October 20, 2008
‘Experimental’ Media Ad Spending Slows
By Tom Ryan
The Wall Street Journal reported last week that one of the first budget areas to be cut back due to the financial crisis is “experimental” advertising. The newspaper noted that digital technologies such as web video, mobile phones, gaming, social networking sites, and other virtual worlds had been widely touted as the “next big thing” in advertising.
For example, this virtual-type advertising will be cut to about five percent of Chrysler’s marketing budget this year, down from as much as 10 percent in previous years.
“We won’t experiment in a lot of things that are fun to have,” Deborah Meyer, the carmaker’s chief marketing officer, told The Journal. “All of our dollars have to go to hitting in-market shoppers with the appropriate media.”
The article noted that these campaigns often reach a small number of people, and standard measurement systems have not been developed.
“When we get into the need to drive results, you can’t spend money on the experiments and hope to keep your job and get your sales goals,” said Peter Kim, senior partner at Dachis, which advises Philips Electronics NV’s Philips Healthcare, Johnson & Johnson and others on marketing strategies.
“Virtual worlds are probably one of the things that haven’t been proven effective just yet,” added Lars Bastholm, an executive creative director at independent digital marketing shop AKQA. “I can’t see us selling virtual worlds to anybody right now.”
According to eMarketer, digital media spending remains small compared to the $21 billion spent on online spending in the U.S. last year. Advertisers spent $878 million last year on mobile marketing, which includes ads delivered through text messages or displayed on a mobile website. A paltry $15 million was spent on widgets and applications, described as small computer programs that can contain videos, interactive games and music that web surfers can post to blogs, social-networking or personal websites.
Some emerging advertising will still get some support given the low costs involved. Chrysler, for instance, will continue to spend on active social-networking sites.
PepsiCo also believes emerging media remains an important way to engage its core consumer. “The market is not going to drive us to miss one of the largest opportunities that we’ve had in a long time,” Bonin Bough, director of digital and social media at Pepsi, told The Journal.
Discussion Questions: Will the financial crisis significantly slow investments in so-called experimental media advertising? Is it a prudent decision by brands to cut back on such spending or are they missing the boat?
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They shouldn’t cut back, because they’re not spending all that much now. Most of those “experimental” opportunities are just getting their feet under them, and are going to bend over backwards to meet marketer’s needs now. It’s a perfect time to shape these new ad models to meet retail and manufacturer marketing needs; to have the right metrics built in; to demand proof that they work. A little money now will go a long way, and the survivors will be better prepared to make real gains when the economy picks up. Marketers who nurture the best of these new companies and ad models through the tough times will be in the best position to benefit from them when (not if) they take off.
When times get tough, the first thing to get chopped is the marketing budget. While on the surface this is a shortsighted idea based on false economics, it is also something that deserves to be looked at closer.
Marketing is not a science. What worked this time may not work next time. A slight tweak in message or delivery may turn weak campaigns into winners. But the price of experimentation can be high.
I would tell any business that in tough times, don’t back off the marketing. Studies have shown that companies that push on with marketing campaigns will weather a financial slowdown better than their competitors. However on the flip side, now is not the time for experimental media. Go with what has proven to work and build on that.
It’s a short-sighted decision to cut back on “new media” advertising because of the economic slowdown. Given the reality of smaller ad budgets, these resources need to be allocated wisely and that does not always mean sticking to yesterday’s strategies. TV viewership is being affected by digital technology (TiVo, shows posted on the Internet) and of course traditional print media like newspapers are a disaster. So if your target audience is getting its message from “new media” like social networking sites, text messages and the like…then go where your customer lives. It’s no accident that the Obama campaign spent some of its resources on advertising in video games, and CPR manufacturers could learn a lesson.
I don’t think its wise for any brand to pull back on marketing during down times. If anything, we need to keep reminding customers to shop and the real way to get them back into stores is to make them feel good about what they are doing. Effective and positive marketing messages can go a long way in turning around customers who really have lost confidence and have reduced discretionary spending to zero.
I predict an increase in experimental advertising as a percentage of total ad budgets for two reasons: 1.) It’s more quantifiable and trackable than traditional media and, 2.) It’s less expensive overall, especially during the current “let’s prove it works” phase. Advertisers will make choices between the production/media expense of a TV campaign vs. an email campaign that delivers millions more (durable) impressions for the same money. When the marketing decision-makers can be made to understand this, it becomes a no-brainer.
I am only responding to this item because I have not seen anyone reference the old John Wanamaker quote. John was the CEO for the Wanamaker Department Stores in the Philadelphia area many years ago. When he was asked about advertising spending he was quoted as saying “I know I have wasted half my spending on advertising, I just don’t know which half.” Deciding how to spend the advertising budget has obviously gotten more complicated than ever before and deciding where to cutback is no easy task. It may be that the marginal return on additional “hits” simply cannot support the cost of reaching the “small tail” of the consumer universe.
With that thought in mind, I would focus my digital budget on search and creating a captivating web store that keeps the consumer interested. By its very nature, search focuses on people who “have a need.” Searchers are looking for something and you are there to sell it to them. On the other hand, once they have come to your site for their specific need, it behooves you to “show your stuff” through a website that entices them to look further. When they come to you for that “best price,” offer them product descriptions, alternative products, in-store pickup options, etc. that cause them to look around and possibly buy more.
Other industries may cut back on innovative advertising, but retailers won’t.
Old-timey promotions, like newspaper ads, may be effective with Boomers like me, but they won’t do a thing to draw younger customers into the store. Teens and twenties live online, and retailers know that they’ll have to promote to them online, too. While some of the edgier venues like Second Life may fall off retailers’ radar screens, I’ll be really surprised if the many of the newer marketing approaches disappear.
Depends on whether or not your CEO thinks it’s measurably working, or just has a gut instinct that it’s still worthwhile getting in on the ground floor. The preponderance of the opinions I have heard suggest it’s just not providing good measurable ROI so far. If I were not seeing ROI, and if it were up to me, dinosaur that I am, I’d take the money out of this for awhile and put it in media that has a longer and more proven track record. On another note, this is no doubt a good time to keep your total advertising/marketing spending intact, but historically, that just doesn’t happen in a tough economy. Net-net, I see cuts in both this new media, and existing media, until the economy shows signs of turning around. Doesn’t take much to see that, since it is already happening.
Marketing budgets should be allocated to correcting the last few years of price increases. There is no question that there is less disposable income being put into the marketplace. Some is driven by emotional concerns, some is driven by practical concerns like “Do I buy this or put gasoline in the car?” I would look at a marketing budget and see how much of it could be channeled to price reduction.
You can’t eat a TV commercial or a magazine ad. More people are making decisions at the shelf rather than from an advertising medium.
These are not normal times. In a tough economy the tactics are different, yet we are still thinking about a strategy that assumes everyone is still spending based on wants, not needs.
In shaky economic times, I’d expect conventional marketers to retreat to conventional marketing–a strategy that is certain to deliver conventional results.
Marketing innovators will continue to press forward with new media, winning new business and creating involved customers who view their messaging as meaningful and relevant. If the background noise drops away due to a retreat to conventional media by conventional brands, then the innovators will only stand out more clearly and leverage their advantage.
I’m firmly in Warren Buffet’s camp on these matters–when the market is down, winners invest.
Is it telling that Chrysler is cutting back on “experimental media” and Pepsi is not? This experimental media not only hearkens to a trend where media may be going in the future but disproportionally targets tomorrow’s demographics. Perhaps Chrysler does not see a tomorrow.
To suggest that hard measurement is demanded for new media is a simple excuse. Hard measurement does not exist for old media. The only thing that does is comfort. What is more telling are the trends in media compared against demographic groups. New media is growing not because advertisers are investing in it, but because it is reaching target customers.
Granted, Chrysler’s target customers may not be heavy users of “experimental media” today, but they surely will be tomorrow. The habits of the younger demographic will follow them as they age. The advertiser that invests now will reap in the future, if not immediately.
I see another criticism of Chrysler. They are cutting their experimental media in half from 10% to 5%. This is a penny wise, pound foolish decision. That savings has a huge impact on their new media visibility. But, I doubt that moving that 5% to traditional media gives them any more visibility.
It has been my experience that consumer efforts have always been the first thing to go in budget austerity times. I do not believe it has ever saved anything in the long run. I agree with most of my colleagues that those who continue to invest in advertising in hard times will be the winners when the economy turns. Further, I believe that those who invest in new media to reach tomorrow’s key demographic will also reap the rewards of that broad thinking.
Yes, experimental advertising will be cut, largely to its lack of measurability. Take the example of YouTube. At a conference over the summer, a YouTube executive got up and declared that YouTube was “bigger than France.” The reasoning went this way: In March of 2008, YouTube had 85 million unique visitors. France is a country of 65 million people. Therefore, that makes YouTube the 4th largest country in the world behind China, India and the United States.
But YouTube can’t get arrested in terms of monetizing video. Similarly, the experimental “social” spaces like Facebook and MySpace can’t demonstrate persuasive metrics to advertisers who are already leary about have their brands showcased next to content that they cannot control.
Microsoft has some interesting new methods for measuring engagement–capturing all the influences that lead up to what they call “the last click”–or the conversion click. But until these kinds of metrics mature, all people care about–especially in the down economy–is where did the last click come from? And that means a blight on experimentation.
Overall, I believe the answer is “yes” that experimental media ad spending will slow. Having said that, the best retailers will continue to reinvent themselves and will use some level of experimental media ads. Watch the ones that aren’t some of the first retailers to go down after the first of the year.
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They shouldn’t cut back, because they’re not spending all that much now. Most of those “experimental” opportunities are just getting their feet under them, and are going to bend over backwards to meet marketer’s needs now. It’s a perfect time to shape these new ad models to meet retail and manufacturer marketing needs; to have the right metrics built in; to demand proof that they work. A little money now will go a long way, and the survivors will be better prepared to make real gains when the economy picks up. Marketers who nurture the best of these new companies and ad models through the tough times will be in the best position to benefit from them when (not if) they take off.
When times get tough, the first thing to get chopped is the marketing budget. While on the surface this is a shortsighted idea based on false economics, it is also something that deserves to be looked at closer.
Marketing is not a science. What worked this time may not work next time. A slight tweak in message or delivery may turn weak campaigns into winners. But the price of experimentation can be high.
I would tell any business that in tough times, don’t back off the marketing. Studies have shown that companies that push on with marketing campaigns will weather a financial slowdown better than their competitors. However on the flip side, now is not the time for experimental media. Go with what has proven to work and build on that.
It’s a short-sighted decision to cut back on “new media” advertising because of the economic slowdown. Given the reality of smaller ad budgets, these resources need to be allocated wisely and that does not always mean sticking to yesterday’s strategies. TV viewership is being affected by digital technology (TiVo, shows posted on the Internet) and of course traditional print media like newspapers are a disaster. So if your target audience is getting its message from “new media” like social networking sites, text messages and the like…then go where your customer lives. It’s no accident that the Obama campaign spent some of its resources on advertising in video games, and CPR manufacturers could learn a lesson.
I don’t think its wise for any brand to pull back on marketing during down times. If anything, we need to keep reminding customers to shop and the real way to get them back into stores is to make them feel good about what they are doing. Effective and positive marketing messages can go a long way in turning around customers who really have lost confidence and have reduced discretionary spending to zero.
I predict an increase in experimental advertising as a percentage of total ad budgets for two reasons: 1.) It’s more quantifiable and trackable than traditional media and, 2.) It’s less expensive overall, especially during the current “let’s prove it works” phase. Advertisers will make choices between the production/media expense of a TV campaign vs. an email campaign that delivers millions more (durable) impressions for the same money. When the marketing decision-makers can be made to understand this, it becomes a no-brainer.
I am only responding to this item because I have not seen anyone reference the old John Wanamaker quote. John was the CEO for the Wanamaker Department Stores in the Philadelphia area many years ago. When he was asked about advertising spending he was quoted as saying “I know I have wasted half my spending on advertising, I just don’t know which half.” Deciding how to spend the advertising budget has obviously gotten more complicated than ever before and deciding where to cutback is no easy task. It may be that the marginal return on additional “hits” simply cannot support the cost of reaching the “small tail” of the consumer universe.
With that thought in mind, I would focus my digital budget on search and creating a captivating web store that keeps the consumer interested. By its very nature, search focuses on people who “have a need.” Searchers are looking for something and you are there to sell it to them. On the other hand, once they have come to your site for their specific need, it behooves you to “show your stuff” through a website that entices them to look further. When they come to you for that “best price,” offer them product descriptions, alternative products, in-store pickup options, etc. that cause them to look around and possibly buy more.
Other industries may cut back on innovative advertising, but retailers won’t.
Old-timey promotions, like newspaper ads, may be effective with Boomers like me, but they won’t do a thing to draw younger customers into the store. Teens and twenties live online, and retailers know that they’ll have to promote to them online, too. While some of the edgier venues like Second Life may fall off retailers’ radar screens, I’ll be really surprised if the many of the newer marketing approaches disappear.
Depends on whether or not your CEO thinks it’s measurably working, or just has a gut instinct that it’s still worthwhile getting in on the ground floor. The preponderance of the opinions I have heard suggest it’s just not providing good measurable ROI so far. If I were not seeing ROI, and if it were up to me, dinosaur that I am, I’d take the money out of this for awhile and put it in media that has a longer and more proven track record. On another note, this is no doubt a good time to keep your total advertising/marketing spending intact, but historically, that just doesn’t happen in a tough economy. Net-net, I see cuts in both this new media, and existing media, until the economy shows signs of turning around. Doesn’t take much to see that, since it is already happening.
Marketing budgets should be allocated to correcting the last few years of price increases. There is no question that there is less disposable income being put into the marketplace. Some is driven by emotional concerns, some is driven by practical concerns like “Do I buy this or put gasoline in the car?” I would look at a marketing budget and see how much of it could be channeled to price reduction.
You can’t eat a TV commercial or a magazine ad. More people are making decisions at the shelf rather than from an advertising medium.
These are not normal times. In a tough economy the tactics are different, yet we are still thinking about a strategy that assumes everyone is still spending based on wants, not needs.
In shaky economic times, I’d expect conventional marketers to retreat to conventional marketing–a strategy that is certain to deliver conventional results.
Marketing innovators will continue to press forward with new media, winning new business and creating involved customers who view their messaging as meaningful and relevant. If the background noise drops away due to a retreat to conventional media by conventional brands, then the innovators will only stand out more clearly and leverage their advantage.
I’m firmly in Warren Buffet’s camp on these matters–when the market is down, winners invest.
Is it telling that Chrysler is cutting back on “experimental media” and Pepsi is not? This experimental media not only hearkens to a trend where media may be going in the future but disproportionally targets tomorrow’s demographics. Perhaps Chrysler does not see a tomorrow.
To suggest that hard measurement is demanded for new media is a simple excuse. Hard measurement does not exist for old media. The only thing that does is comfort. What is more telling are the trends in media compared against demographic groups. New media is growing not because advertisers are investing in it, but because it is reaching target customers.
Granted, Chrysler’s target customers may not be heavy users of “experimental media” today, but they surely will be tomorrow. The habits of the younger demographic will follow them as they age. The advertiser that invests now will reap in the future, if not immediately.
I see another criticism of Chrysler. They are cutting their experimental media in half from 10% to 5%. This is a penny wise, pound foolish decision. That savings has a huge impact on their new media visibility. But, I doubt that moving that 5% to traditional media gives them any more visibility.
It has been my experience that consumer efforts have always been the first thing to go in budget austerity times. I do not believe it has ever saved anything in the long run. I agree with most of my colleagues that those who continue to invest in advertising in hard times will be the winners when the economy turns. Further, I believe that those who invest in new media to reach tomorrow’s key demographic will also reap the rewards of that broad thinking.
Yes, experimental advertising will be cut, largely to its lack of measurability. Take the example of YouTube. At a conference over the summer, a YouTube executive got up and declared that YouTube was “bigger than France.” The reasoning went this way: In March of 2008, YouTube had 85 million unique visitors. France is a country of 65 million people. Therefore, that makes YouTube the 4th largest country in the world behind China, India and the United States.
But YouTube can’t get arrested in terms of monetizing video. Similarly, the experimental “social” spaces like Facebook and MySpace can’t demonstrate persuasive metrics to advertisers who are already leary about have their brands showcased next to content that they cannot control.
Microsoft has some interesting new methods for measuring engagement–capturing all the influences that lead up to what they call “the last click”–or the conversion click. But until these kinds of metrics mature, all people care about–especially in the down economy–is where did the last click come from? And that means a blight on experimentation.
Overall, I believe the answer is “yes” that experimental media ad spending will slow. Having said that, the best retailers will continue to reinvent themselves and will use some level of experimental media ads. Watch the ones that aren’t some of the first retailers to go down after the first of the year.