Opinion

Despite an ocean of advertising money, traditional media is still flailing

Digital advertising currently enjoys close to half of total advertising media spend. Instead of attempting to cut a share for themselves, traditional advertisers have instead embarked on short-term cost-cutting exercises with no thought for the future, argue Dr Rohan Miller and Kate Gunby.

As debate rages over the future ownership of Network Ten, it is time to examine why the traditional media is flailing when there is an ocean of advertising money.

The old media guard seems to have been asleep at the wheel and to have too easily conceded advertising revenue share to new media. Over the last decade or so, digital advertising has acquired close to 50% of total advertising media spend, with the lion’s share flowing to Facebook and Google.

Traditional media blame Facebook for a lot of their revenue woes

To compensate, traditional media has become cost-focused. Why? Probably because it is easier to cut costs in the short term than risk money developing new content and building a new business model appropriate for the future.

For example, the emphasis on low-cost product such as reality and game shows was never the right strategy for Network Ten to attain the audience numbers required to garner the advertising revenue to sustain a national television network.

Following a low-risk low-reward content strategy may seem fiscally responsible, however, a national television network needs blockbusters to commercially succeed. That is, traditional media needs to invest more money in content in order to succeed.

In addition, traditional media needs to improve its measurement metrics and develop realistic theory to provide advertisers with a plausible story of how media can provide a return on advertising investment.

“The old guard has been asleep at the wheel”

Most of the attempts to do this seem to have failed. For example, the print industry’s media metric initiative, enhanced media metrics Australia (emma), was supposed to measure total readership across print, website, mobile and tablet and establish a common media metric for what the “traditional” media considers synergistic content. However, the expectation that advertisers would invest in emma’s data was overly simplistic.

The television industry also continues to ignore the fact that advertisers require better television audience measurement. Rather, ThinkTV, a body established to promote and lobby for free-to-air television, has been developing an esoteric argument related to return-on-investment (ROI).

They allege that TV pays back $1.74 for every $1 invested, compared to 72c for online display advertising in the FMCG category. These claims show just how out of touch the traditional media really is.

If ThinkTV’s research and logic held true, advertisers would just keep pumping money into television advertising and reap amazing returns on investment. However, that isn’t what is happening. It is time to acknowledge television’s glory days are gone, and along with it the extraordinary profits often associated with regulated monopolies.

That said, it is possible for the traditional media to change and reap commercial rewards. For example, the outdoor industry set up a new measurement and planning system that was aggressively marketed to advertisers and agencies, along with support and training.

As a result, out-of-home advertising experienced double digit growth, be it off a smaller base than traditional television or print media. Out-of-home also continues to develop new products and innovate.

Dr Rohan Miller

The newer digital media channels have been able to obtain a large share of advertising revenues by continually investing in and improving their product. They approach the advertising market by lyricising about the benefits of tracking consumers’ paths to purchase, the promise of better targeting, reduced advertising expenditure wastage and greater speed to market. That is, giving advertisers the media metrics they need in order to target the right people, at the right time, and in the right place.

Kate Gunby

There are chinks in the new media’s data armoury. Organisations like Facebook and Google face growing disharmony in advertising circles because their data seems to lack in transparency, are not from an independent source and are not audited.

There are also substantial theoretical and practical questions about the ability of digital media to accurately measure and depict the full path to purchase across a range of goods and services when only 6.5% of retail sales are conducted online.

In addition, as many purchases seem to be repeated or habitual, it must be asked whether the approaches that are used to measure digital performance are really fit for that purpose. The methods used in digital attribution models are coming under scrutiny as is the simplistic concept that assigning (all) online sales to an online media channel is somehow appropriate.

The fundamental challenge remains for the old media industry to meet its clients’ pent-up need for better a better product, meaningful data, better performance metrics and more responsive business models.

If the old media continues to relinquish advertising revenue at the pace it has been, shareholders face further loses. And to put two statistics together: approximately 50% of Australian advertising money flows to digital media, and online sales account for about 6.5% of retail sales. The shareholders of traditional media companies need to consider the revenues they could reclaim with a better business model that invests in content, and develops metrics and theory to make it easier for advertisers to justify their investments.

Dr Rohan Miller is a senior lecturer in marketing at the University of Sydney Business School. Kate Gunby is a former advertising industry executive and is now enrolled in a higher research program at the University of Sydney Business School. 

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