ChasNote

Yup, the hit shows like American Idol & Martha Stewart’s version of The Apprentice are still doing just fine: MediaWeek.

Kurt Oeler pointed me to a great piece in the latest McKinsey Quarterly by David C. Court, Jonathan W. Gordon & Jesko Perrey, “Boosting Returns on Marketing Investment”.

“. . . Real spending on prime-time television ads . . . has continued to rise, even as the number of viewers has plummeted (Exhibit 2). The spending patterns of the US automakers, which increased their marketing expenditures per car during the 1990s even as advertising became less effective and their collective market share declined, typify these trends. Marketing powerhouses such as P&G are also quite concerned. At the 2004 meeting of the American Association of Advertising Agencies, Jim Stengel, the company’s global marketing officer, said, ‘I believe today’s marketing model is broken. We’re applying antiquated thinking and work systems to a new world of possibilities’. . . . ”

Btw, Exhibit 2 looks like this: X. The audience for prime-time broadcast TV was around 45 million viewers in 1994; it dropped to about 25 million by 2003. Yet inflation-adjusted ad spending on those networks during prime time grew from $5 billion to $7 billion.

Not long ago I heard a marketing VP at Visa admit that TV advertising wasn’t working nearly as well as it was 10 years ago, yet CPMs continued to rise. She griped that the networks had fewer & fewer viewers, but they charged more & more for each one. So Visa reduced the share of ad dollars spent on broadcast TV spots, from 95% to 75% of its total ad budget. The shocker to me is that Visa continued to invest 3 out every 4 of its ad dollars into something that wasn’t delivering the goods.

Late last month, Google’s first print advertisers turned up in the back pages of PC Magazine (image) and Maximum PC, and with them Google inaugurated a shake-up in the media business as dramatic and fundamental as paid search was a half decade ago. This time they’ve brought their auction-style pricing model to an arena where performance can’t be measured in cost-per-click terms — and CPM advertising may never be the same.

Clearly this is good news for media buyers, who now determine the value and set advertising rates themselves, eBay-style. And it’s good for print publishers in the short-term, who see Google’s print sales efforts as a glimmer of good news in an era of declining ad revenues. Ziff-Davis president Jason Young told the NY Times: “We’re thrilled for PC Magazine in print to be presented to Google’s fantastic base of hundreds of thousands of smaller advertisers.” It’s outsourcing for back-of-the-book ad sales. Google’s self-service advertising platform, of course, does business with tens of thousands of customers much less expensively than live telemarketers can. As Battelle puts it, “this is free money for the publisher, and they probably love it” (Searchblog).

Jason’s counterpart at Conde Nast, Richard Beckman, is not so sure. “If you start selling an advertisement at a price that is not healthy for your profit margins, you can never really recover,” he told the Times. Yea, what’s the big idea letting customers tell you how much they value of your services?

I couldn’t disagree more with Beckman’s point of view. In my opinion, Google is in fact lighting the only pathway to recovery for publishers. For five years, magazine publishers have stubbornly maintained their traditional business practices and organizational structures (albeit with fewer people on staff) despite radical and obvious transformation among their customers. The Internet and digital media have closed the loop on performance tracking, measuring not only direct response (click through) but also ad viewership itself (actual impressions). Online marketplaces — from Yahoo’s Overture and Google’s AdSense to recent upstarts BlogAds and AdBrite — have perfected the dynamic pricing that’s always guided television’s spot market.

At some point, you have to face the music: The customer is always right. You can either set your own prices and keep dropping them until media buyers start returning your phone calls, or you can give those media buyers a more efficient platform to communicate what they think is a fair price. If that price doesn’t deliver the profit margin you’d like, improve your product or cut your costs. There’s nothing worse for the bottom line than telling your customers they’re insane.

(Also check out Gary Stein’s “Why Google’s Print Ad Experiment is a Really Big Freakin’ Deal,” Jupiter. Google’s switchboards will handle calls to 800 numbers listed in the print ads: Very soon Google will know more than the publishers about how well their own readers respond to ads in their publications.)

What’s CBS to do about their #3 position among evening news programs, still smarting from the “early retirement” of Dan Rather? CBS chairman Les Moonves thinks the revitalization of his network’s news needs to steal some inspiration from the Internet’s Naked News. From today’s NY Times Magazine:

“On the one hand, we could have a newscast like ‘The Big Breakfast’ in England, where women give the news in lingerie. Or there’s ‘Naked News,’ which is on cable in England. I saw a clip of it. It’s a woman giving the news as she’s getting undressed. And then, on the other hand, you could have two boring people behind a desk. Our newscast has to be somewhere in between.”

“If you start selling an advertisement at a price that is not healthy for your profit margins, you can never really recover,” says Conde Nast media group president Richard Beckman to the NY Times. What an odd point of view: Value determined by a yield manager in the back office, rather than by the customer buying the service. Hardly the free-market American way!

Meanwhile, the same article reports, “Google executives have said that they believe traditional media will ultimately emulate search engines by using an auction structure to sell ads.”

Who are you betting on?