Businesses need to advertise their products and services. Media offer a vehicle that can display the ads. Either they offer mass-market reach or niche reach (local or specialized). Advertisers buy eye-balls hoping that some of them will be customers. Media, using polls, study their customers and build their sales pitch around it. They offer a limited amount of space (time or number of pages) and sell this scarcity to the advertisers.
Digitalization is fundamentally changing the game.
- Media no longer have the monopoly of offering a platform to display ads. Any website can display ads. Why promote the release of a new DVD on a newspaper site and not on the Target site?
- Scarcity does not exist anymore. There are no limits to inventory space. The limit is on the advertising side. There are just not enough ads to finance everybody. When scarcity does not exist anymore, prices (CPM) go down.
- Data collection is the name of the game. Before, it was difficult to collect information about customers. It is why we were using a lot of tools based on polls. Today, polls are in competition with real data collection. Why use polls when you can track the habits of each customer one by one, compile and analyze them? Today's data are much more precise than yesterday's polling data. Pages are talking to pages. Data are being linked. Devices are starting to talk to each other. The Internet is becoming this huge machine, as Kevin Kelly is explaining at this Ted conference in December 2007, full of information about each one of us. Question : how much data are we willing to give away? The privacy limits are probably going to be decided by the legislators.
When you are losing, step by step, your monopoly of serving ads... When the price to advertise is going down... What do you need to offer to stay the best advertising vehicle? You need to offer the best ROI. In other words, you need to move from an eye-ball logic to a transaction logic. And you'll get your dollars if you are able to prove that your vehicle helps to increase sales.
I know ! It is tough because all of a sudden you become somewhere responsible for the quality of the advertising and the quality of the product/service. It is a total paradigm shift. The total nightmare for the media and advertising business. But, Google, with CPC and CPA based ads, has already been changing the game. A few words online (ad-word campaign) can have better ROI than a very sophisticated and expensive ad on TV. Tough times.
Not only does the media need to display ads, but also they need to show to the right person. And on top of that, the right person for a business is a person that buys the product or service advertised. Bottom line is that businesses need customers. The winners will be -- are -- the ones providing the best engine to get those customers.
So, if news organizations still want to finance their operations with advertising dollars, they need to ask themselves : "Are we in the data collection business?" If the answer is no, your chance to survive, with an advertising model, in the medium-to-long term is close to zero. And if advertising revenue dries up, who is going to subsidize the information?
Example of what you can do: Geo Segmentation: Add ZIP To Your Email