Craig Gugel is the Chief Research Officer for LogicLab. Gugelplex, his weekly blog, will provide progressive vision relative to standards and practices in areas such as 360 media and marketing, communications planning and buying, strategic consumer insights, data integration and in the areas of digital media, out-of-home and social media.
Last December in this column, we reflected on economic trends and their effects on the U.S. ad economy over the prior 12-month period. We also provided some perspective on what was in store for the current fiscal year. In late January, the U.S. Congressional Budget Office (CBO) released its updated Economic Outlook for 2011 to 2021. Magna Global also released their updated U.S. Ad Revenue Forecast for 2011. Following is an overview of what’s expected for the advertising and larger U.S. economy for the remainder of the current calendar year.
Looking ahead, the U.S. CBO appears to be a bit more conservative in its forecast for inflation-adjusted GDP long-term, projecting an annual average growth of about 3.4% (down from an earlier 4.4%) for the period 2013 to 2016. For the period 2017 to 2021 their estimate of 2.4% remains essentially unchanged. However, by the end of 2011, the CBO projects real GDP to rise by approximately 3.1% (up from an earlier 1.9%) as a result of recent corrective actions by U.S. policymakers. Nevertheless, the U.S. Consumer Price Index is expected to remain unchanged—rising by 1.3% by December 2011. Despite a forecast decline in the U.S. unemployment rate from 9.5% to 9.2%, the outlook for the budget deficit is murky at best, rising to about $1.548 trillion, up from $1.066 trillion. The good news is that, longer-term, the unemployment rate is projected to decline to 5.3% by the end of 2016.
Although various economic challenges persist and deep structural weakness continues to be evident in certain sectors of the ad economy, Magna Global forecasts that U.S. media advertising revenues will grow by 3.1% in 2011. Overall, this growth equates with a total of about $173 billion in ad revenue by the close of the current calendar year.
Print media including newspapers, magazines and directories are expected to take the biggest hit, declining by about 2.9% over the course of the year, while television, radio, digital and outdoor properties collectively grow by about 6.9% during the same period. One potential saving grace for traditional publications are the inroads being made by converting print to digital platform applications such as those offered via the iPad and other electronic readers. However, it will likely take three years or more before the revenue lost from the print paper product is offset by the gains made in the digital print product.
Not surprisingly, most of the advertising focus in the coming quarters is likely to be on digital media properties such as online video, mobile applications, digital out-of-home and cinema. Mobile advertising tends to lead the pack with a projected growth rate of over 60%, while online video advertising is forecast to be a significant second with ad revenue increases of almost 27%. Emerging digital out-of-home properties will also surpass the non-digital outdoor sector with increases of over 17% expected by December 2011. Traditional television, online digital display advertising and paid search will also do well during the course of the year with increases of 6%, 12% and 11% expected, respectively.
As we indicated in December 2010, we are not in full recovery mode just yet, despite forecasts based strictly on stock market performance. The daunting budget deficit forecasts and chronic unemployment levels are bellwethers for the health of the larger U.S. economy in general and the media advertising sector specifically. Structural changes in the labor market have displaced workers whose job skills are often a mismatch for those required for available jobs. While progress is being made to retrain workers and reduce the deficit, the process is slow and these levels are not likely to begin a more rapid descent until after the 2012 elections. Nevertheless, we expect that both the overall economy and the media advertising sector will return to more normal levels by the end of the 2012-2013 broadcast year.
In mid-2010, the Advertising Research Foundation held its annual Audience Measurement Symposium here in New York. The theme of last year’s conference was “Cross-Media ROI: Crossing All Avenues.” Several of the sessions on day one of the conference dealt with the “changing landscape and the new media mainstream.” The Director of the U.S. Census who spoke at one of the keynotes indicated that the U.S. population was getting older and becoming more ethnically diverse while forecasts from others shed light on the increasing technological sophistication of the populace. Separately, at the ARF’s annual Re:Think Conference, The Nielsen Company played to a standing-room-only audience in an opening session where they discussed how “Today’s consumers are assuming ever-greater voice and choice through social networking and the simultaneous use of multiple media and emerging devices. The result is a revolution in how content is created and distributed and how shoppers make purchase decisions.”
Fast forward to 2011. It appears that some marketers and media buyers continue to tout the under 50-crowd as the most important target group to advertise to. Those over 50 appear to be superfluous. To these individuals I say—please move beyond your outdated notions that only young people may be persuaded to buy products and services. U.S. consumers 50 years of age and older have the financial wherewithal and the desire to extract ads and promotional messages that give them the information they seek to make informed purchase decisions.
A recent Mediapost article citing engagement of the Baby Boomer generation with technology reported that: “Baby Boomers hold 77% of the U.S. wealth and they spend 15 hours per week online—two hours longer than teenagers each week.” Mediapost also cited several industry studies which generally concluded the obvious, that Boomers grew up with entertainment and technology. From the following highlights and anecdotes, it’s clear that only targeting the youth segment or the 18 to 49 cohort is an ineffective, inefficient and inaccurate way of doing business today.
From the mid-1950’s through the early-1980’s, traditional forms of media and entertainment flourished in America. U.S. television programming was in its heyday, radio had successfully made the crossover from live variety to a power-source for music, and print media, specifically magazines, became more niche-oriented accommodating the tastes of virtually every age and lifestyle. Growing up during that era, Baby Boomers were “born” with the entertainment gene so to speak. Today, those over 50 are likely to spend more online than either of the two generations that followed (i.e. Generations X and Y). Witness the success of Boomer music artists who came of age during the 60’s, 70’s and 80’s. Many of them including: the Rolling Stones, Bruce Springstein, Paul McCartney, Elton John, the Eagles, Madonna, U2 and Billy Joel are still touring, performing live concerts and, in many instances raking in record ticket sale revenues. In addition, these “oldsters” are often among the largest audiences for Wii and other consumer electronic devices that are relatively new to the market.
Technology is another favorite among the Bill Gates’ and Steve Jobs’ generation. By the way, both of these gentlemen are Baby Boomers and were instrumental in creating the “high-tech gen” we are living in today. Those 50 and over were early adopters of most electronic items including: digital cameras, computers, CDs, DVDs, VCRs, DVRs cell phones, microwaves, et.al. It’s no wonder then that the latest in consumer electronic devices are a must buy among this group. Early on, Boomers were among those who tended to embrace iPads, iPhones, iPods, GPS, websites of interest and social media. They continue to do so today in significant numbers.
A core proposition of LogicLab’s targetLab™ product is the ability to go beyond traditional demographics to make targeting more efficient and accurate. The use of client customer data as the base for developing target sets will actually propel media practitioners from the demographic days of old (i.e., age/gender breaks for those under 50) to finally include all consumers who have purchased or are likely to be prospective purchasers of a manufacturer’s brand, whatever age they may be. As they were during the 60’s, 70’s and 80’s, Baby Boomers will continue to be a leading edge generation, always reaching over the top. If they have anything to say about it, they will never be over the hill.
Psychographically-speaking, people who shop, which includes most of the U.S. population, can probably be classified on a continuum from purchase planners to impulse purchasers. A factor that helps define purchase planners is their inclination to search for and study information about a brand or service before actually making a purchase. The vast amount of data available on the Internet has made this process several times easier than it was even a decade ago. In an effort to get a handle on how the planning process impacts brand loyalty and influences purchases, AMP Agency recently released its 2011 Amplified Study: Inside the Buy. Consumers who participated in the research were between the ages 25 and 49. Also, they had to have made a purchase in the past month in one of five different product categories: baby products, consumer electronics, fashion, food & beverage or health & beauty. Following are some of the insights drawn from the study.
Customer loyalty is much more difficult to come by today than it was in the early part of the last decade. Only 3% of current survey respondents consider themselves to be loyal sole brand purchasers. Twice that number had no loyalty to any brand at all. Forty-two percent expressed loyalty to a limited set of brands, while almost half (49%) of consumers were open to trying any new product. But perhaps the more interesting statistic is that, on average, 43% of consumers always do some form of research before making a brand purchase and that 94% of those interviewed stated that the research they did positively influenced their purchase decision. As Syms, the clothing retailer, has stated for years in their television commercials, “an educated consumer is our best customer.” It’s obvious that this level of education now extends into virtually all forms of consumer consumption.
As AMP stated in the study, “…the consideration stage – the new path to purchase – is about doing research and learning more to arrive at the products a consumer will consider buying.” In order to arrive at a purchase decision, 47% of consumers have engaged with a retailer, manufacturer or brand site to conduct research prior to the purchase event. Seventy-two percent of respondents stated that general consumer online reviews are among the first destinations they seek out to learn more about a product or service. These individuals generally want to see what others have to say about a retail item before parting with their cash. Personal brand experiences weigh heavily here as does feedback from a friend at 59% and 41%, respectively.
Ironically, the wealth of information available on the Internet is not always successful in helping consumers find what they are looking for. Although approximately two-thirds (68%) of survey respondents said there was just enough information available to make an intelligent decision, close to 32% indicated just the opposite. It seems likely that insufficient data about a brand or service may have impeded sales in certain categories that could have benefited from exposing positive reviews about product offerings.
LogicLab recognizes that we live in a data intensive age. The quality of the information available regarding a product, service or a media property can impact whether a consumer or a media buyer will actually execute a purchase to acquire the same. Part of LogicLab’s mission is to enable and optimize the connection between client customer data and data on vehicle performance allowing media professionals to make the best decisions possible when implementing cross-media schedules. In essence, our beliefs correspond with Syms with slight modification—we believe that an educated client is our best customer.
Over the past several weeks, our column has focused more attention on media markets closer to home. We have examined market selectivity versus buying efficiency, the state of the American video universe and we have reviewed local rather than global media outlets. However, this week we’ll be providing an overview of how we stack up against our neighbors on planet Earth. Last fall, The Nielsen Company released a fairly comprehensive study on “How People Watch: A Global Nielsen Consumer Report.” Below are some highlights of where the U.S. and North America stand relative to the rest of the world.
Of all video platforms available to global consumers, television continues to be the “screen” that is most widely viewed. This is perhaps the reason why past 30-day indices of home television usage appear to be fairly flat on a regional basis. North America and MEAP (Middle East, Africa & Pakistan) both index at 101, while Latin America and Asia-Pacific index at 104. Europe is the only region that lags with an index of 89. The average daily time spent viewing television per person ranges from a high of five hours or more in countries such as Serbia, Macedonia, the United States and Greece to less than three hours per day in Australia, Taiwan, China, Venezuela and Thailand.
New technology is a video driving force in many countries. On a worldwide basis, 30% of Nielsen survey respondents own an HDTV set and 70% of online consumers watched some form of video programming over the Internet. As a frame of reference, global Internet penetration stands at about 27%. North America, Australia/Oceania and Europe top the penetration list at 76%, 61% and 53%, respectively. Latin America (32%) and the Middle East (29%) fall in the middle, while Asia and Africa bring up the rear at 20% and 9%, respectively. High-definition set ownership was highest in North America with an index of 157 and lowest in MEAP and Latin America, each with an index of 63. The European and Asia-Pacific regions indexed mid-range at 110 and 90, respectively. Countering this, MEAP and Latin America had the highest indices relative to online video consumption, each at 114. Terrestrial transmission infrastructure issues are likely to partially account for higher online video usage in countries making up these regions. The laggards this time were the North American and European regions, where infrastructure issues are less of a concern, with indices of 89 and 77, respectively. The Asia-Pacific region was closer to the former with an overall index of 111.
Work-based viewership to online video programming currently stands at about 57% globally. Ranking highest in this category are the Asia-Pacific countries which index at 128. Once again, Europe and North America find themselves significantly below average with indices of 67 and 60. MEAP and Latin America bring up the middle with indices of 119 and 112, respectively. North America and Europe also score below average relative to mobile video adoption rates. Mobile video usage is 45% above average in the Asia-Pacific region and 36% above average in the Middle East, Africa and Pakistan. Latin America falls in the middle at 18% above, while North America and Europe lag at 55% and 45% below, respectively.
LogicLab believes that the global marketplace often serves as a bellwether for media adoption practices on a country-specific basis. For example, programming developed in the U.K. often finds its way to America two to three years after it has achieved success on British television (e.g., Skins, a British teen drama that was re-created for MTV here in the U.S.). This is also often the case for historical methodological approaches and media platforms (European data fusion, Japanese mobile technologies, etc.) LogicLab will continue to monitor media technology and research methodology developments in global markets and apply the knowledge gleaned to our products and services here at home.
Many readers have probably encountered the phrase “Think Globally, Act Locally” at least once in their careers. This term has been attributed to Patrick Geddes based on his 1915 book “Cities in Evolution,” and later to a host of others including David Brower, founder of Friends of the Earth in 1969. Given that today we live in a global marketplace where news and information move at lightening speed across both the Internet and 24/7 cable news channels, it is interesting to note that those of us in the ad media business seem to be less preoccupied with data being global and more focused on data granularity. In light of the focus on more specific socio-geographic data, local media outlets are becoming Touchpoints of considerably greater importance in the overall media plan consideration set.
To address the growing importance of local media properties, research and forecasting company BIA/Kelsey inaugurated the weekly Local Media Index (LMI) in early 2010. The LMI is a source for market capitalization statistics derived from the valuations of publicly held local media companies. The metrics reported in the LMI provide a directional view of how the local media industry is performing relative to the overall economy.
Generally, the news is good. It appears that the local ad media economy has begun to improve. In comparing the LMI for the first business week of 2011 versus that for the same period last year, we found that companies in the local online space significantly out performed all other local media with respect to aggregate market capitalization, indexing at 418 versus 100 in 2010. Companies in this sector include: ReachLocal, Inc., LiveDeal, Inc., Marchex, Inc. and Local.com Corp. In contrast, the S&P 500 index was only 112. Local radio has also seen healthy gains over the past 12 months—indexing recently at 144. CC Media Holdings, Inc., Cumulus Media, Inc., Emmis Communications, Salem Communications and Spanish Broadcasting System among others comprise the local radio sector. The total media baseline for all sectors equals 100 based on commencement of the index back on January 4, 2010.
On the television and out-of-home fronts, local cable TV and local outdoor performed well, reporting indices of 136 and 133, respectively. Comcast, Cablevision Systems, Time Warner Cable and Charter Communications are among those included in the local cable TV average, while Clear Channel, Lamar and National Cinemedia make up the outdoor sector. In aggregate, broadcast television companies such as Belo, Gray, LIN, Sinclair and Young Broadcasting have also made notable gains, indexing at 129 for the week of January 6, 2011. Flat or lagging slightly are newspapers (95 index) and online search (99). The Daily Journal, Lee Enterprises, Sun-Times Media, Scripps, McClatchy and The New York Times Company comprise the newspaper sector, while Google, IAC/InterActive Corp. and Yahoo, among others make up the online search component.
BIA/Kelsey also reports a diversified media category which includes the likes of: CBS Corporation, Discovery Communications, McGraw-Hill, Media General, News Corp. and Time Warner. This contingent performed on par with the S&P 500, indexing at 111 in the most recent report.
Economists largely agree that the Great Recession came to close in early 2010. That notwithstanding, the recent post-recessionary period has not been particularly robust given that unemployment levels continue to run above 9%. On a positive note, it does appear that the global and U.S. ad economies are beginning to grow again, although perhaps not at the rate of the pre-recessionary period. Going forward, LogicLab will continue to monitor the BIA/Kelsey Local Media Index Report, updates from the U.S. Congressional Budget Office and ad economy reports from agencies such as Magna Global and Zenithmedia in order to keep our readers up to date on the fiscal health of the U.S. and global media markets. In other words, we will “think global and act local.”
Last week in this column we discussed the changing media environment and how the communications planning process has become ever more complex over the past decade and a half. While rules of thumb can and often should be modified to reflect the evolving media marketplace, one common tactical question that seems to arise every so often is: When planning and buying on a local market basis, how do you determine when to stop? In other words, how many of the 210 DMA markets should I buy to effectively and efficiently achieve my client’s communication goals? The answer may vary somewhat depending on the category, brand and daypart to be purchased. However, one rule that’s occasionally cited is that it’s more efficient to buy national broadcast rather than continuing to purchase additional spot markets once you have reached the top 56 DMAs or so.
One might then ask, how was this parameter established? For starters, the top 56 Designated Market Areas represent approximately 72% of the U.S. adult population. But more importantly, at around the 57th DMA (Richmond-Petersburg, VA) the cumulative spot market primetime cost-per-point ($38,154) begins to surpass that for national broadcast ($37,898), making it less efficient on a CPM basis to add on additional markets (i.e., $23.81 cume CPM for the top 57 DMAs versus $23.65 for national coverage on the television networks).
Of course, what and how many markets you buy will also depend on other factors, not the least of which will be product distribution, category and brand development indices (CDIs and BDIs). For example, when planning in the personal computer category, one can narrow down the market candidates and select only geographic areas of significant category opportunity rather than the entire list of the top 56 DMAs. These include markets with Claritas-defined CDIs in the 120-plus range including: Los Angeles (133), Chicago (172), Philadelphia (143), San Francisco (137), Phoenix (165), Seattle (158), San Diego (125), Salt Lake City (178), West Palm Beach (166), Austin (345) and Greensboro, NC (129). In the food service and beverage category, the opportunity market list becomes even smaller. CDIs for only eight DMAs index at 120-plus: San Francisco (121), Boston (137), Washington, DC (130), Orlando (136), San Diego (132), Columbus, OH (121), Las Vegas (171) and West Palm Beach (123).
Version 3.0 of LogicLab’s targetLab™ product will provide marketers with the ability to plan on a local market as well as on a national basis. Based on client customer name and address data by target set, LogicLab is currently able to match product purchasers and prospects back to the zip codes in which they live on the Merkle National Consumer Database and then aggregate those zips by DMA for reporting purposes. Given that media data have been scored and appended by names and addresses as well, local usage of various national media properties can be attributed to client customers living in specific DMAs. Local usage of local media properties will also be able to be identified once Scarborough and Nielsen NSI local data have been scored and appended to the Merkle NCD.
In summary, while CDIs and BDIs may help media professionals determine market selectivity for advertising a particular category or product, the intersection of cumulative local market costs-per-point with that for the national broadcast CPP, can help media professionals eliminate inefficiency in planning by geography. LogicLab’s targetLab™ Version 3.0 will be available in the not-too-distant future to help provide media practitioners with the tools they need to plan both locally and nationally.
Many readers will probably agree that the advertising media planning process has become ever more complex over the past 15 years. For starters, we no longer live in a simple media environment. There are literally thousands of commercial media outlets of all kinds available in the U.S. ranging from TV stations, radio stations, streaming radio channels, satellite networks, broadcast networks and cable nets, to magazines, local/community newspapers, mobile, web and digital out-of-home properties. Following on the heels of media vehicle expansion is data proliferation in a variety of forms. So much data is now available for so many media properties, that quantifying demographic and behavioral audiences, product consumption and reach & frequency becomes a daunting task as traditional syndicated research now collides with custom client research and virtual census data.
As 2011 dawns, so too does a new version of LogicLab’s targetLab™ product (i.e., Version 2.0). For those whose New Year’s resolutions include making their professional lives less complicated, targetLab’s software as a service may very well be the tool that you cannot do without. Version 2.0 will provide full media planning capabilities (including reach & frequency) in addition to the target set profiling, media ranking and relevance features that users have come to value from the Version 1.0 release.
The new targetLab™ planning template will permit media planners to select the media properties they are interested in from the vehicle target ranking screen and have them auto-populate the plan editor. Users supply their communications goals including: reach, frequency and GRPs along with proposed budget and weight/insertion levels by media type. Default ad rates (e.g., page 4-color costs for magazines, 30-second unit costs for TV, et.al.) will be provided as a starting point. Planners will be able to adjust the default rates based on client-specified negotiated media insertion costs. They will also be able to populate their plan requirements by number of units. GRPs, reach, average frequency, gross impressions and costs-per-thousand will be calculated automatically. Multiple versions of media plans will now be simpler to implement as currency datasets have been scored and appended to a single core—the Merkle National Consumer Database.
On a plan summary level, LogicLab’s targetLab™ Version 2.0 will generate a running schedule composite track so that media planners will be able to quickly identify the difference in their proposed schedule delivery versus communication goals. Below are sample calculations.
Future versions of LogicLab’s targetLab™ will incorporate a multimedia reach & frequency optimization system, a sophisticated media property filtering system and other features designed to efficiently enable the evolving 360o Communications Planning process. With over fifty-thousand media Touchpoints expected to be available in targetLab™ by the end of second quarter 2011, silo-less, zero-based media planning will finally become a reality. We look forward to providing our clients with an easier road to effective media planning during the second decade of the 21st Century.
Happy New Year!
As 2010 rapidly comes to a close, it’s time for us reflect on the past 12 months and to take a look at what the upcoming year has in store both on an economic front and with respect to media and advertising. Following are several forecasts, drawn from the U.S. Congressional Budget Office and from Interpublic Group’s Magna Global unit, which provide a preview of what to expect over the next 12 months.
Looking ahead, the U.S. Congressional Budget Office projects annual average GDP growth to be about 4.4% between 2012 and 2014 due in part to stronger business investment and residential construction. A drop to 2.4% annually is expected from 2015 to 2020 as business investment levels off. For 2011, real GDP growth is forecast to be 1.9%, with a Consumer Price Index rise of about 1.3%. By the end of 2011, the U.S. budget deficit is projected to decline to $1.066 trillion or to 7.0% of GDP. While the unemployment rate is expected to remain at about 9.5% next year, the CBO expects this to decline to about 6.5% in the 2012 to 2014 period with a further decline to 5.0% by 2020.
As the economy begins to pick up steam, Magna Global’s 2011 Advertising Forecast projects an average 5% U.S. growth rate for ad spending over the next five years. As one might expect, digital and subscription based media are likely to see compounded annual growth rates for this period that are above 10%, while more traditional media vehicles will report growth under 10% for the five-year period ending December 2016. Going into 2011, ad revenue per person in the United States is expected to be about $475.
Overall, total media adspend will rise 5.4% to $412 billion globally by the end of calendar year 2011. During the same period, total television ad revenue is expected to gain 6%, rising to $169 billion annually. Growth for broadcast TV will be somewhat lower (i.e., 4.2%) for a total of about $126 billion, while subscription TV (cable, satellite, telco, et.al) will rise to almost 12% or $44 billion by year-end.
Digital media will likely see healthy gains with total Internet adspend rising about 12.5% to $71 billion by this time next year. The 14.4% increase in paid search will account for almost half of that amount ($35 billion), with online video ($5 billion), mobile ($3 billion) and the balance of Internet ($29 billion) accounting for the rest with increases of 40%, 32% and 5.4%, respectively.
According to Magna Global, total adspend in the print category, will largely be flat over the next 12 months, rising only about 0.7% to $116 billion. Newspaper and magazine increases will be about the same (0.7% to 0.8%) with revenue estimated at approximately $80 billion and $36 billion, respectively. On the otherhand, radio will grow modestly, up about 3% to almost $30 billion by December 2011. Similar to online, the out-of-home category is poised to do well in the New Year, rising a total of 8% to over $26 billion. Cinema ($3 billion), digital ($2.6 billion), transit, billboards, bulletins and balance of out-of-home ($21 billion) are expected to rise about 9%, 20% and 6.5%, respectively.
Generally, the slumbering economy appears ready to rise in 2011. Greater demand for products and services (e.g., replacement of business equipment such as personal computers and data servers), is likely to collide with the consumer’s need to replace aging automotive vehicles and to make necessary household repairs. However, we’re not out of the woods just yet. As long as the unemployment rate remains high, consumer spending will not begin to mimic ad spending on a percentage basis coming out of 2011. Nevertheless, we do expect more of a return to normal by the beginning of the 2012-2013 broadcast year.
Happy Holidays!