Another Watershed Year for Old Media

  |  December 30, 2004   |  Comments

Browsers, banners, and now search. Old media is at a crossroads -- again.

I started my career in the newspaper industry. Nearly all the companies I now work with own newspapers, magazines, TV stations, and cable networks. So I spend a lot of time thinking about the digital media challenges and opportunities so-called old media companies face. Some of old media's watershed moments:

  • 1994: Web browsers and online advertising flooded (well, trickled) onto the scene. Old media paid some attention but mostly chose to wait and see.

  • 1999: The Internet bubble was almost totally inflated, and online advertising was its poster child. Old media began to pay too much attention. Many dropped hundreds of millions of dollars on superficial dot-com investments.

  • 2001: The bubble burst, and media companies that lost their millions felt ridiculous. They vowed never to do it again. Media companies that escaped such losses acted smug, thumbed their noses at the risk-takers, and convinced themselves they'd never get caught up in digital shenanigans.

  • 2003: It was all about search. Though search helped pull the online ad industry out of its post-bubble depression, 2003 was when search exploded. Most old media companies noticed. But once bitten, they deemed it better to sit on the sidelines to see if search was for real.

  • 2004: Search proved it was not only for real but very likely to change the entire future of marketing. Another technology innovation, behavioral targeting, took a supporting role on the online ad stage. Most of old media is trying to figure out how to keep the world's Googles from gobbling up all the local search business.

Fundamental changes are happening so fast, 2005 is certain to be another watershed year in digital media. Today, search represents only 3 percent of the 350 billion monthly page views generated by U.S. online audiences. The opportunity for growth is extraordinary. The only bottleneck is a shortage of searches, or audience "interactions," that can be targeted for search-like advertising.

This will be the year search and media companies start working to ensure much more of the remaining 97 percent of Web pages are viable targets for search-like ads. Analysts predict this could add the better part of $15 billion per year to the search market by 2010. This year and next will be make-or-break years for old media companies. They must figure out how to play in this space or move aside so new media companies can pick up that money.

Five factors will drive growth in search advertising over the next five years:

  • Improved search contextualization. Search companies will do a better job figuring out what people want when they search, the "context" of the search. Not only will this produce better organic results, but it will also produce better, tighter context for ad delivery on search pages. This will drive ad dollars per search.

  • Advertiser adoption. It's simple: Search works for advertisers. The more they try it, the more they like it. The more they like it, the more they buy. Assuming inventory is available, the advertiser adoption curve has the potential to accelerate exponentially.

  • Network-driven reach and frequency. Search advertising is largely limited to search inventory, which is very limited in volume. This is changing with the development of contextual ad networks and with greater emphasis among search companies on the development of search-box syndication programs. Search companies will build ever-bigger Web site networks to generate the massive audience reach and frequency they need to satisfy the advertiser demand they're creating.

  • Personalization. Nothing will drive more effective search advertising than delivering ads according to the people who search. Delivery will take into account their search histories, not just the keywords they're searching at the moment. Leveraging behavioral histories and registration data will put a significant multiplier effect on the degree of targeting that can be delivered with each ad and the value advertisers will pay on a per-search or per-page basis.

  • Localization. Search currently offers advertisers little localization value. Most goods and services are marketed, discovered, negotiated, sold, financed, delivered, and serviced on a local basis. That's why the majority of all ad expenditure is currently in local media. Search engines lack true local context, so they deliver little local value as ad vehicles. This is expected to change.

    Search companies are eying the local market, local yellow page, and classified dollars with eager, greedy eyes. Local advertisers are eager for new media vehicles with more attractive pricing models, and at lower prices. craigslist is but the tip of the iceberg for local's future.

What does this mean for old media? Search companies are now big, profitable, true media companies, not just tech companies that sell ads. They've proven their smarts. They've proven their ability to execute. They're creating hundreds of small, follower companies that offer one-off alternatives, such as IndustryBrains. They'll define old media companies' future, unless old media companies define their own future.

What should old media companies do?

They should decide whether they're in the game for the long haul. If so, their search strategy should be to go where search is going, not just where they've already been. They have the assets to win in the markets where search is headed. They have relationships with millions of advertisers. They have massive audience reach and frequency on their sites. They have the content and the trusted relationships with consumers that's so essential to successful personalization. They own local with the content, the environments, and the relationships.

What's the difference between 2005 and earlier old media watershed years? New media is now embodied in a real-life, dragon-slaying competitor that delivers greater value to consumers and advertisers than old media does, at a fraction of the cost. It possesses an ability to scale that's unimagined in the traditional media world. This is a new era of marketing. The future is old media's to lose.

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ABOUT THE AUTHOR

Dave Morgan Dave Morgan founded TACODA Systems in July 2001 and serves as its CEO. TACODA is a pioneer and leading provider of behavioral-targeted online advertising solutions for driving quality branding relationships. TACODA delivers advertisers high quality, targeted audiences from premium sites, powering successful online advertising campaigns. TACODA-enabled Web sites, which number over 2,000, reach over 70 percent of the U.S. Internet audience monthly. Its roster of customers, mostly Fortune 1000 business, includes branded national, regional and vertical sites, and 75 percent of the top 20 U.S. newspaper companies. Customers include the New York Times Digital, Weather.com, iVillage, Gannett/USATODAY.com, The Tribune Company, Belo Interactive, BusinessWeek.com, About.com, Advance Publications' Advance Internet and Forbes.com. Virtually every top 50 online marketer has run campaigns on TACODA-enabled sites, including travel, automotive, packaged goods, consumer/health products and consumer electronics companies.

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