order to compete. Connected to this trend is the broadening definition of what a “media owner” actually is. Consumers can now see ads in shops, on the back of cigarette paper packets or on the insides of window cleaning gondolas strapped to office blocks. Even local governments can now help create advertising campaigns.
Convergence
Mobile phones can now be used to watch TV, email, surf the internet, instant message friends, take and upload photos and find local information based on your position, as well as make phone calls. We are living in the converged age where one device can open the door to multiple services. In the home we no longer have separate VCR recorders and cable set top boxes and now we can buy on-demand content as well. We no longer use our PCs to merely surf the web; instead watching TV or even sharing our own home made content with others around the world (or sometimes illegally sharing the content of others). This converged age is breaking up the traditional structure of the way that advertising is bought and sold. Media buying groups still have “TV Buying Departments” that no longer match how video content is consumed and newspaper companies are notoriously trying to extend their brands into new channels, both through events and online. But we also see “Convergence” in a wider sense - that of breaking down of all traditional barriers. Coffee chains are becoming record labels (Paul McCartney’s deal with Starbucks to distribute his latest album, for example). MySpace has become an A&R paradise for record labels, but the record labels’ business is also being attacked by live gig companies (such as Live Nation) who are signing acts direct. Ad supported music and video (MySpace, YouTube, Hulu, Veoh) is becoming the medium of the future with a consumer who does not expect to pay and even Hollywood companies are talking to ad agencies about script development. No business model is sacred as digital technologies change our view of established businesses.
Display versus Performance
In the old days, an advertiser would buy a billboard or some TV airtime and then hope people would see it! They put a lot of investment into the “creative” to ensure that people remembered their message. The price of the media would occasionally be set by research that helped to monitor the audience (though not always). So a large industry therefore formed around this model of “display” (such as the TV ratings companies). In addition “pre-testing” and “post-testing” helped advertisers manage the risk of spending a large amount of money with no 100% guarantee of return on their investments with increased sales. “Brand recall studies” kept tabs on how salient a brand was in a consumer’s mind. Industry benchmarks such as “purchase intent” or the “cost per thousand” were the currency. In the “new” model, an advertiser can buy media digitally and thus target in different ways. Cookie files can store up someone’s behavior (what they look at, when and how often) and complex algorithms and data merging (from loyalty cards for example) can then ensure that an ad for a particular product can be “served” to an individual who is most likely to respond. Sometimes the level of targeting can be scary – particularly to older consumers! In addition, advertisers can “track” behaviors after they’ve seen the ad – meaning that, in principle, they can work out whether the message has led to a sale. This is called “performance marketing” and it effectively shifts the cost of risk from the advertiser to the media owner (or agency) – meaning that the advertiser only needs to pay for the results – not for all those potential eyeballs who were busy making cups of tea during the advertising break.
Disintermediation
To buy a keyword search campaign on Google, you don’t necessarily need a large advertising agency to help you. In fact, Google’s success has been because smaller companies can now access a mass audience through the dominance of Google’s search engine. Such technologies “democratize” advertising. In addition, even the big brand owners like Coke or Procter & Gamble are “going straight to source” – cutting out the middle man and asking media owners (like News Corporation or Time Warner) to come up with the advertising campaigns and then distributing through their own networks (sometimes the brand can own the IP and then create ongoing revenue streams of their own via the media). Brands can also create their own pages on Facebook – and talk about their new products and ideas in these new environments. They don’t necessarily need a media buyer for this. Some brands are even using consumer’s own content – gleaned from social networks - for their own advertising campaign, meaning that the consumer is becoming the advertising agency! All this means that the powerful global agency companies are reviewing their business models and working out their futures.
Globalisation
Not only are these trends happening all across the world, the companies that are getting to grips with them are now global – with central HQs, regional hubs and local offices. If you walked across the world and looked at every advertisement – whether on TV, in cinemas or on the sides of buses – you would find that about 7 out of every ten of the ads witnessed would have been purchased by only six global companies. Thus the buying power of these organisations has increased enormously since the locally-focused days of “Madmen” or when Charles and Maurice first left trade publishing to set up a little shop on Charlotte Street. These global agencies serve global brands and, gradually, the media companies themselves are global in ambition and scope (it used to be that media owners only needed to be local or in countries of their tactical choosing. Now even they are looking for global economies of scale. Professionals in the industry travel and have frequently worked in a variety of countries. Media markets in different countries, however, develop at their own pace and have different cultures and priorities. Thus the world of communications can learn a great deal by sharing information from one market to the next. This is one of the things C Squared does through its variety of products and services.
