I came across some research last week that I found interesting and surprising. “Online Media Concentration” was released by Jupiter Research (a Jupitermedia Corp. division) earlier this month. It debunked a myth many may have regarding the perceived dominance of the three portals (AOL, MSN, and Yahoo) relative to time spent and share of online advertising dollars. My personal belief was the Big Three represent a significantly dominant share relative to other online properties of both time spent and ad-dollar revenue. This report sheds some new light on the subject.
It draws on a few data sources, including comScore Media Metrix and the Jupiter Research Internet Advertising Model (July 2004). It states the three portals represent only 36 percent of overall Internet time spent and 38 percent of Internet ad spending (if Google were added, you’d still only be up to 49 percent of the ad market). It gets even more interesting when compared to other markets and media outlets with their degree of concentration.
The report uses the Herfindahl-Hirschman Index to make this comparison. This index is used by the U.S. Department of Justice and the Federal Trade Commission to evaluate proposed mergers and acquisitions. It squares each party’s shares and adds them together to create the index. The index increases as the number of players decreases and as the disparity in share increases. Indexes span the range of 0 to 10,000, with 0 indicating no market concentration and 10,000 representing a monopolistic (highly concentrated) situation.
For perspective, the “desktop operating systems” category has an index of 9,000, illustrating Microsoft’s dominance of that market. Some other interesting indexes:
- Beer: 2,200
- Wireless subscribers: 1,700
- Cable TV advertising: 1,600
- Broadcast TV advertising: 1,600
- Movie box office: 1,600
- Music: 1,500
- Magazine advertising: 1,400
- Internet ad spending: 650
- Internet usage minutes: 490
Is this counterintuitive? Not really, given the tremendously diverse offerings (and number of ad-supported sites) on the Internet. However, given the high profile of the big three portals and their PR, research studies, and marketing efforts, you could lose sight of that.
The situation becomes even more pronounced if we factor in more than 60 percent of consumer time spent with portals (as per the report) is in environments such as email and IM (neither particularly ad-friendly). Add up all these data points, and the challenge to build online reach starts to come into focus.
From a planning and buying perspective, the lack of market concentration is a good point of leverage. As in the traditional media world, there’s no must-buy property. Every online publisher can be “bought around” if necessary. It is, however, becoming increasingly difficult to aggregate mass audiences and not include scores of publishers in a digital media plan.
It’s also driving up demand for those areas that allow for quick aggregation of reach, such as portal home pages. These coveted pieces of real estate that cost $100,000 or more for a 24-hour period now sell out months in advance.
As an industry, we’re running into situations with many of our mass marketers that highlight the challenge to create significant reach in our online media plans.
What’s the answer?
The solution may appear when you examine the Internet’s role in your overall communications mix. More than likely, you’re already spending tens of millions of dollars (if not more) with traditional mass media (quickly becoming extinct, but more on that another time) to build mass reach. Why not use the Internet as a complement to that plan to capitalize on the inherent power of the medium: engagement, immersion, and action?
Different media require different paradigms. Does “speaking the same language” in terms of reach, frequency, and rating points begin to make sense in an interactive media context?
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