A Recession With A Digital Lining?

There’s been a fair bit of chatter lately about the likelihood of a full-blown recession and its subsequent effect on the advertising and media industries.

While I’m basically an optimist at heart, the pragmatist within finds it difficult not to conclude that a recession of some sort is pretty much inevitable — the only question being its length and depth. Bearing in mind this and the many other major challenges facing the country, it kind of makes you wonder who in their right mind would choose now to make a bid for the White House (tainted as the next administration will be by the fallout of this), but maybe that’s a subject for a different forum.

As far as the media industries go — and advertising in particular — one view is that a general downturn in the economy and the consequent tightening of marketing budgets will ultimately benefit email, search and direct marketing and the web. The underlying argument is that the generally higher levels of accountability (particularly in the direct response media) will make these more attractive and more readily justifiable for marketers seeking to demonstrate the efficacy of their spending to the CFO.

All very fair and logical. When times are tough, fewer risks are typically taken and the more one can quantify effect, the less one appears to be risking. However, many of these predictions also foretell doom and gloom for the TV ad market on the basis of the current lack of similar types of accountability. And it’s here that the crystal-ball gazing gets interesting — and where I potentially part company with the expressed conventional wisdom.

Ever the one to enjoy a contrary view (think of it as creative scenario planning), it seems to me that the implications of the digital switchover in a year’s time are being overlooked by many forecasters. While a recession may start to make itself felt before the switch — and while no one in his right mind expects TV to totally change overnight on Feb. 17, 2009 — we may be surprised by how quickly the industry moves to take advantage of the opportunities to leverage new revenue opportunities.

All of the MSOs — cable and satellite — have been playing in the sandbox of interactivity and the return path to a greater or lesser extent for years. More recently there has been an uplift in this kind of activity — sometimes using the DVR as a proxy, sometimes working in specific regional deployments to test ad models and interfaces. Even if these tests have been only partial, there have been many of them, and the combined learning is putting both operators and networks in a better position than might be expected by many looking at things from a distance.

Broadcasters and operators are well aware of the apparent disadvantage that TV currently suffers in accountability. I say apparently, because the jury is out on just who has the most valuable set of metrics when it comes to reach, etc. However, when it comes to the link between exposure to a message and a specific action (request for info, entry into a competition, purchase, downloading coupons etc.), as of now, the Web has it hands-down.

But with all this testing that’s been going on, with the just-announced $50 million to $70 million investment in Project Canoe by Comcast, with the telcos rolling out their offerings, and of course with the impetus behind the switchover itself that will lead in time to many more return-path enabled homes, those direct-response-based advantages currently enjoyed by Web-based media will be significantly eroded.

The 800-pound gorilla that is TV will morph into something more akin to a leopard — fleet of foot, responsive and still able to hold our attention and leave a lasting impression.

Conventional advertising won’t go away of course, but the ever-increasing desire to be able to measure and account for more may lead to a two-tier advertising system (a class system if you will), and pricing will be differentiated accordingly.

On the one hand, you will have the kind of brand-building ads we are used to — high production values, emotional triggers and all. Set-top box data along with other data sets will tell us plenty about viewing figures, but these ads will be principally focused on the impression and indirect response they generate in themselves.

On the other hand, there will be the ads you “do things” with. Anyone who has been following TV Board will have read of many examples of this sort of thing, but they all basically revolve around the viewer using the remote control to respond to a call to action within the ad to access more content, special offers, etc. These ads will provide the direct-response metrics that advertisers covet and which TV is not great at delivering other than in the infomercial space (frequently overlooked and often wrongly derided). The kind of data advertisers will harvest will be invaluable, as many of them know what each lead is worth to them in terms of conversion rates and subsequent profits (hence the automotive industry’s enthusiasm for interactive TV around the world).

Most brands will leverage elements of both kinds of advertising; some will migrate to (or stick with) just one.

For media owners and agencies, however, probably the best chance they have to minimize the effect of any recession resides in this opportunity to combine improvements in meaningful metrics with an increase in the amount and type of inventory that can be sold. Inevitably there will be expensive lessons to be learned along the way to getting this right, but as long as enough of the propositions put forward are offered in a way that appeals to sufficiently large numbers of viewers, I would like to think that the digital transition may provide the best means the TV business could hope for to be as recession-resistant as it is possible to be.

See — told you I was an optimist!

by Mike Bloxham
Mike Bloxham is director, insight and research, at the Center for Media Design at Ball State University — mb******@bs*.edu.
Courtesy of http://www.mediapost.com