Category Archives: Advertising

MarketHive Groups

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Diverse Business Team

Like Facebook, Teams is actually a much more focused culture celebration to have actually subject matter discussions accordinged to the Teams style.

Unlike Facebook, Teams is the center of all the devices from the system. Allow’s start with the blog writing platform.

The Group blogging platform is actually a special system published to from the team members that prefer to publish to that platform. The Markethive blogging site system also takes advantage of plugins so that web content may be routed to several WordPress blogging sites. This permits you to develop a group from marketing experts all cooperating for a common source providing web content for the Markethive weblog systems as well as WordPress circulation (scope).

SEO Links management is another group functionality where the group company takes advantage of the Backlinks system to construct white hat hyperlinks for particular projects.

Co-op Marketing campaign Finance: Press releases, Youtube video recording advertisements, Facebook Advertisements, Google advertisements can effortlessly be funded with an inner co-op project.

Membership Control Files: As Admin, you could review task records for the participants in your group. Login task, blogging in the team, Link activity, Massaging responsiveness, and so on. Enable decisions accordinged to activity to figure out ejecting non responsive members.

Rotators: Used to distribute traffic involving the Group blogging sites, or Co-op website traffic to marked sites or even grab webpages. Or dispersed traffic for any sort of factor. Similar to the Co-op campaign is actually the capability to obtain leads, clients or distributor in a co-op function as well as disperse the leads, consumers, etc. accordingly.

Possession Chart: A control device whereas screens the relational hookups in between, catch web pages, account web pages, blogs, social media networks, press releases etc

Group Messaging: Communication with your group members is effectively managed with the team feature messaging unit.

Reproducing PDF documents:

A Markethive team is like a Home Sector. You may utilize Teams to create a start-up organisation, an expert service, an energy home based business staff, nothing like this before, like building a start-up service without any overhead. This is actually the pledge of the brand-new Market Network (distinguished to the old Social Networks) That is precisely what Markethive is.

Typical case: Chris Corey, Annette Schwindt, Stephen Hodgkiss as well as I have actually created a new firm contacted Wavefour Inc. This firm is actually negotiating an advertising project with a new customer that is employing our team to operate a representative acquisition, reach, Craigslist, capture webpage project, having the potential to generate over $500k for our team when our experts get to aim at. This is actually exactly why our team developed Markethive, a market atmosphere created to nurture, sustain and also allow tiny, large and also medium organisation.

Markethive Groups is actually the center from each one of this. Welcome to the brand-new Market Network from the future. Markethive!

Rotators: with to arrange website traffic happening to the Team blogging sites, or even Co-op website traffic to marked web sites or capture webpages. A Markethive group is like a Cottage Sector. You could played with Groups to build a startup organisation, a qualified service, a power network marketing crew, nothing at all like that previously, like developing a startup repair with no overhead. And Markethive Teams is actually the epicenter of all of this.

 

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What is Impact-Based Advertising?

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Impact-based advertising is a form of advertising designed to have a lasting psychological effect on viewers so they will remember the product or vendor. This approach can help advertising produce the greatest results for a given expenditure.

Impact-based advertising is often contrasted with impression-based advertising, which is focused on the number of times that an ad is seen and does not differentiate between segments of the audience. Impact-based advertising seeks to give the user something of value, whether that is entertainment or information and create a positive association with the product or service advertised.

On the Internet, impact-based advertising applies mainly to Web-based content although it can take the form of marketing email messages. With the increasing availability of high-speed Internet connections, sophisticated Web-based ads have become practical. A good example is a video that plays while the viewer looks at a Web page. Such videos often have distracting features such as handsome heroes, dancing dogs, crashing cars or marauding monsters.

When an advertiser wants to maximize the impact of an ad, the placement of the ad is a critical consideration. Effective ad locations are in transitional Web pages or in pages that viewers are likely to look at for a sustained period of time. Some advertisers use pop-ups that block desired content or pop-unders that remain on the screen even after the user exits the browser. However, many Web users find these tactics annoying and may react to them negatively.

Ads that come between users and the content they have requested are a form of interruption marketing, a category that also includes telemarketing calls during the dinner hour and commercials during your favorite television show. According to a report from IBM, The End of Advertising as We Know It, the advertising world will go through more change in the next five years than it did in the previous 50. An increasing trend towards impact-based and permission-based marketing is expected to be a part of that change.

Chuck Reynolds
Contributor

MarketHive

The Future of Advertising

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Twenty creative directors, planners, media strategists, and account executives from agencies across the country are down on all fours on the floor of a 100-year-old tenement on Manhattan’s Lower East Side. They are each staring down at a blank poster-size sheet of paper, contemplating their most abject fears about their careers, their livelihoods, and their future. They have reason to worry. They are, after all, in the business of advertising.

This slight three-story brick building on the edge of Chinatown has been taken over by Hyper Island, a school based in Sweden renowned for producing the most coveted digital talent in the ad industry. That school is located in an old prison on the Baltic Sea, and students are taught that there are no boundaries when it comes to digital marketing.

Last summer, the Swedes at Hyper Island recognized that where there’s panic, there’s opportunity, and opened this New York branch. Like the many foreigners who settled in this downtown locale before, the school arrived with its own set of promises — to drag the denizens of Madison Avenue into the 21st century. While its students back in Sweden are “digital natives,” these elder New Yorkers are “digital immigrants,” who have gathered for three days of hard-core immersion in dealing with the chaos digital technology has wrought on their industry. “Something digital immigrants would do,” explains one instructor, “is make a phone call to make sure someone received an email.”

Most of the men and women here — average age: 38 — have worked at agencies for more than a decade. Such tenure used to be considered an asset, but these days it’s more of a liability. They’re all well aware that coding is now prized over copywriting and that a résumé that includes Xbox and Google is more desirable than one featuring stints at BBDO or Grey.

Step one of their therapy, of course, is admitting there is a problem. In this room where Swedish pastries litter a couple of Ikea tables, they have been told that their first assignment is to “put [their] digital stinky fish on the table.” So each supplicant finds some space on the floor and rolls out that big blank sheet of paper. Eventually, everyone writes something, and after a few minutes, the group gathers in a circle — a safe space — where one by one they voice their insecurities. The first person stands up. “I walk around in fear and loathing, dazed and confused,” he says. Another confesses, “I’m a person who’s petrified to fail.” One by one, they exhale the cold fears of an entire industry: “I feel like I’m standing here and there are a thousand baseballs dropping from the sky and I don’t know which ones to catch.” “I left my cushy job at a global agency. Actually, I didn’t leave; I was pushed out.” “I kind of feel like the digital world is a gated world. It’s wide open, but I don’t even know enough to walk in.” “This whole ‘collaboration, we’ll work together as a team’ breaking down of the creative director and art director team — I find it fucking difficult.”

Depending on how you look at it, the next 72 hours are either a communal hazing or a primer on today’s rules of marketing. Creative teams, the participants are told, now need to behave more like improv actors — “story building” instead of storytelling — so they can respond in real time to an unpredictable audience. Marketing actually needs to be useful — “use-vertising” instead of advertising — which means that you must think more like a product developer than an entertainer. While campaigns once promised glossy anthemic concepts, perfected before being shipped off to the waiting client, digital is incremental, experimental, continually optimized — “perpetual beta” — and never, ever finished. “Digital will fuck you up and the way your agencies are built to make money, staff things, price things,” says the instructor. “You guys have to change your DNA, and you’re going to have tough decisions.” Later, there’s an entire lesson on letting go of egos. Throughout the session, instructors remind the novitiates that these new rules are certain to change completely, and soon.

CHAOS

Like a beetle preserved in amber, the practice of advertising has sat virtually unchanged for the last half-century. Before 1960, ad making was a solitary practice. Copywriters toiled away on words to pitch a product, then handed them off to an art director who translated them into an illustration or photograph. Creative director Bill Bernbach (the B in DDB) changed all that when he recognized that pairing wordsmith and artist could spark genius. That simple move ignited the industry’s creative revolution, raising the practice of advertising from sleazy salesmanship to some permutation of art.

The ad business became an assembly line as predictable as Henry Ford’s. The client (whose goal was to get the word out about a product) paid an agency’s account executive (whose job was to lure the client and then keep him happy), who briefed the brand planner (whose research uncovered the big consumer insight), who briefed the media planner (who decided which channel — radio, print, outdoor, direct mail, or TV — to advertise in). Then the copywriter/art director team would pass on its work (a big idea typically represented by storyboards for a 30-second TV commercial) to the producer (who worked with a director and editors to film and edit the commercial). Thanks to the media buyer (whose job was to wine-and-dine media companies to lower the price of TV spots, print pages, or radio slots), the ad would get funneled, like relatively fresh sausage, into some combination of those five mass media, which were anything but equal. TV ruled the world. After all, it not only reached a mass audience but was also the most expensive medium — and the more the client spent, the more money the ad agency made.

That was then. Over the past few years, because of a combination of Internet disintermediation, recession, and corporate blindness, the assembly line has been obliterated — economically, organizationally, and culturally. In the ad business, the relatively good life of 2007 is as remote as the whiskey highs of 1962. “Here we go again,” moans Andy Nibley, the former CEO of ad agency Marsteller who, over the past decade, has also been the CEO of the digital arms of both Reuters and Universal Music. “First the news business, then the music business, then advertising. Is there any industry I get involved in that doesn’t get destroyed by digital technology?”

Thanks to the Internet and digital technology, agencies are finding that the realization of their clients’ ultimate fantasy — the ability to customize a specific message to a specific person at a specific moment — is within their grasp. It is also one very complex nightmare. After all, digital isn’t just one channel. It’s a medium that blooms thousands of other mediums. Brad Jakeman, who formerly led advertising at Citigroup and Macy’s, says the explosion of platforms like search, geotargeting, the iPad, and mobile apps mean fragmented media budgets and fragmented consumer attention. “The irony is that while there have never been more ways to reach consumers, it’s never been harder to connect with consumers,” explains Jakeman, now chief creative officer at Activision, the gaming company. The death of mass marketing means the end of lazy marketing. At agencies, the new norm is doing exponentially complex work. Think of the 200 Old Spice YouTube videos whipped up by Wieden+Kennedy in 48 hours. “Creating more work for less money is a big paradox,” says Matt Howell, president of the Boston agency Modernista.

And the Internet has turned what used to be a controlled, one-way message into a real-time dialogue with millions. “Our power has been matched and, in some categories, rivaled by user influence,” says Nick Brien, CEO of Interpublic Group’s McCann Worldgroup, who notes that sites such as Engadget and Yelp can make or break a product. The opportunity for marketers is that instead of having to pay for their message to run somewhere, they can “earn” media for free, via consumers spreading YouTube clips, Groupons, and tweets as if they were trying to saturate their networks with photos of their newborn. Says Jon Bond, cofounder of Kirshenbaum Bond Senecal + Partners who left his agency last year to launch a startup: “Marketing in the future is like sex. Only the losers will have to pay for it.” But the dark side of a transparent marketplace is that marketers have never had more of an opportunity to rub consumers the wrong way and be publicly skewered. The days of lathering on a brand message that a product may not live up to are long gone.

All of this has made life much more confusing for the client. At a time of shrinking budgets, chief marketing officers don’t know where to turn. They have little confidence that old-world agencies know how to navigate the chaos, and they don’t know which newcomers to trust. “It’s the most treacherous job in corporate America, blamed for everything and credited for nothing,” concedes Jakeman, who notes that the average CMO tenure is down to 22 months.

With clients in a tailspin, the very role of agencies is in question. Many CMOs are shunning “agencies of record” relationships — the plum long-term, retainer-based deals that have been the bread and butter of full-service firms. After an agency review last year, Angelique Krembs, marketing director of PepsiCo’s SoBe brand, opted to work with only shops that specialized in digital, PR, or promotional work, excluding all generalist firms. “I didn’t see it as us ditching a creative agency. We were going beyond traditional,” says Krembs, in words that can hardly be reassuring to the old line. “We realized it was unlikely we’d find everything we wanted in one place.” That’s apt to become the norm as a generation of senior marketers emerges from the digital side, rather than from classic marketing educations at P&G or General Mills. For example, the recently appointed president of marketing at Sears, David Friedman, was recruited from the digital agency Razorfish.

Squeezed by clients, agencies are also beset by a host of new competitors attacking from every direction. Technology companies have commoditized much of the “art” of that old assembly line. Producing an ad doesn’t have to be an expensive multiperson affair these days, given that commercial-quality high-definition video can now be shot on cameras that cost less than $2,000. Consultancies like Accenture and Sapient are branding themselves as digital agencies. Tech titans like Microsoft, IBM, and Google are rolling out tools that replace agency analysis with digital measurements that can predict the best targets for a campaign and quantify its success. Google, arguably the industry’s most polarizing frenemy, is helping agencies use its planning and analytics tools, while at the same time automating their media-buying jobs. “With infinite ad inventory on the Internet, you just can’t have people do [media planning] anymore,” says Dan Salmon, an analyst at BMO Capital Markets who covers advertising and marketing services. “It’s now being done by a piece of software.”

Technology startups also digitize away agency roles. MediaMath, DataXu, and X + 1 are racing to deliver automated ad-buying platforms; Buildabrand.com has reduced the branding process to an algorithm that produces customized logos in five minutes; Lotame is doing audience data management, which tracks every dollar spent and how it performs. Web 2.0 stars like Facebook and Foursquare are starting to work directly with brands, sometimes cutting agencies out of the conversation entirely.

The attack on the industry is also coming from agency expats. Former Crispin Porter + Bogusky exec John Winsor recently opened Victors & Spoils in Boulder, Colorado. Victors & Spoils has virtually no staff and “operates on the principles of crowdsourcing” — currently the most vilified term in the agency world. Since its launch last year, Victors & Spoils has lured marketers at General Mills, Oakley, Virgin America, and Harley-Davidson, which just ditched its agency of record of 30 years. “Many agencies are hanging on to this idea that creativity is theirs to own and sell,” says Harley CMO Mark-Hans Richer. “[Victors & Spoils] offered a great place to start versus sitting across from a creative who spent weeks crafting the perfect idea and gets upset if you want to change a word.” Says Victors & Spoils chief creative officer Evan Fry, who’s also a Crispin alum: “I think the new model is scary because all of us in the ad industry want to feel, at least from a creative point of view, that we have something no one else has. So if you’re really good at it, you had to go to Creative Circus or Portfolio Center; you had to pay for it. Then you had to toil to get into a good shop. Then you had to get lucky to get on the good briefs. For someone to come out and say, ‘We think a lot of people can offer great ideas’ means, ‘What, I’m not special?’ ”

For the enterprising client that can see clearly through the chaos, this new world holds promise. Kraft, for instance, has assembled a growing Rolodex of 70 new specialist partners. This isn’t some fringe brand — it’s Kraft, the country’s largest food marketer, which spends some $1.6 billion on marketing every year. The company is so open to new thinking that it recently hired a startup called GeniusRocket to develop a new campaign for the relaunch of its Athenos Hummus.

GeniusRocket is what an ad agency looks like when it’s stripped of Madison Avenue skyscrapers, high-priced creatives on a payroll, sushi dinners at Nobu, and two-week shoots at the Viceroy in Santa Monica. The firm is nothing more than a bare-bones website that crowdsources broadcast-ready TV ads from a pool of loosely vetted talent from Poland to Guam. A CMO accustomed to handing over millions of dollars to an agency for a campaign designed around a single spot can now hand GeniusRocket $40,000 — and get seven spots, each of which will be syndicated on 20 web platforms for tracking, testing, sentiment analysis, and wide distribution. GeniusRocket gleans a 20% to 40% commission, and the rest goes to the creators. “It seemed like an interesting, cost-effective way to get some new creative ideas,” says Marshall Hyzdu, the Kraft brand manager who hired GeniusRocket. “We fell in love with one spot.

“For an agency to be on the cutting edge, it must have heavy overhead,” Hyzdu points out. “Versus GeniusRocket, which is a lean team focused on new ideas. I wonder if that becomes the new model.” That kind of thinking sends shivers through the business. “I’ve gone to see all the big cheeses at all these big agencies, and the reaction to us tends to be in one of three buckets,” says Mark Walsh, GeniusRocket’s co-founder and CEO and a proud bottom-feeder. “If the executive is over 57, he says, ‘Thank God I’m getting out of this business.’ If they’re in their forties, they say one of two things: ‘You’re Satan and you’re out to kill me,’ or ‘You’re Satan, but can you help me and not tell anybody?’ ”

“There’s never been a better time to be in advertising,” says Aaron Reitkopf, North American CEO of digital agency Profero, referring to the unbound possibilities of digital, “and there’s never been a worse time.” Reitkopf left his CEO post at Kirshenbaum Bond Senecal + Partners a year ago and spent some time visiting agency heads while figuring out a next step. “At the beginning of our conversations, they would put on a brave face, but once you began to quiz them about the future, the door would close in the office,” he says. “They’d look at you and say, ‘I can’t possibly know what the future looks like.’ ” There’s only one thing everyone agrees on, Reitkopf says, and that’s that there is too much excess: too many people, too many of the wrong kinds of people, too much bloat, too much inefficiency. And this in an industry that has laid off more than 160,000 people in the past two years. “Ohhhh,” nods Reitkopf, “the carnage is going to be awesome.”

 OPPORTUNITY

Surviving that carnage, of course, is the real reason people sign up for Hyper Island’s grueling three-day sessions. “You go in there not wanting to admit you’re an alcoholic and by day two, you’re like, ‘I am a little bit of an alcoholic,’ ” says Kevin Moehlenkamp, chief creative officer of Boston-based Hill Holiday. Moehlenkamp attended the inaugural U.S. class last fall, which was held for the industry’s top creative execs. “Before, I was a bit of a creative elitist. I thought digital was just another medium.” TBWAChiatDay chief creative officer Rob Schwartz attended that same course. He remembers that the group of top competitors arrived with cautious bravado. “Everyone was arms folded, it was very tense, and there was a lot of nervous laughter,” says Schwartz. “The room had a Twitter feed, but 70% of the room didn’t know what Twitter was.”

Moehlenkamp and Schwartz say Hyper Island pushed them from digital observers to participants. “Before, I felt open to the conversation, but I wasn’t in it,” says Schwartz, who admits he had even been afraid to blog. “What they teach you is that with digital and social media, either you’re on the shore or you jump in. The class gave me the confidence to jump in.” The 20-year industry vet started blogging and says he has discovered that data tools — which creatives have always shunned as an enemy of artistry — help him stay ahead. Above all, he does not want to be left behind. “My fear was missing out on what could be the next creative revolution,” he says. “I was too young for Bernbach. I didn’t want to miss out this time.”

Many in the business do realize that this moment of unsettling disruption is filled with possibilities. “The headline is, we’re on the verge of a creative revolution,” says Brian Martin, a consultant who has spent more than 25 years in the industry. Advertising’s first creative revolution happened soon after television went mainstream. Digital has reached a similar saturation point. “It’s an exciting time, not doom and gloom,” says McCann’s Brien, who is charged with turning around the atrophying behemoth. “It unleashes creativity.” You might even argue that the revolution is the agencies’ to lose. “In our business, whenever there’s a disruption, our clients need guidance,” says Brien’s boss, Interpublic Group chairman and CEO Michael Roth.

For three years now, Joe Grimaldi, the longtime chief of IPG-owned Mullen, has been trying to drive change at his agency. Mullen is a Boston-based 40-year-old traditional agency with 550 employees, clients such as Timberland and LendingTree, and a lukewarm reputation for its creative work. Grimaldi decided that his agency had to unlearn its bad habits and develop agile, flexible ones. “We want to be an interdisciplinary company with adaptability built in,” says Grimaldi, an Italian immigrant raised in Queens.

Nothing has come easy. “We brought people in from the outside to lead digitally,” says Edward Boches, who for years was Mullen’s chief creative officer, “but they always tried to change us into a pure digital play. Then the ad types who wanted to do brands and big ideas would say they’re jerks who dis us, who think we’re dinosaurs.” That was only the beginning of the misfires. “In the early days, digital was always an afterthought, so we didn’t acknowledge the true cost,” says Boches, with his thick-as-chowder Boston accent. “We sold wrong, we neglected to put digital-savvy people in our new business roles. Instead of building digital things that had utility, we approached it from a messaging mindset and put messaging into it’s space. It took us a while to realize that project management in the digital space is completely different.”

For years, the agency had been located in a palatial mansion outside the city. People were isolated in offices and by long hallways; different disciplines never crossed paths. Last summer, Grimaldi relocated the agency to an open office in downtown Boston. Now, social media people, creatives, media planners, technologists, and user-experience folks are sprinkled next to one another at modular desks. And Boches has ditched the CCO title for something more nebulous — chief social-media officer. “It’s really hard, to be honest,” says Grimaldi, who’s trying to get his staff to thrive by having more points of view.

There are signs that Grimaldi is succeeding. Earlier this year, Mullen launched Olympus’s new PEN E-PL1 camera following a new mantra: “Everything we launch, we launch for free first.” The campaign, which included the first augmented-reality 3-D camera demo, helped increase year-over-year sales by 55%. Mullen had to lay off 100 workers during the recession, but this year, it has hired about twice that after some impressive client wins. The agency recently caught the industry off guard after being awarded the business of two extremely progressive social media clients, Zappos and JetBlue. Says Marty St. George, JetBlue’s SVP of marketing and commercial strategy: “I don’t think any of us expected Mullen to win. But we all noticed through its pitch process that you couldn’t tell who the creative people were from the media people or the planning people. They all finished each other’s sentences, regardless of what we were talking about.”

 MONEY

St. George says the most surprising aspect of JetBlue’s agency search was how many firms still believed that the key to solving any business problem was the 30-second spot. But maybe he shouldn’t have been surprised. Agencies still yearn for the fat 15% commissions they used to score off of a client’s media spend, a spend ballooned mostly by television commercials. The industry isn’t even close to adjusting to the truism that digital dimes don’t replace analog dollars, the very problem that bedevils music labels, publishers, and television networks. Today, agencies really have no clue as to how they should get paid. “We still don’t know how to monetize what we do,” admits Peter McGuinness, CEO of Gotham, which, like Mullen, is owned by IPG. “We don’t monetize ourselves properly, so we don’t hit our margins.”

In many ways, the end of the rich old model is the agencies’ own fault. In the 1980s, agencies decided they could benefit from economies of scale, as well as manage client conflicts of interest, by merging. Not incidentally, this trend also gave the agency owners a way to cash out. The result was an industry centered on four major holding companies: WPP, Omnicom, IPG, and Publicis. But the move has backfired. “Agency leaders were making more money than the clients,” says Martin, the industry consultant. “That’s when the clients began to realize, ‘Gosh, we must be paying them too much.’ ”

Clients forced the agencies into a service-fee model instead, which is far less lucrative. “It’s like lawyers,” explains BMO Capital’s Salmon. “The fees are based on head count and time spent working,” Grimaldi explains why this is so much tougher than the old model. “If a creative team now takes six people instead of two, just think about the burn rate of that room,” he says. “Unfortunately, not everything generates as much money as it used to. There are only so many hours you can bill.” Now those hours are getting squeezed from every direction. The clients employ procurement officers and cost consultants to negotiate down the fee on everybody in an agency. And given today’s hypercomputation, agencies can sink up to $1 million and four months pitching for a new account they might never win. “When the smoke clears,” says McGuinness, “we make no money.”

Given this madness, the agencies still cling to those expensive TV buys. Bob Garfield,an  advertising-industry pundit and author of The Chaos Scenario, says, “Agencies have worked out very complex compensation formulas, which are nominally fee-based, but if you track compensation against media spend, you will see that the lines are parallel.” The less a client spends on media, Garfield continues, the less an agency makes. Some agencies are scrambling to address this by reinventing their compensation structures. “We are paying the price of belonging to an industry that does not know how to protect its own interests,” wrote TBWA Worldwide chairman Jean-Marie Dru in an Advertising Age manifesto entitled “Endless Pressure on Price Traps Agencies, Clients in Death Spiral.” “We are our worst enemies.”

Virtually every CEO in the business is now railing for one of two solutions to the problem of, well, not making enough money. First, they want to be financially rewarded for performance, and thanks to all those new data-analytics tools, for the first time ever, their effectiveness can be measured. Says IPG chairman Roth: “We should get higher [compensation] if it works and lower if it doesn’t. That’s how this industry can return to the profitability level.” It’s a nice thought, but those tools aren’t infallible: While Wieden’s innovative Web campaign for P&G’s Old Spice garnered tons of publicity, Ad Age speculated that the boost in sales may well have been due to a coupon.

Then there’s the industry’s biggest fantasy about compensation. “We have to figure out how to get paid for the big idea, and what that idea is worth,” says McGuiness. What’s a big idea? Something as ubiquitous as MasterCard’s “Priceless” campaign that arguably could transform a business. “This is a holdover from 20th-century marketing,” says Brian Collins, a former Ogilvy exec who now runs an innovation consultancy. “People who think that way are supremely well equipped to work in a world that no longer exists.” Plus, as Garfield points out, “in the whole history of mass advertising, the number of transformative ideas that have created wealth via advertising you can count on one set of fingers and toes.” Garfield sees this big-idea payday as the last wish of an industry that’s drowning. “In a world where media spend is in inexorable decline, and where advertising per se is an endangered species, [agencies] don’t know where to turn,” he says. “The realization of the nightmare is under way. And that nightmare is the utter collapse of the business model.”

 ADAPTATION

In its fight for survival, the advertising industry is at war with itself. Generalists are competing with specialists. Interactive shops are vying to become full-service agencies, while traditional shops are yearning to become digitally integrated. “The Great Race,” as Forrester Research dubbed it in March, drives a more intense competition over an already shrinking pie, and there won’t be room for everyone. En route to the center, agencies are chasing one another to the bottom. “I spoke to a high-level CMO the other day,” says Profero’s Reitkopf. “She said, ‘I work with a holding company’s promotions company, its social-marketing company, its response marketing company. Every time we’re in the room together, it’s fine, but the minute I walk out to get a cup of coffee, someone will follow me and tell me they can do what the other agencies do for cheaper.” Adds Harley CMO Richer: “Agency networks supposedly combine all these experts together on your behalf, but it only really happens when the business is at risk of walking out the door. Before then, these creative entities are locked off in separate P&Ls. They’re not built to solve clients’ problems, they’re built to satisfy individual P&Ls.”

Publicis Groupe chairman and CEO Maurice Lévy admits this. “Historically,” the Frenchman says, “one way to manage a holding company — which still is the case for other holding companies — is to stimulate each agency to compete with each other. The stimulation was about rivalry and competition within the same group. They felt that this was the best way to drive growth.”

These divisions were exacerbated in the 1990s, when holding companies spun their media departments out of creative agencies into stand-alone companies, creating new entities such as Omnicom’s OMD and WPP’s Mindshare. The goal was to hold onto a client’s media spend even if the client took its creative business elsewhere. But marketers like Johnson & Johnson’s Brian Perkins are now begging media and creative shops to bundle back up. “When media and communications planning have become more important than ever,” Perkins wrote in Ad Age this year, “why are our media agencies further (physically and philosophically) from the people who create advertising?”

Lévy is aggressively trying to bridge that gap. He recently created Vivaki, which is largely an internal effort to get its media agencies, Starcom MediaVest and Zenith Optimedia, to collaborate with its digital agencies, Digitas and Razorfish. The carrot he’s employing is deeply traditional: a change in fiscal incentive structure. While each agency has its own P&L, the pay of top execs also depends on Vivaki’s P&L of the combined companies. “In the beginning, it was a really hard pill for me to swallow,” says Bob Lord, CEO of Razorfish, which was acquired last year by Publicis. “I built my career at Razorfish being the most aggressive, saying we can do everything for the client. Now it’s supposed to be okay to say, ‘Well, we are weaker in CRM, and we can learn from Digitas.’ That’s a hard thing for people to accept.”

Of course, the willingness of Lévy and other holding-company CEOs to experiment is based on their continued belief that one-stop shops will outlive and even outpace any disrupter. “We have to be ahead of the curve in all areas,” says IPG’s Roth (who earned $6.3 million in 2009, down 40% from the year before). “We’ll do it by investing in or partnering with these new types of companies and making them part of our offering.” In other words, holding companies will ultimately do what they believe they do best: They will chase the next shiny object, hedge their bets with acquisitions, and perhaps make their already monolithic structures even more colossal.

Rosemarie Ryan and Ty Montague have a smaller vision of the future. Until June, the two were the North American copresidents of JWT, the WPP-owned behemoth, armed with a combined 40 years in the business. Then they quit. Montague and Ryan decided to build a new kind of marketing business with no old-world waste and inefficiency. Co, which Montague describes as “a brand studio built for 21st-century CEOs and CMOs,” is a tiny group of consultants from the agency, technology, and business strategy worlds that can “deploy the right team for the right action at the right time for the right outcome.”

Its ability to scale up and tackle a wide range of client problems will come from the eclectic network of 44 specialist companies they’ve lured to play nice with them, from digital agencies like Big Spaceship to crowdsourcing firms like Victors & Spoils to bigger companies like McCann Worldgroup and Horizon Media, the largest U.S. independent media-services company. “We want to be as small as possible and as big as necessary,” Montague says. “It’s not about scale; it’s about scalability. Even though we have only five employees, right now we have 1,500 people we can put against an opportunity.” Says Bill Koenigsberg, CEO of Horizon: “Getting a piece of business doesn’t mean they have to hire an army. There’s a nice elasticity there.”

Co’s financial model is to be paid a retainer, a flat project fee, or equity, depending on its client; it does not get a cut of what its specialists bill. “We are, by its nature, helping to build businesses that we do not own,” says Montague. Since it doesn’t own any of those specialists, Co has no vested interest in treating a client’s business problem with any particular solution. Its goal is to move from the ghetto of marketing into the world of pure problem solving, so Co plans to work with only clients who promise C-level access beyond the CMO. “The answer can come from marketing, but it can also come from R&D or product innovation or design,” Montague says.

Earlier this year, technology observer Clay Shirky argued that “complex societies collapse because, when some stress comes, those societies have become too inflexible to respond.” Societies like the Romans and the lowland Mayans fell because further reductions became too uncomfortable for those in power. “Collapse is simply the last remaining method of simplification,” writes Shirky. After disintegration, he explains further, the members of a society disperse, experimenting with new ways of doing things. “When the ecosystem stops rewarding complexity,” he writes, “it is the people who figure out how to work simply in the present, rather than the people who mastered the complexities of the past, who get to say what happens in the future.”

Co may be an example of how the members of this collapsing industry could make it simpler and more logical. “I think all of it [the industry] needs to get smaller to get better again, on some level,” says Ryan. Co may or may not succeed, but what makes its model so intriguing is that the company doesn’t have to make a big bet on a single possible future. “I don’t think anybody can look you in the eye and say, ‘This is what the business will look like in 20 years”, says Ryan. “If they do, they’re lying.” Co’s only plan for growth is that its founders will hire other tiny teams of four or five people. In other words, Co’s only growth plan is another pod.

That may be a vision for the industry as a whole. With all the defections of top agency talent over the past year — Alex Bogusky from Crispin, Gerry Graf from Saatchi, Kevin Roddy from BBH — it’s easy to imagine a new advertising ecosystem of pods built around industry stars who have left their lumbering institutions behind. The holding companies will still exist, but around them could emerge a chaotic pattern of startups, independent talent, and connectors who thrive with minimum overhead. That kind of industry would be a fraction of the size of the current one. It would create opportunities for the most talented and hurt everyone else. It would be harder work, with fewer assistants and fewer million-dollar paydays. But this smaller business would be aloft on its new creative potential rather than being crushed under the weight of its past.

Chuck Reynolds
Contributor

MarketHive

What is part of Advertising?

 

Recently, I landed the tech-journalism equivalent of a Thomas Pynchon interview: I got someone from Twitter to answer my call. Notorious for keeping its communications department locked up tight, Twitter is not only the psychic bellwether and newswire for the media industry, but also a stingy interview-granter, especially now that it’s floundering with poor profits, executive turnover, and a toxic culture. I’ve tried to get them on the record before. No one has replied.

This time, though, a senior executive from one of Twitter’s key divisions seemed happy—eager, even—to talk with me, and for as long as I wanted. You might even say he prattled. I was a little stunned: I’d been writing about tech matters for years as a freelance journalist, and this was far more access than I was used to receiving. What was different? I was calling as a reporter—but not exactly. I was writing a story for The Atlantic—but not for the news division. Instead, I was working for a moneymaking wing of The Atlantic called Re:think, and I was writing sponsored content.

In case you haven’t heard, journalism is now in perpetual crisis, and conditions are increasingly surreal. The fate of the controversialists at Gawker rests on a delayed jury trial over a Hulk Hogan sex tape. Newspapers publish directly to Facebook, and Snapchat hires journalists away from CNN. Last year, the Pulitzer Prizes doubled as the irony awards; one winner in the local reporting category, it emerged, had left his newspaper job months earlier for a better paying gig in PR. “Is there a future in journalism and writing and the Internet?” Choire Sicha, co-founder of The Awl, wrote last January. “Haha, Heck no, not really.” Even those who have kept their jobs in journalism, he explained, can’t say what they might be doing, or where, in a few years’ time. Disruption clouds the future even as it holds it up for worship.

But for every crisis in every industry, a potential savior emerges. And in journalism, the latest candidate is sponsored content.

Also called native advertising, sponsored content borrows the look, the name recognition, and even the staff of its host publication to push brand messages on unsuspecting viewers. Forget old-fashioned banner ads, those most reviled of early Internet artifacts. This is vertically integrated, barely disclaimed content marketing, and it’s here to solve journalism’s cash flow problem, or so we’re told. “15 Reasons Your Next Vacation Needs to Be in SW Florida,” went a recent BuzzFeed headline—just another listicle crying out for eyeballs on an overcrowded homepage, except this one had a tiny yellow sidebar to announce, in a sneaky whisper, “Promoted by the Beaches of Fort Myers & Sanibel.”

Advertorials are what we expect out of BuzzFeed, the ur-source of digital doggerel and the first media company to open its own in-house studio—a sort of mini Saatchi & Saatchi—to build “original, custom content” for brands. But now legacy publishers are following BuzzFeed’s lead, heeding the call of the digital co-marketers and starting in-house sponsored content shops of their own. CNN opened one last spring, and its keepers, with nary a trace of self-awareness, dubbed it Courageous. The New York Times has T Brand Studio (clients include Dell, Shell, and Goldman Sachs), the S. I. Newhouse empire has something called 23 Stories by Condé Nast, and The Atlantic has Re:think. As the breathless barkers who sell the stuff will tell you, sponsored content has something for everyone. Brands get their exposure, publishers get their bankroll, freelancer reporters get some work on the side, and readers get advertising that goes down exceptionally easy—if they even notice they’re seeing an ad at all.

The promise is that quality promotional content will sit cheek-by-jowl with traditional journalism, aping its style and leveraging its prestige without undermining its credibility.

The problem, as I learned all too quickly when I wrote my sponsored story for The Atlantic (paid for by a prominent tech multinational), is that the line between what’s sponsored and what isn’t—between advertising and journalism—has already been rubbed away. Whether it can be redrawn will it depend less on the hand-wringing of professional idealists and more on the wavering resolve of an industry that, hearing chronic news of the apocalypse, has begun to quake and ask, Is it too late to convert?

Like Pigs to Sponsors

It was money that got me into the sponsored content racket.

As a freelance journalist, you learn, with a great deal of self-loathing, to follow the scent of cash. Every so often, a writer friend stumbles upon a startup, or a journal backed by a well-heeled foundation, and a flag goes up: there’s money here! And off we stampede, like hogs snuffling through the underbrush in search of truffles, pitching and writing until the funds dry up or an editor gets laid off.

A while ago, one of those signals came wafting over from The Atlantic’s sponsored content shop. Like many of these upstart projects, Re:think has a roster of full-time employees—designers, editors, programmers—but it also relies on freelance writers to get the job done. (Think Lena Dunham’s character on Girls, cranking out Neiman Marcus–branded stories for GQ.)

It is a strange thing to identify yourself
as a journalist and then ask someone to
comment for an ad you’re creating.

I wasn’t exactly sold on the idea of sponsored content, much less the spotty record of Re:think, which began with a gaffe and a whimper in 2013. Among its first clients was the Church of Scientology—“David Miscavige Leads Scientology to Milestone Year,” went the headline—and The Atlantic’s “creative marketing group” has been recovering from that embarrassment ever since.

But my new Atlantic contact gave me the lowdown: the magazine was looking to expand its sponsored offerings, and it would pay obscenely well—up to $4 per word in some cases, a rate that can be found these days only at the glossiest of glossy mags.

I had written a few pieces for The Atlantic’s website before, at the measly rate of $150 each. Now I was in line for up to forty times that, if only I could twist my journalistic skills to what was essentially reported copywriting.

Perhaps best of all, I wouldn’t have to use my byline.

Naturally, I said yes.

Soon I was meeting my contact, who had the title of integrated marketing manager, at a Union Square coffee shop. I was delighted—few editors have ever asked me out for coffee, which may say as much about my personal charms as it does about their harried schedules. The marketing manager, whom I’ll call Alex, was a pleasant, smart guy in his mid-twenties with an editorial background. He understood why writers like me would be doing this work and why we might feel a little sheepish about it (none of his previous contributors had used a byline, he told me). Advertisers would have some say over the final product, but their involvement would be “minimal.”

Within days I had signed on to do an article sponsored by IBM. The piece would involve “reporting,” and the goal was to achieve the look, feel, and mannerisms of a bona fide Atlantic story—except maybe with fancier graphics. The story was supposed to trumpet the merits of Watson, IBM’s heavily promoted super-computer, and its new partnership with Twitter. Specifically, I was charged with disclosing the ways in which Watson, by analyzing real-time data piped in from Twitter, would soon revolutionize the future of news.

I dove in gamely, wearing my reporter’s face. Alex took the lead, booking me phone interviews with vice presidents of IBM and Twitter, who were exceedingly accommodating. In exchange for access, though, I got instructions. I was required to submit some questions in advance of each interview, and company PR reps would sit in on the calls.

It was clear that all parties—The Atlantic, IBM, Twitter, and especially me, with my reservations about taking the assignment in the first place—wanted this exercise to resemble real journalism. The trouble was, none of the VPs I interviewed seemed to grasp the meaning of “news,” much less what all their high-level info-crunching might have to do with its future. Instead, my interviewees talked, with excitement and eloquence, about the sheer amount of data being transmitted, the raw power of IBM’s analytics software, and possible applications for big business. (If you want to know what people in Peoria think about your new basketball shoe, the Watson supercomputer is your guy.)

The closest we got to something useful was when a Twitter executive speculated that in the aftermath of a disaster, emergency services might scan tweets to see where help is needed. However aligned our purposes—in this case, promoting the Twitter and IBM brands—we were speaking two different languages. I had been tasked with writing a story that didn’t exist.

Freelancing is a miserable hustle, one that few people pursue by choice, and with an estimated one-third of American workers now swelling the ranks of the precariously employed, journalists can claim no special privilege in their anhedonia. (It’s a different kind of privilege—occasional infusions of parental generosity; a spouse with a steady job; an improbable, and briefly lucrative, run as a game-show contestant—that has allowed me to stay in this game for so long.) I considered putting the assignment. But my spouse had recently quit work to return to graduate school, and I found myself in the familiar too-afraid-to-look-at-my-account-balance zone, with no shortage of investigative stories to pitch, but no editors willing to pay me for them.

So I kept at it, digging around a bit more to see if any media companies were doing interesting work with Twitter. (Few were, it seemed, despite the data journalism fad sweeping the industry.) I asked a contact at Nieman Lab, a journalism think tank if she had any thoughts, but mostly we ended up talking about the peculiarities of sponsored content. It is indeed a strange thing to identify yourself as a journalist and then ask someone to comment on an ad you’re creating.

But I’m a writer, I thought. Whipping nothing into something is what I do! Remembering that this was an advertisement, I set aside years of techno-skepticism, channeled the fawning credulousness of a TechCrunch-style puff piece, and wrote in my most chipper, optimistic voice. I dropped in some references to Dataminr, Vocativ, and other data-driven journalism projects, but for the most part, I strung together quotations from my interviews and stuck to a fan-fiction script. Since we were talking about the “future” of news, it all seemed inherently speculative anyway. (What was the future but a set of informed guesses that would never be questioned or compared against the eventual outcome?) Within a few days, I managed to put together a readable draft. I figured I had done a reasonable job—certainly I had presented IBM and Twitter in a positive light—and maybe, just possibly, earned my ample fee.

Things hit a snag, though, when the Re:think team brought in a ringer: a longtime editor who, I was told, had overseen a well-known news magazine during its “heyday.” He would help shepherd the article, or ad, or whatever it was, to completion. While Alex had been genial, this journalistic veteran played in a different key. (Any time someone’s first message opens with the words “please don’t react to the length of this email,” you know you’re in for something real.) The article needed work, he said. But what kind of work wasn’t clear.

I began to wonder if, like me, this veteran editor was just trying to earn his fee. How much was he making, I wondered? How much does an editor who presided over an industry’s golden age receive to consult for the same industry during its hospice years? Did he hate himself too, at least a little bit, for using his decades of expertise to gin up propaganda for corporations that, were he to approach them as a journalist, would shoo him away with a curt “no comment”?

My questions became nagging anxieties and then, over the next few nights, a full-blown existential crisis. I was a month away from the release of my first book, a critical treatment of the big tech companies and the world they’ve made for us, and here I was sweating over an assignment glorifying some of those same companies. And I couldn’t even figure out how to do it properly! I had the impression, common to many anxiety sufferers, that my problems were self-made but also eminently real. This sentiment merged with a number of other ugly feelings—my disgust toward the media establishment, my distaste for advertising, my profound frustration with the older editor, my fear that I would be grinding out bullshit work like this for the rest of my days—until I thought that I just couldn’t do it. I began to wonder how I would explain to my spouse that, because I couldn’t finish this assignment, we would have to change our names and move to a foreign country. It all made a kind of sense.

In a tidier narrative, I would say that this was when I stumbled upon some epiphanic moment, either converting to the sacred cause of content marketing or storming off the assignment in a righteous airing of my principles. But the truth is much more banal. For a few days, I paced my apartment, smoking a healthy amount of weed, racking my paranoiac’s brain to figure out how I could possibly—in the words of the consulting editor—“square this circle.” The editor kept after me for a new draft of the article, and finally, on a cold Saturday, after receiving his third email of the day, I sat down, banged it out, and filed.

Media companies hail their “brand sponsors”
and “featured partners” as if they were
journalistic saviors instead of Typhoid Marys.

Several weeks went by, and I heard nothing. I wondered if I had blown my easy paycheck and they had moved on without me. I wrote to the consulting editor and asked about the article. “It’s live!” he said. He didn’t have a link, but it was online, somewhere. We’d done it, I guess.

I found the article, dressed up with a lush design meant to obscure its meaty content, under the headline (writ large) “The Race to Probe the Twittersphere” and the disclaimer (writ small) “sponsor content.” The Atlantic’s logo nodded its approval from the top of the page.

The text mostly resembled the last draft I had sent, with a few flourishes and anecdotes thrown in. It was, I thought, nothing special and barely worth the trouble. It’s the kind of work that one should do simply for the money, without looking for any higher meaning. Neurotics, or purists, need not apply.

I submitted some paperwork, and a month later, a check arrived for $2,000. Except for my book advance, it was the most I had ever received for a single piece of writing.

Firewall, Farewell

Such is the anticlimax of sponsored content: it promises to know the future of news, but in the end, all it’s got is cash (and vaguely aspirational brand messaging). Sure, native ads may be sleeker and slightly more substantial than annoying buy-now banner spots, but there’s no panacea here for journalism—no corrective to the vapid advertising of the past, no white knight for anxious legacy publications trying to get the Internet right, no savvy compromise that will cede part of a media company’s soul to keep the rest of it (namely, the news division) pristine and intact.

Far from it. Because who would bother pitching a story to The Atlantic for $100 when you could pitch yourself as a copywriter and make twenty times as much? And why would a Fortune 500 executive respond to a journalist’s questions when he could just hire The Atlantic to produce a glittering, 1,200-word advertorial instead and then buy some promoted tweets to ensure it racks up shares?

The notion that a publication could sell access to its editorial style without also changing the terms of journalistic access itself is laughable. While the Times insists that it maintains a strict firewall between its T Brand Studio and its hallowed newsroom (“The news and editorial staffs of the New York Times had no role in this post’s preparation,” goes a typical disclaimer), other publishers make overlap a featured selling point. When Condé Nast opened its sponsored content shop, it promised marketers “access to our unparalleled editorial assets.” Even the venerable Guardian traffics in two tiers of payola—“supported by” and “paid content/paid for by”—with each reflecting a different level of editorial independence, advertiser participation, and other possible outside funding. These deals have produced strange results, like a “Shell and Working Mums partner zone”—a clutch of puff pieces sponsored by a noted polluter and published in a newspaper known for its vocal fossil-fuel divestment campaign.

Vice, which is known as much for its marketing arm as for its neo-gonzo journalism, has reportedly spiked news stories for fear of offending its brand sponsors. The same goes for BuzzFeed, whose staffers pass effortlessly from its advertising division to its editorial division.

If you’re able to coax a candid reply from an editor who works for, perhaps, a conglomerate comprising a movie studio, a struggling stable of magazines, and several other conflicts of interest waiting to happen, you’re likely to hear tales of panicked phone calls from marketing managers asking if that snarky four-hundred-word blog post is really worth risking the $1 million ad buy under way a few doors down. (The inevitable answer: of course it isn’t; delete the post and live to fight another day.)

Last spring, the American Society of Magazine Editors relaxed its guidelines for native advertising, changing “Don’t Ask Editors to Write Ads” to something resembling a wink and a nod: “Editors should avoid working with and reporting on the same marketer.” So much for the firewall.

These challenges, of course, aren’t entirely new. In his book Media Freedom, Richard Barbrook writes that during France’s Third Republic, “both national and local newspapers sold ‘editorial advertising’ to interested companies or governments.” Bribes were regularly exchanged. “Because publishing was a business,” Barbrook writes, “newspaper-owners were as interested in selling their products to advertisers as to their readers.” Plus ça change.

But as journalists imitate advertisers and advertisers imitate (and hire) journalists, they are converging on a shared style and sensibility. Newsfeeds and timelines become constant streams of media—a mutating mass of useless lists, videos, GIFs, viral schlock, service journalism, catchy charts, and other modular material that travels easily on social networks—all of it shorn of context. Who paid for this article, why am I seeing it, am I supposed to be entertained or convinced to buy something? The answers to these questions are all cordoned off behind the algorithmic curtain.

Access Swapping, Mattress Hopping

I should have emerged from my sponsored content gig with the kind of relieved rededication to my craft that would overcome, say, a new driver reeling from the adrenaline surge of his first head-on near-miss. Instead, though, my tour of the sponsored content waterfront permanently altered my own vision of journalism’s future—and not at all in a good way.

Consider the example of Maxim, a former lad mag now trying to reinvent itself as something more respectable—GQ lite, perhaps, or something like the old Details. Maxim may not be anyone’s pinnacle of taste, but it’s an interesting reclamation project with several things going in its favor: brand recognition; the hiring of Kate Lanphear, a respected editor from the Times’ style magazine, as editor in chief; and a built-in base of luxury advertisers. Recently, Maxim has staffed up, given its writers travel budgets and room to go after weightier fare, and revamped its covers in a more tasteful style, photographing models from the neck up. (One issue featured Idris Elba, who is a man, making him unique in Maxim cover history.)

If the old Maxim was unabashedly brand-friendly, the new Maxim has simply doubled down on the posture, furnishing its readers with bottomless cocktails of content about gadgets, cars, clothes, and other indulgences that tend to come with free samples, sumptuous photo packages, and referral links to online stores.

Last year, according to a source at the magazine, the editorial team was flooded with attention from a PR firm hired by Casper, a “mattress startup” backed by celebrity investors and a vigorous marketing campaign. Casper sent a number of free mattresses to the Maxim staff, some of whom duly took them home. There was nothing unusual about that: the magazine even has a swag table where unclaimed gifts are up for grabs. “It is literally insane, the amount of shit they throw at editors,” says the insider. “We’re talking thousands of dollars, the amount of free stuff that a single editor can get in a year.” An eighty-inch Vizio television, for example, arrived, gratis, in the Maxim offices; it was addressed to a departed staffer and no one was quite sure what to do with it.

Because it’s a venture-capital-funded company, valuing growth above profit, Casper can afford to spend lavishly on product sample giveaways for potentially influential fans, whether they’re magazine journalists or Kylie Jenner, who once Instagrammed a photo of her Casper mattress. My Maxim source mentioned that colleagues at BuzzFeed also received free mattresses last year—and in February, BuzzFeed published a sponsored post authored by Casper, followed in March and June by glowing reports about the company, one written by a freelancer, the other by a BuzzFeed staffer. As the staffer’s article noted, BuzzFeed and Casper “share some investors.”

In the case of Maxim, Casper naturally hoped for something in return for its largesse. After the mattresses went mostly unreturned (one of the company’s selling points is that you can send back a mattress you don’t like), a PR rep began probing Maxim, asking where the coverage was. The site’s editorial director asked a gathering of staffers if any of them had accepted the free mattresses. About ten hands went up, representing nearly $10,000 in gifts. That was too much, the editorial director decided. They would have to write an article. Eventually, the site published a Q&A with one of Casper’s founders.

It probably didn’t matter to the innovators at Casper that they had doled out so much money for what was essentially one web article. The VC-backed company was looking to create brand awareness through any method possible, and as the Maxim source told me, merely getting Maxim’s journalists to use its product was itself considered a win. Now Casper had “ten people who go to bed every night working for what’s essentially a consumer propaganda machine, saying, ‘Oh, I fucking love this mattress.’”

On the face of it, this is a familiar tale: wherever free product samples appear, positive coverage is not far behind. But there’s an added twist. In addition to its giveaway initiative, Casper had a little something going on the side. After the mattress haul, three Maxim staffers were approached by the same PR firm to find out if they wanted to interview for positions at Van Winkle’s, a new website dedicated to “smarter sleep and wakefulness.” In May, Matt Berical, a Maxim editor, decided to jump ship for the new venture.[*] It is not immediately clear who sponsors VanWinkle.com, but if you poke around, you’ll land on a familiar name: “Van Winkle’s is published,” says the site’s About page, “by Casper Sleep, Inc.”

Connect to Facebook

 

Too Many Salmons

And so it is that American journalism, in this late decadent phase, has come to mistake its biggest rivals for its dearest sponsors. Now that visibility, which can be bought like so many ad impressions, is won by gaming search and social platforms, publishers are no longer just hosting or appeasing advertisers; they are also competing with them. They are employing the same sponsor-pleasing jargon, vying for the same resource—attention—in the same newsfeeds and timelines, and scouting the same talent. Last year, Starbucks tapped Rajiv Chandrasekaran, an award-winning Washington Post reporter, to lead a media company. Rhapsody, a new literary magazine produced by United Airlines, is wooing top-shelf writers. Meanwhile, much as the Guardian, Der Spiegel, and the Times rush to release articles to Facebook Instant without seeming to care that Facebook is in the process of consolidating its own publishing monopoly, media companies hail their “brand sponsors” and “featured partners” as if they were journalistic saviors instead of Typhoid Marys.

Maybe the key to all this rudderless and frenzied market obsequity resides in the simple realization that the media business is no longer a business. Instead, it’s a line item for a cable conglomerate, a confidence game played with venture capitalists, a glamor object for a newly moneyed twenty-eight-year-old tycoon, a passport to power for a foreign oligarch. Or more to the point, it’s simply content—culture’s Astroturf—around which increasingly sophisticated advertising may be targeted until no one, not even its creators, can tell the two apart.

Yet it’s hard not to think that, despite all of the industry’s failures, despite its own self-imposed deathwatch, journalism may still have a future.

The truth, after all, is that there is money in journalism. It’s just woefully misallocated, doled out according to a stars-and-scrubs model that rewards brand-name journalists no one’s ever heard of outside of New York. Meanwhile, a mass of freelancers—whose work is necessary to the functioning of many publications—cadge whatever assignments they can and don’t complain when the checks take six months to arrive. A great deal more cash is wasted on outside consultants, events, quixotic reporting trips, redesigns, and other ventures that may please advertisers or middle managers but do little for readers. Recent high-profile failures include Chris Hughes’s attempt to reinvent The New Republic—a $20 million outlay that, according to reports, was mostly spent on office space, interior decorating, consultants, and lavish parties.[**] Racket and Ratter, two well-funded journalism startups, folded after publishing little, or in the former’s case, nothing at all. ESPN, despite its boundless resources, shuttered Grantland, its beloved outlet for literary sports journalism and pop culture coverage, and bungled the launch of The Undefeated, a black-interest site, firing founding editor Jason Whitlock, whose long history of public histrionics (and no history of managing anyone) had augured poorly from the start, or so it had seemed to anyone outside of ESPN’s headquarters in Bristol, Connecticut. In their numbing waste of talent, attention, and money, these stumbles recall the demise of Portfolio and Talk, nine-figure failures that came to symbolize an earlier era of bubble thinking.

The truth, after all, is
that there is money
in journalism. It’s just
woefully misallocated.

Apart from these emblematic cases, we generally learn how corrupt this industry is only on the rare occasion when some company is forced to open its books or when a former Time magazine intern, for instance, tells you that Charles Krauthammer used to get $7,000 per column. After Tina Brown left The Daily Beast, I finally learned why, in years of writing for them, I could never get more than $250 for an article: she spent it all.

Not long ago, Felix Salmon, one such brand-name journalist working for Fusion, a media startup flush with buzz and cash but short on readership, published a meandering post that asked a simple question: “Is there any such thing as a career in digital journalism?” His answer was the same as Choire Sicha’s: no, not really. And he very well may be right. But Salmon left out an important detail: his salary is rumored to be $250,000. So my answer to his question is this: not as long as digital journalism employs people like Felix Salmon.

For that amount of money, you could hire five smart thirty-year-old writers, especially if you’re not drafting through the traditional Ivy League patronage system. You could pay a bunch of writers to actually write.

Alternatively, with the same cash outlay, you could consign them to the remunerative banality of sponsored content, which might pose the greatest threat, in the end, to young journalists. Do the math: Why pay for a journalism conference when you could attend “Food, from Farm to Table,” hosted by the National Press Foundation and funded by Monsanto? From there, it’s just a skip and a jump over to VanWinkle.com.

As of now, there’s a glut of young writers circling, anxiously wondering if they’ll ever have more to show at the end of a year than a bunch of 1099s, double Social Security tax, and a few new Twitter followers. If journalism hopes to recuperate itself as a viable career, it will have to find a way to let some of these people in and to keep those who want to stay. Otherwise, the advertisers wait, and their pocketbooks are bigger.

Chuck Reynolds
Contributor

MarketHive

Advertising Analytics 2.0

Advertising Analytics 2.0

 

  • One of our clients, a consumer electronics giant, had long gauged its advertising impact one medium at a time. As most businesses still do, it measured how its TV, print, radio, and online ads each functioned independently to drive sales. The company hadn’t grasped the notion that ads increasingly interact.

 

For instance, a TV spot can prompt a Google search that leads to a click-through on a display ad that, ultimately, ends in a sale. To tease apart how its ads work in concert across media and sales channels, our client recently adopted new, sophisticated data analytics techniques. The analyses revealed, for example, that TV ate up 85% of the budget in one new-product campaign, whereas YouTube ads—a 6% slice of the budget—were nearly twice as effective at prompting online searches that led to purchases. And search ads, at 4% of the company’s total advertising budget, generated 25% of sales. Armed with those rich findings and the latest predictive analytics, the company reallocated its ad dollars, realizing a 9% lift in sales without spending a penny more on advertising.

That sort of insight represents the holy grail in marketing—knowing precisely how all the moving parts of a campaign collectively drive sales and what happens when you adjust them. Until recently, the picture was fuzzy at best. Media-mix modeling, introduced in the early 1980s, helped marketers link scanner data with advertising and decide how to allocate marketing resources. For about 20 years, everyone gorged on this low-hanging fruit, until the advent of digital marketing in the late 1990s. With the ability to monitor every mouse click, measuring the cause-and-effect relationship between advertising and purchasing became somewhat easier. Marketers started tracking a consumer’s most recent action online—say, a click on a banner ad—and attributing a purchase behavior to it.

Combined with a handful of time-honored measurement techniques—consumer surveys, focus groups, media-mix models, and last-click attribution—such outmoded methods have lulled many marketers into complacency. They mistakenly think they have a handle on how their advertising actually affects behavior and drives revenue. But that approach is backward-looking: It largely treats advertising touch points—in-store and online display ads, TV, radio, direct mail, and so on—as if each works in isolation. Making matters worse, different teams, agencies, and media buyers operate in silos and use different methods of measurement as they compete for the same resources. This still-common practice, what we call swim-lane measurement, explains why marketers often misattribute specific outcomes to their marketing activities and why finance tends to doubt the value of marketing. (See the exhibit “Get Out of Your Swim Lanes.”) As one CFO of a Fortune 200 company told me, “When I add up the ROIs from each of our silos, the company appears twice as big as it actually is.”

Get Out of Your Swim Lanes

Connect to Facebook

Today’s consumers are exposed to an expanding, fragmented array of marketing touch points across media and sales channels. Imagine that while viewing a TV spot for a Toyota Camry, a consumer uses her mobile device to Google “sedans.” Up pops a paid search link for Camry, as well as car reviews. She clicks through to Car and Driver’s website to read some reviews, and while perusing, she notices a display ad from a local dealership but doesn’t click on it. One review contains a link to YouTube videos people have made about their Camrys. On YouTube, she also watches Toyota’s clever “Camry Reinvented” Super Bowl ad from eight months earlier. During her commute to work that week she sees a Toyota billboard she hadn’t noticed before and then receives a direct-mail piece from the company offering a time-limited deal. She visits local dealerships’ websites, including those promoted on Car and Driver and in the direct-mail piece, and at last heads to a dealer, where she test-drives the car and buys it.

Toyota’s chief marketing officer should ask two questions: How did this combination of ad exposures interact to influence this consumer? Is Toyota investing the right amounts at the right points in the customer decision journey to spark her to action?

Data Deluge

Seismic shifts in both technology and consumer behavior during the past decade have produced a granular, virtually infinite record of every action consumers take online. Add to that the oceans of data from DVRs and digital set-top boxes, retail checkout, credit card transactions, call center logs, and myriad other sources, and you find that marketers now have access to a previously unimaginable trove of information about what consumers see and do.

The opportunity is clear, but so is the challenge. As the celebrated statistician and writer Nate Silver put it, “Every day, three times per second, we produce the equivalent of the amount of data that the Library of Congress has in its entire print collection. Most of it is…irrelevant noise. So unless you have good techniques for filtering and processing the information, you’re going to get into trouble.”

In this new world, marketers who stick with traditional analytics 1.0 measurement approaches do so at their peril. Those methods, which look backward a few times a year to correlate sales with a few dozen variables, are dangerously outdated. Many of the world’s biggest multinationals are now deploying analytics 2.0, a set of capabilities that can chew through terabytes of data and hundreds of variables in real time. It allows these companies to create an ultra-high-definition picture of their marketing performance, run scenarios, and change ad strategies on the fly. Enabled by recent exponential leaps in computing power, cloud-based analytics, and cheap data storage, these predictive tools measure the interaction of advertising across media and sales channels, and they identify precisely how exogenous variables (including the broader economy, competitive offerings, and even the weather) affect ad performance. The resulting analyses, put simply, reveal what really works. With these data-driven insights, companies can often maintain their existing budgets yet achieve improvements of 10% to 30% (sometimes more) in marketing performance.

Drawing on the pioneering mathematical models developed by UCLA marketing professor and MarketShare co-founder Dominique Hanssens, our firm provides analytics 2.0 solutions to many large global companies. The models quantify cross-media and cross-channel effects of marketing, as well as direct and indirect effects of all business drivers, and the software employs cloud computing and big-data capabilities. The cases we present in this article are drawn from our client companies. Numerous other firms—such as VivaKi, Omniture, and DoubleClick—have emerged in recent years to meet the growing demand for advanced analytics.

The Move to 2.0

Powered by the integration of big data, cloud computing, and new analytical methods, analytics 2.0 provides fundamentally new insights into marketing’s effect on revenue. It involves three broad activities: attribution, the process of quantifying the contribution of each element of advertising; optimization, or “war gaming” by using predictive analytics tools to run scenarios for business planning; and allocation, the real-time redistribution of resources across marketing activities according to optimization scenarios. Although those activities are described in this article as sequential steps, they may occur simultaneously in practice; outputs from one activity feed into another iteratively so that the analytics capability continuously improves.

How One Company Attributed, Optimized, and Allocated

Attribution.

To determine how your advertising activities interact to drive purchases, start by gathering data. Many companies we’ve worked with the claim at first that they lack the required data in-house. That is almost always not the case. Companies are awash in data, albeit dispersed and, often, unintentionally hidden. Relevant data typically exist within sales, finance, customer service, distribution, and other functions outside marketing.

Knowing what to focus on—the signal rather than the noise—is a critical part of the process. To accurately model their businesses, companies must collect data across five broad categories: market conditions, competitive activities, marketing actions, consumer response, and business outcomes. (See the exhibit “Optimizing Advertising.”)

Optimizing Advertising

With detailed data that parse product sales and advertising metrics by medium and location, sophisticated analytics can reveal the impact of marketing activities across swim lanes—for example, between one medium, say television, and another, social media. We call these indirect effects “assist rates.” Recognizing an assist depends on the ability to track how consumer behavior changes in response to advertising investments and sales activities. To oversimplify a bit: An analysis could pick up a spike in consumers’ click-throughs on an online banner ad after a new TV spot goes live—and link that effect to changes in purchase patterns. This would capture the spot’s “assist” to the banner ad and provide a truer picture of the TV ad’s ROI. More subtly, analytics can reveal the assist effects of ads that consumers don’t actively engage with—showing, for example, a 12% jump in search activity for a product after deployment of a banner ad that only 0.1% of consumers click on.

This insight translates directly to any advertising that consumers encounter but may not specifically act on, including TV ads, social media placements, PR, online or outdoor displays, mobile ads, and in-store promotions. Think of the billboard ad on our Toyota buyer’s commute. The ad itself probably didn’t cause her to drive to the dealership and purchase a car. But it may have nudged her to look at the direct-mail piece when it arrived, which ultimately inspired the visit to the dealership—a complete customer journey we can now measure. It’s difficult or impossible to quantify such assist effects at an individual level, particularly when they involve off-line ads, so analytics 2.0 works by exposing those effects. It uses a sophisticated series of simultaneous-equation statistical models that reassemble various interrelated effects into a view that accurately explains the market behavior.

The hazards of simplistic swim-lane measurement were personal for one of our client’s marketing executives. Early in his career, at a high-profile e-commerce company, the marketing team presented to finance some campaign results that had been generated using traditional analytics methods:

Things quickly became awkward when finance pointed out that the business unit had generated only $110 million in revenue, $50 million short of the reported total. The discrepancy arose because, lacking good data, leaders in each swim lane claimed the same bucket of revenue.

That lesson stuck with this executive as he set out to help solve the industry problem of incorrect attribution. He eventually joined a consumer technology company that has enthusiastically embraced analytics 2.0. There he created an analytics platform to reveal how the company’s advertising and sales force activities interacted.

Examples like these necessarily distil the complexity of analytics 2.0. In actual analyses run by a large company, statistical models may account for hundreds or thousands of permutations of advertising and sales tactics, as well as exogenous variables such as geography, employment rates, pricing, a season of the year, competitive offerings, and so on. When you analyze every permutation of an ad campaign according to those variables, the complexity of the task and the necessity for cloud computing and storage become clear. You also realize that such analyses allow you, for example, to instantly see how a new TV ad affects consumers’ online search patterns—and then to change your keyword search bidding strategy to buy up relevant words as the ad is running. They might also help you identify Facebook’s actual effect on both short-term revenue and long-term brand equity.

Optimization.

Once a marketer has quantified the relative contribution of each component of its marketing activities and the influence of important exogenous factors, war gaming is the next step. It involves using predictive-analytics tools to run scenarios for business planning. Maybe you want to know what will happen to your revenue if you cut outdoor display advertising for a certain product line by 10% in San Diego—or if you shift 15% of your product-related TV ad spending to online search and display. Perhaps you need to identify the implications for your advertising if a competitor reduces prices in Tokyo or if fuel prices go up in Sydney.

Working with the vast quantities of data collected and analyzed through the attribution process, you can assign an “elasticity” to every business driver you’ve measured, from TV advertising to search ads to fuel prices and local temperatures. (Elasticity is the ratio of the percentage change in one variable to the percentage change in another.) Knowing the elasticities of your business drivers helps you predict how specific changes you make will influence particular outcomes. If your TV ads’ elasticity in relation to sales is .03, for example, doubling your TV ad budget will yield a 3% lift in sales, when all other variables remain constant. In short, analytics 2.0 modeling reveals how all driver elasticities interact to affect sales. (See the exhibit “How Ads Interact to Boost Sales.”)

How Ads Interact to Boost Sales

War gaming uses the actual elasticities of your business drivers to run hundreds or thousands of scenarios within minutes. In a typical war-gaming process, team members define marketing goals (such as a certain revenue target, share goal, or margin goal), often across multiple products and markets. Crunching the vast database of driver elasticities, optimization software generates a set of most-likely scenarios along with marketing recommendations to achieve them. The software also can test specific what-if scenarios: For instance, how will sales of our midsize pickup truck in Denver be affected if gas prices climb 5% and we launch a combined TV and online campaign promoting a $300 rebate?

At Ford, marketing communications director Matthew VanDyke leads a cross-functional team involving IT, finance, marketing, and other functions. The group is tasked with optimizing Ford’s $1 billion in advertising spending. Using advanced analytics, the team routinely runs thousands of scenarios involving hundreds of variables to gauge the probable effects of different ad strategies under a range of complex circumstances. The analyses incorporate insights from the attribution step, allowing Ford to predict from one scenario to the next how changes in advertising investment in one medium are likely to affect ad performance in others, and how exogenous factors might influence outcomes.

For example, as consumers’ interest in fuel-efficient vehicles has grown, Ford’s marketing science manager Mike Macri and his team have used war gaming to quickly assess which markets will be receptive to creative messages about fuel efficiency and have redirected advertising resources accordingly via their agency partners. Indeed, these war games are driving several current cross-media campaigns for Ford.

Predictive analytics also allow Ford to war-game changes in media planning and purchasing, both nationally and locally. For instance, it discovered that the company’s overall digital spending, though appropriate, was overemphasizing digital display and underinvesting in search. In addition, before the firm used war-game scenario planning, national and local marketing budgets were treated separately and rarely coordinated. It had been difficult for Ford to determine, for example, how much it should provide in matching funds to dealer groups, whether consumer incentive levels differ among the various cars and regions in its portfolio, and how boosting social-media spending and reducing traditional media buys would affect sales to young drivers. War gaming allowed Ford to predict how those scenarios would play out before actually making changes. The result: Shifts from the national budget to local budgets have produced tens of millions of dollars in new revenues, with no net change in the total ad budget.

Marketers are also using analytics 2.0 to run what-if scenarios for advertising new-product launches, ad buys in markets where data are limited, and the potential effects of surprise moves by competitors. For instance, as a global consumer electronics company client of ours was preparing to launch a game-changing product in an emerging market where historical sales-marketing data were scarce, it used advanced analytics to review advertising behavior by competitors and accurately predict their spending for upcoming releases. Using those predictions and optimization scenarios, the company successfully entered the market with a much clearer understanding of the strategic landscape and adjusted its plans quickly to address new competitive dynamics.

Allocation.

Gone are the days of setting a marketing plan and letting it run its course—the so-called run-and-done approach. As technology, media companies, and media buyers continue to remove friction from the process, advertising has become easier to transact, place, measure, and expand or kill. Marketers can now readily adjust or allocate advertising in different markets on a monthly, weekly, or daily basis—and, online, even from one fraction of a second to the next. Allocation involves putting the results of your attribution and war-gaming efforts into the market, measuring outcomes, validating models (that is, running in-market experiments to confirm the findings of an analysis), and making course corrections.

At one of the world’s largest software companies, senior management realized that it needed more accountability and precision in its marketing, as allocation decisions had historically not been based on scientific analysis. To understand which marketing activities were driving leads to its website, resellers, and retail partners—and thereby generating sales—the marketing leadership team used analytics 2.0 to reveal how all its marketing components interacted.

By using models that ultimately accounted for hundreds of variables, the company quantified the precise combination of ads that most effectively stimulated software trials, which activities by resellers generated the most profits, and how advertising in one product category influenced purchasing in other categories. With those insights, the firm reallocated marketing dollars for its various B2B and B2C products. Shifts between off-line and online spending, as well as investments in brand building, have boosted revenues by millions of dollars incrementally.

This company’s analytics 2.0 system has gained credibility with executive management, is now driving minute-to-minute allocation decisions, and is being rolled out globally. As a result, the firm’s advertising ROI has nearly doubled over the past three years.

Five Steps to Implementation

Analytics, once a back-of-the-house research function, is becoming entwined in daily strategy development and operations. Executives who were pioneering early digital marketing teams 10 years ago are advancing to the CMO office. Already wired for measurement, they are often amazed at the analytics immaturity of the broader advertising industry. These new CMOs are taking more responsibility for technology budgets and are creating a culture of fact-based decision making within advertising. Technology consultancy Gartner estimates that within five years, most CMOs will have a bigger technology budget than chief technology officers do.

Technology is necessary but not sufficient to move an organization to analytics 2.0. In our experience, these initiatives require five steps, which can be implemented even by small companies:

First, embrace analytics 2.0 as an organization-wide effort that must be championed by a C-level executive sponsor. Often, pockets of resistance to new analytics approaches crop up, as they challenge closely held beliefs about what works and what doesn’t. Senior-level buy-in is essential to help promote clarity of vision and alignment in the early stages.

Second, assign an analytics-minded director or manager to become the point person for the effort. It should be someone with strong analytical skills and a reputation for objectivity. This person can report to the CMO or sit on a cross-functional team between marketing and finance. As the project expands, he or she can help guide business planning and resource allocation across units.

Third, armed with a prioritized list of questions you seek to answer, conduct an inventory of data throughout the organization. Intelligence that is essential to successful analytics 2.0 efforts is often buried in many functions beyond marketing, from finance to customer service. Identify and consolidate those disparate data sets and create systems for ongoing collection. Treat the data as you would intellectual property, given its asset value.

Fourth, start small with proofs of concept involving a particular line of business, geography, or product group. Build limited-scope models that aim to achieve early wins.

Fifth, test aggressively and feed the results back into the model. For instance, if your optimization analysis suggests that shifting some ad spending from TV to online display will boost sales, try a small, local experiment and use the results to refine your calculations. In-market testing is old hat—what’s new is getting the cross-media attribution right so that your testing is more effective.

When businesses have multiple sales channels such as retail, online, value-added resellers, or multiple products and geographies, analytics 2.0 may become more complex than internal teams can handle. That’s when vendors with specific analytics and computing capabilities are needed. But any company can begin the journey and build much of the required infrastructure for analytics—and the culture of adaptive marketing—in-house. The challenge is as much organizational as computational. Either way, the writing is on the wall: Marketing is rapidly becoming a war of knowledge, insight, and asymmetric advantage gained through analytics 2.0. Companies that don’t adopt next-generation analytics will be overtaken by those that do.

Chuck Reynolds
Contributor

MarketHive

How To Improve Your Marketing Campaign Using Mobile Marketing

mobile marketing

Mobile marketing is used by companies to advertise across mobile devices such as cell phones and portable media players. Methods of mobile marketing that companies use can be something simple like a visual ad or something a bit more complex such as a QR codes. (QR stands for Quick Response).To decide which mobile marketing method is best for your company, use the following tips.

Compared with online campaigns that include social networking sites, homepages, and email lists, many companies neglect to actively promote and develop their mobile marketing platforms.

The mobile marketing aspect should be given equal emphasis and weight as other approaches. After all, users carry their phones within arm’s reach during practically all waking hours. Computers? Not so much.

To make sure every customer can get the most out of your ads, test them on a variety of devices. What looks good on one kind of phone might not look good on a different kind of device. Ask friends and your co-workers to test out your ads for you so that you can confirm they look great on every device.

Try using QR codes in your mobile marketing. QR stands for ‘quick response’, and the codes themselves are similar to bar codes. They can be scanned by most mobile devices on the market to reveal a message. QR codes are an excellent way to build interactive and engaging mobile campaigns with your targeted audience. Link the code to a special offer, discount or giveaway message to create real buzz for your brand!

The old rules of telephone marketing also apply to mobile marketing. A telephone call from a sales person during dinner time is one of the quickest ways to lose a sale and a customer. Time your marketing messages for mid-morning to early-afternoon. Do not send messages in the middle of the night or at dinner time.

Make your website easily navigable on your mobile devices. While you may know your site works for larger computers and tablets, you need to be sure it will work for mobile phones as well. Test it using your own mobile device to see how it handles, and make any necessary changes.

Be very aware of the market conditions around you when mobile marketing. If anything changes that you’re not absolutely prepared for, you can easily be left behind and lose a lot of business. The internet is constantly changing.  Always stay prepared for change.

If you have multiple people working in your business on mobile marketing, it is important for each person to understand the plans and goals behind your company, so that everyone is working on the same page. Your team should be knowledgeable enough not to put your business in a bind, should a customer ask a question.


Ida Mae Boyd
MarketHive Alpha Founder
Skype me at imboyd681
please include in the Skype Contact message “Market Hive”

 

MarketHive

What Does Advertising-Supported Revenue Model Mean?

What Does The Future of  the Ad-Supported
Revenue Model Mean to the Internet and Technology?

 

An advertising-supported revenue model is a business approach that emphasizes the sale of advertising as a major source of revenue. This structure is most prominent in traditional broadcast and print media, as well as online media. Media businesses generally earn revenue from advertising, customer subscriptions or a combination of the two.

Traditional Media

TV and radio shows, along with newspapers and magazines, generally serve to entertain or inform viewers or readers. TV and radio have traditionally been largely advertising-supported. While networks and TV stations do often earn revenue through subscriptions to satellite or cable television, much of their income is earned from advertisers trying to appeal to viewers. Similarly, magazines and newspapers charge subscription or purchase fees, but advertisers pay to place ads within these print media.

E-Commerce

The emergence of the Internet in the mid-1990s has affected the advertising-supported revenue model. Newspapers, for instance, have tried to adjust to increased demand for online content and limited growth in print publications. Thousands of media websites have been born online, which often offer free access to content for users. This attracts users and enables the publishes to sell banner ads and advertorial ad spaces. Traditional newspapers have offered free content as well, but many are trying to figure out how to combine ad revenue with subscription fees as of 2013.

Benefits

The benefit of an advertising-supported revenue model is that if you have an audience, you can almost always find companies that want to pay to reach it. This is especially true when you can provide specific details about the nature of your audience. When you operate with a 100 percent ad-supported model, you can more easily attract users with free content. Newspapers have long given away hundreds of copies to businesses and organizations in communities to drive up their circulation and readership, and subsequently, ad revenue potential.

Drawbacks

The major drawback of an entirely ad-supported revenue model is the inherent lack of diversification. Businesses generally prefer multiple revenue streams when possible. In a down economy, advertisers might back off their investments, which can more negatively affect a medium that has no subscription revenue. Plus, print publications, and even some websites, have high costs. Even a small subscription rate can help cover some of these costs. Local newspapers charging, say, 35 cents per issue can’t use that to cover all production costs, but the fees do help offset costs and allow revenue to build.

Facebook Reports Soaring Revenue, Buoyed by Mobile Ads

On Wednesday, Mr. Zuckerberg’s social-networking company, Facebook, reported another quarter of soaring revenue. The company said sales in the fourth quarter rose 52 percent from a year ago, to $5.84 billion, while profit increased to $1.56 billion, more than doubling from $701 million a year ago. For the full year, the company reported $3.69 billion in profit on $17.93 billion in revenue, an increase of 44 percent from 2014.

The numbers far surpassed Wall Street’s fourth-quarter expectations of $1.2 billion in profit on $5.37 billion in revenue. Investors welcomed the performance by pushing up Facebook’s stock more than 12 percent in after-hours trading.

The results were largely a result of Facebook’s enormous success in selling advertising on mobile devices, a business that the company was not even in just a few years ago. Mobile ads made up 80 percent of the company’s total ad business in the fourth quarter, compared with 23 percent in the same quarter of 2012.

“We have a Super Bowl on mobile in the U.S. every single day,” Sheryl Sandberg, chief operating officer of Facebook, said in an interview.

The results offer a bright spot in a tumultuous climate for many American technology stocks. Shares of Twitter, Facebook’s most visible social networking competitor in the United States, have tumbled more than 55 percent during the last year. Yelp, the local-review service, is down about 60 percent. LinkedIn, the professional social networking service, is off more than 15 percent.

Facebook is a much larger company than many of its peers, yet it is able to keep its growth rate high. The company has notched double-digit jumps in ad revenue and in the expansion of its user base. Facebook now has 1.59 billion monthly visitors, up 14 percent from a year ago. About 1.44 billion of those people visit the site on a mobile device; 1.04 billion visit Facebook every day.

That growth engine has given Facebook lots of room to play in different areas — like virtual reality, messaging and even building drones capable of delivering Internet service to far-flung places around the world — that seem to have little to do with Facebook’s core business of advertising.

Facebook is spending billions of dollars developing those projects, and Mr. Zuckerberg has repeatedly said the company has no plans to make money on them in the near term. In an earnings call with investors, David Wehner, Facebook’s chief financial officer, said the company projected that expenses would increase roughly 30 to 40 percent over the course of 2016 compared with last year.

One example of the spending is on Oculus, Facebook’s $2 billion bet on bringing virtual reality to the mainstream. The unit will begin selling its first headsets to consumers in March. Facebook has said it plans to sell the hardware, called the Rift, at a loss to help the technology catch on with a large audience.

“These are long-term bets, but we don’t think they’re particularly large bets relative to the size of Facebook,” said Ben Schachter, an Internet analyst at Macquarie Securities. “They’ve gone out of their way to say they’re not Google and going after health care, for instance.”

Other analysts said they also saw potential for profit in the hundreds of millions of people who regularly use Facebook Messenger and WhatsApp, a messaging service also owned by Facebook.

They are also bullish on the potential for Instagram, the photo-sharing service that has more than 400 million regular monthly users, to become a significant source of revenue in the future. The company does not disclose what portion of revenue Instagram accounts for in Facebook’s overall sales. Ms. Sandberg said 98 of the top 100 advertisers on Facebook also advertised on Instagram in the last quarter.

As for Mr. Zuckerberg, he spent a portion of the investor call on Wednesday talking about his new role as a father to his daughter, Max.

“With a new addition to my family, I’ve been reflecting a lot on the legacy we want to pass on to the next generation,” he said, adding that he wanted Facebook to “continue to focus on solving the fundamental challenges facing the world, and bringing the world closer together.”

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Stephen Hodgkiss
Chief Engineer at MarketHive

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