MAGNA Global May 2008 Advertising Economy
Transcript of MAGNA Global May 2008 Advertising Economy
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May 2008
The Advertising Ec onomy
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Onc e Upon a Time, Marketing = Media + Creative
Trad itiona l med ia was p rimary (sole?)
venue for c ommunic a tions ob jec tives
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But Fragmenta tion Frac tured That Proposition
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New Platforms Would Make Change Possible
Source: MAG NA Globa l
Multichannel Homes
DVR Homes
VOD Homes
Broadband Homes
Satellite RadioSubscriptionsHD Subscriptions
Mobile Phone
Subscriptions
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
%ofUS
Households
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Music Was The Canary In The Coal Mine
Sourc e: MAGNA Glob al, RIAA
Digitization c hanged produc tion, distribution and c onsumption
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Revenues
($000s)
TotalDigitalSales
RetailSales
Manufacturers' Shipments of Recorded Music
Napster Launched
(June 1999)
BitTorrent, Kazaa,
Grokster, etc. activeiTunes Launch
(March 2003)
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The Venture World Would Shake Everything Else Up
Traditiona l Med ium Equivalent / Ad -Supported Revenue Driver
Rad io/ Music
InformationSeeking
Commerc e /Shopping
IndividualorCorporate
BehaviorDriver
TV Online/ Print Out-of-Home MarketingServic es
OtherMarketing
UGCProduction
Content-on-
Demand
Soc ia l ContentConsumption
Nic he ContentConsumption
New Plac eConsumption
AssetManagement
Ga me Playing
Source: MAGNA Global
Thousands of new models would surely c hange everything
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And DVRs Were To Be The Last Nail In The Coffin
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With A Digital Revolution Blooming In The Aftermath
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But Traditional Media Never Died
Television is the
worst form ofadvertising, exceptall the others thathave been tried
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But Traditional Media Never Died
New advertisers rely on it for mass branding effec ts
1 McDonald's 1 AT&T Wireless
2 KFC 2 Verizon
3 Burger King 3 Sprint
4 Miller Lite 4 McDonald's5 Budweiser 5 Home Depot
6 AT&T 6 T-Mobile
7 Wendy's 7 Subway
8 American Express 8 Toyota Tundra
9 Miller High Life 9 Lowes
10 Advil 10 Wendy's
20071987
Top 10 Network TV Advertisers
Source: MAGNA Global analysis of TNS-CMR data
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But Traditional Media Never Died
Large brand-based advertisers: foc us on reach
Network TV Prime Time Reach - Live Only Adults 18-49
96.17% 96.72%
0.0%10.0%
20.0%
30.0%
40.0%
50.0%60.0%
70.0%
80.0%
90.0%
100.0%
2002 2007
Source: Initiative Analysis of Nielsen Data
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But Traditional Media Never Died
And frequency
0
100,000
200,000
300,000
400,000
500,000
600,000
2005 2006 2007 2008 2009 2010
TV
Radio
Total Internet
Newspapers
Consumer
MagazinesSearch
1.8bn
37.0bn
51.3bn
56.9bn
241.3bn
539.0bn
Total US Population: Hours Spent With Media
MillionsofPerson-HoursPerYear
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13/4013 Source: MAGNA Global, WARC, InternetWorldStats. Weekly reach figures for France and UK, daily for other countries. Reach definition for magazines = issue reach in France, Italy andSpain. Internet reach typically = % of population online monthly per Nielsen NetRatin s, ITU and other sources as of June 30 2007 except for US = March 31, 2007
But Traditional Media Never Died
This is true in established markets
Media Reach By Country
0.0%10.0%20.0%30.0%40.0%
50.0%60.0%70.0%80.0%90.0%
100.0%
TV
Rad
io
Newspape
rs
Magazin
es
Intern
et
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But Traditional Media Never Died
And emerging ones
Source: MAGNA Global, WARC, InternetWorldStats. Weekly figures for Brazil and Russia. Russia, China and India magazines are issue reach figures. Indian TV and radio = daily, newspapers= issue. Chinese TV = weekly and radio = daily. Internet typically = % of population online monthly per Nielsen NetRatin s, ITU and other sources as of June 30 2007
Media Reach By Country
0.0%10.0%20.0%30.0%40.0%
50.0%60.0%70.0%80.0%90.0%
100.0%
TV
Radio
Newspapers
Magazin
es
Internet
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But Traditional Media Never Died
It also holds for young audiences
Young Audiences' TV Viewing Trends
15.0
17.0
19.0
21.0
23.0
25.0
27.0
29.0
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07H
oursofView
ingPerWeek P2-5
P6-11
P12-17
P18-34
Source: MAGNA Global analysis of Nielsen Media Research data
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But Traditional Media Never Died
In the US and around the world
Source: WARC
TV Reach: Adults and Teens
0.0%10.0%20.0%30.0%40.0%50.0%
60.0%70.0%80.0%90.0%
100.0%
UK
Germany
France
Italy
Spain
US
Brazil
Russia
India
China
Adults
Teens
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But Traditional Media Never Died
General Print TV
Suffic ient Rangeof Content
Suffic ientTec hnic a l Qua lity
Equipment
SubstitutionSuffic ientCustomer Service
Effic ientNavigation
Cheaper toSubstitute
IncreasedConvenience
SUMMARY
Limited TV co ntentava ilab le tod ay
Internet can t d eliverhigh res video we ll
IPTV: no STB integration
Qo S is c ritica l for video
Hard to navigate to findaudio/video
Online ba ndwidth canbe expensive to p rovide
Print is typ ica lly portab le
Print is ta c tile
Prospec ts for onlineme d ia substitution limitedby drawbacks relative to
trad itiona l media
Source: MAG NA Globa l
Is New Media a lways a better substitute? Consider c riteria
Yes! NotReally
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But Traditional Media Never Died
Reflec ted in ac tual usage Conventiona l TV popularity: 100x vs. Online in 2011?
Source: M AGNA Glob al, Ac custream
145.8x
119.8x
99.2x82.7x
69.4x 58.6x
0.0x
20.0x
40.0x
60.0x80.0x
100.0x
120.0x
140.0x
160.0x180.0x
200.0x
25% 30% 35% 40% 45% 50%Different Scenarios:
Assumed 4-Year Compounded Annual Growth Rate of Online Video
PopularityFac
torofConventional
TV
in2011
2007 Growth Rate Was 34.4%
Above Trend
Below Trend
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Communic ations Extends Beyond Media
The company is(putting) retail
marketing strategyunder the same
marketing directors who
oversee brand teams
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Communic ations Extends Beyond Media
Large advertisers real shift: non-media marketing
Hershey Promotion and Advertising Expense 6-Year CAGR
Advertising Growth
Promotion Growth
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2001 2002 2003 2004 2005 2006 2007
8.8%
-6.2%
Source: MAGNA Global, Company Reports
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Communic ations Extends Beyond Media
Large advertisers real shift: non-media marketing
Coca-Cola Selling and Advertising 6-Year CAGR
Selling ExpenseGrowth
Advertising ExpenseGrowth
-15.0%
-10.0%-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
2001 2002 2003 2004 2005 2006 2007
6.5%12.8%
Source: MAGNA Global, Company Reports
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Communic ations Extends Beyond Media
Large advertisers real shift: non-media marketing
Liz Claiborne Marketing and Advertising 6-Year CAGR
Marketing Growth
Advertising Growth
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2001 2002 2003 2004 2005 2006 2007
4.4%
9.0%
Source: MAGNA Global, Company Reports
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Communic ations Extends Beyond Media
Large advertisers real shift: non-media marketing
Wrigley Merchandising, Selling and Advertising 6-Year CAGR
Merchandising andPromotions/Other
GrowthSelling and other
Marketing Growth
Advertising Growth0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
2001 2002 2003 2004 2005 2006 2007
15.2%
16.2%
10.0%
Source: MAGNA Global, Company Reports
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Drivers of Online Spend = Endemics, New Businesses
Largest advertisers drive TV, smaller advertisers drive online
Source: MAGNA Global analysis of TNS-CMR data
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Drivers of Online Spend = Endemics, New Businesses
Online a llows for lower c ost, narrow reac hing campaigns
2006: Unique Advertisers By Medium
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Network TV Internet Display
Source: MAGNA Global analysis of TNS-CMR data
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Drivers of Online Spend = Endemics, New Businesses
Search primarily driven by small businesses + e-commerc e
Search Spending as % of E-Commerce Sales
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
1Q00A
2Q00A
3Q00A
4Q00A
1Q01A
2Q01A
3Q01A
4Q01A
1Q02A
2Q02A
3Q02A
4Q02A
1Q03A
2Q03A
3Q03A
4Q03A
1Q04A
2Q04A
3Q04A
4Q04A
1Q05A
2Q05A
3Q05A
4Q05A
1Q06A
2Q06A
3Q06A
4Q06A
1Q07A
2Q07A
3Q07A
4Q07A
Source: MAGNA Global, IAB, BEA
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27 Source: MAGNA Global, US Census, Veronis Suhler
Drivers of Online Spend = Endemics, New Businesses
Reflec ting effec tiveness for SMEs
$0.00$1.00
$2.00
$3.00
$4.00$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
2005 2006 2007 2008 2009 2010
Search
Newspapers
Total Internet
ConsumerMagazines
TV
Radio
Advertising Dollars Spent Per Hour of Media Consumption
$9.39
$0.94
$0.08
$0.58
$0.10$0.33
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Beyond search, emerging media = small business today
Emerging Media Advertising: Sourc es of Revenue
2007E Emerging Media Advertising
$0.0
$2,000.0
$4,000.0
$6,000.0
$8,000.0
$10,000.0
Search All OtherR
evenuesinM
illions
Source: MAGNA Global, IAB
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Emerging Media Advertising: Sourc es of Revenue
Sub-scale media: more effec tive for sub-scale advertisers(?) Emerg ing med ia requires ad hoc p roc esses and workflows
Most or a ll p roc esses in sma ller advertisers a re ad hoc !
or
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Emerging Media Advertising: Sourc es of Revenue
But gut dec isions on fee l frequently d rive a lloc ations Use of newer med ia c an be simila r to magazines: it fee ls right
=
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Emerging Media Advertising: Sourc es of Revenue
What will c ause advertisers to use more emerging media? Trad itiona l med ia stops working
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Emerging Media Advertising: Sourc es of Revenue
What will c ause advertisers to use more emerging media? Better infrastruc ture
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Emerging Media Advertising: Sourc es of Revenue
What will c ause advertisers to use more emerging media? Bette r-a ligned organiza tions
OperatingDivision
RetailDistribution
ProductDevelopment
Branding
CEO
Other CorporateFunctions
COO
PR / CorporateCommunications
OperatingDivision
ProductDevelopment
Branding
OperatingDivision
ProductDevelopment
Branding
CMO / CentralMarketing
Creative OtherMedia
Marketing, PR,Retail, Sales
Marketing, PR,Retail, Sales
Marketing, PR,Retail, Sales
Source: MAGNA Global
Direct /Online Sales
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Emerging Media Advertising: Sourc es of Revenue
What will c ause advertisers to use more emerging media? Foc us on peop le, not pages (or ra tings)
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Emerging Media Advertising: Sourc es of Revenue
What will c ause advertisers to use more emerging media? Ab ility to assess va lue, not c ost
Top 10 DMAs National Network
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Emerging Media Advertising: Sourc es of Revenue
What will c ause advertisers to use more emerging media? Ab ility to ac tua lly use da ta
= +
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Emerging Media Advertising: Sourc es of Revenue
So when is emerging media used?
Nic he-foc used brands or marketing ob jec tives
Reac hing c onsumers ac ross multip le touc h-points
Experimenta tion / interna l lea rning / p repara tion for the future
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What Have We Learned Today?
We thought we c ould makemoney on the internet
While the internet is new andexc itingit hasnt matured
as a d istribution mec hanism
It will be a few yearsbeforemed ia on theinternet can be monetized
- Kyle Broflofski, April 2008
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Summary
OldMedia :
NotDeadYet,
BecomesDigital
BelowThe Line :Growth
Driver ForLargest
Advertisers
OnlineDisplay:Foc us on
Endemics,Commerce
OnlineSearch:Led bySmall
Businesses,
Commerce
NewMedia:
SystemicLimits fo r
Most La rge
Advertisers
EmergingMedia:Niches,MultipleTouc h
Points orTests
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Contacts:
Brian Wieser, CFATel: 646-865-2260Email: [email protected] om
www.interpublic.com/news+ideas/research