Time for a fresh look at how to sell ads

The threat facing traditional media has been evident for at least a decade – certainly its imminent death has been regularly canvassed.

Typically, it is put down to a problem of having to adapt to digital platforms. Content has to be delivered in new ways, so the argument runs, and the fact that advertising rates are lower in the digital environment simply means that it will become a lower margin business.

While that’s undoubtedly true, the challenge is to innovate with the advertising service. Newspapers typically derive 85 to 90 per cent of their revenue from advertising and there is little prospect that charging for editorial content will make up the shortfall, although, as media analyst with Deutsche BankAndrew Anagnostellis comments, “specialist sites such as FT.com for the Financial Times have developed a “sustainable digital platform, albeit a digital reader is worth less than a print reader”. In free-to-air television, 100 per cent of the revenue comes from advertising.

The founder of the search engine company roi.com.au, Ewan Watt, says advertising is evolving. “Traditional media still has the vast majority of eyeballs but all forms of media need to integrate and interact with businesses and customers to add value in the future,” Watt says.

For instance, he says, companies in old media could aggregate data about which ads work and which do not as a way to deliver greater value to their ad customers.

The editor of the blog MacroBusiness, David Llewellyn-Smith, says too much attention is paid to the editorial side of traditional media businesses and not enough to what is required to improve the advertising. “Eighty-five per cent of a newspaper’s revenue is derived from advertising,” he says.

“Cutting costs doesn’t solve a big decline in this revenue stream, neither does changing your distribution mechanism. What is needed is innovation in how to deliver the core product to the core customers – advertisers, not readers. There is an answer, mastered by many a niche publisher. Embrace fragmentation and creative advertising solutions, tailored for clients, delivered in continually refreshing ways, for targeted audiences.”

So how can the advertising offering be improved? David May writes in the media, marketing and advertising website Mumbrella that what is needed is to “get the best 50 minds in the country, minds that don’t work in print today, lock them away for a month and try to get them to re-create what Google did for AdWords for print and digital. Print has become the tail and digital the dog. There needs to be a better way to commercialise than pay walls and digital display.”

The biggest problem that needs to be addressed is the passivity of old media. They either offer space (print), or time (electronic media).

This used to work, provided the content was attracting enough attention. But in print, space is not as valuable as it once was. For one thing, whereas in physical print products, the space went away at the end of the day or week, in digital it tends to stay around. Worse, there is no shortage of space on the internet because of the range of providers.

Mumbrella editor Tim Burrowes says there are thousands of online forms being offered to potential advertisers. “It becomes extremely competitive,” he says. “You don’t have infinite inventory, but there is far more online out there than there is in print.”

Burrowes says collecting research on behalf of customers about which ads are effective and which are not is costly. He says it is better done by industry organisations but believes industry media marketing bodies are not good at capturing the data. He says some individual salespeople provide feedback to advertisers about what is going to work best for customers but it is rare.

“You get individuals who do it but [for the most part] there is not really robust data and when it is gathered it is not entirely reliable,” he says. “It is more about selling, rather than really robust analysis of what works and what doesn’t.

“One of the hard things in any established media company is that success is measured by whether you have done 5 per cent better than last year. When you are working within an existing system, it is a lot harder to create something new.

“That is not endemic to newspapers, it is endemic to organisations. But maybe newspapers are [worst] than most because they have had the same model for 100 years, so maybe it is harder. Particularly when the people you are selling to think it is a dying medium: 22-year-olds [in media buying companies] who may not even read newspapers themselves.”

It is unlikely that ads in old media will disappear, even if it is hard to find a business model. Watt says companies that want to build brand awareness still have to look at conventional media. The internet, meanwhile, allows firms to deliver personalised content to individuals. “I think they are very complementary,” he says. “People are using multiple forms of media. This is the way to increase depth.”

At the moment, old media companies seem to have a bleak future, But as Gary Hamel comments in his book Leading the revolution: How to thrive in turbulent times by making innovation a way of life, solutions can come from unexpected places. “New business concepts are always, always the product of lucky foresight,” Hamel says. “That’s right – the essential insight doesn’t come out of any dirigiste planning process; it comes from some cocktail of happenstance, desire, curiosity, ambition and need.”

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