As budgets dry up online looks up

Despite the global financial slowdown – as nice a way of saying ‘global recession’ as anybody and CNN has been able to come up with – at least one marketing medium will expand its share of the revenue pie, even as others prepare to face cutbacks and closures.

After online ad revenue grew 24% in 2006, 27% in 2007 and 32% in 2008, World Wide Worx researcher Arthur Goldstuck predicts it will grow 32% in 2009. This will see revenue jump from R319 million in 2008 to R419 million this year.

An informal survey by AdReview of members of the Online Publishers Association (OPA) reveals similar optimism. Members forecast that online’s share of advertising expenditure will double from the current 1.5% to 3% by the end of next year, 7.5% by 2013 and 13.7% by 2018. Interestingly, the survey showed that while there seems to be wholesale agreement on the decline in the percentage of ad spend going to TV, cinema, direct mail and print, increases are expected for radio and outdoor.

This trend isn’t only a local one. Globally, eMarketer.com notes that revenue for the US newspaper industry declined 16.4% in 2008 to $37.9 billion. By 2012, spending will slide to $28.4 billion. Yet most researchers predict growth in global online spend this year of between 3 and 15%. And a survey by PermissionTV of 400 senior-level decision makers in the US marketing and media industry revealed that they believed their digital marketing efforts to be least affected by budget cuts.

While growth will continue, it should be noted that forecasters have indicated that the pace of growth will slow. Most analysts have already adjusted their predictions downward to take into account the global crisis.

Henry Blodget, a senior Internet analyst at Merrill Lynch, notes on news site CNet.com that, historically, advertising spending on “new media” does not decline before, during, or after recessions, it simply grows less quickly than during normal years. “This trend was clearly visible in the growth of television advertising during the recessions of the 1950s and 1960s, and in the growth of cable advertising during the 1990s. One explanation for this effect is obvious: during the development phase of any industry, there are two main revenue growth drivers: new buyers and increases in spending by existing buyers.”

New buyers will continue to come online and online budgets in South Africa are expected to increase this year because of the Net’s accountability, lack of wastage through effective targeting and user interactivity. Also don’t forget 2010, when the World Cup will mean increased spend in sectors using the online market, including the hospitality, communication, travel and tourism and car hire industries, not to mention the actual sponsor brands. International accounting firm Grant Thornton estimate that 483 000 foreign tourists will visit the country during the World Cup. The Net will be a primary vehicle for research and communication for these visitors.

“I believe there will be multiple reasons why we’ll see an increase in online ad spend,” says Diane Charton, Managing Director of Acceleration Media, a South African online media planning company. “I think that the measurability of the medium and the ability to track and monitor ROI will become more critical for marketers as they need to ensure their money is working that much harder for them. As a medium, online provides this, and as more marketers begin to understand this and are educated about the opportunities and benefits, I believe we will see greater investment of their marketing budgets.”

Charton believes that many local marketers have been using the medium effectively and understand the metrics involved. These are the marketers and businesses who have developed models that measure ROI and show the proven value of the medium.

“We are also seeing increasing pressure coming from international elements within an organization questioning the lack of online in the marketing plans and strategies,” says Charton. “I think this will further force marketers to become educated on the medium, understand the potential value for their organizations and utilize the medium.”

Online consumers meanwhile are expected to spend more time online researching purchases, seeking out special deals, the best prices and comparing product features.

OPA members expect dramatic increases in the time spent online and time spent gaming. They expect moderate growth in time spent listening to the radio. However, they expect a decline in time spent watching television, going to the movies (in spite of a growing middle income segment), and reading of magazines or newspapers.

A number of factors are working in favour of online. Affordable broadband is finally set to take off during the course of 2009. Growth will be stimulated too by the arrival of Seacom, which will relieve congestion on the SAT-3 cable, networks laying fibre networks in major metropolitan areas and the EASSy cable connecting up in 2010. This in turn will see bandwidth limitations diminish and user engagement increase.

“The Internet usage and activity boom of 2006-2008 will flatten in 2009, but easing of broadband limitations and international interest in 2010 will compensate,” says Goldstuck’s State of Online Media in SA report. In 2008, 4.5 million South Africans were connected online (a figure expected to grow to 5.1 million in 2009 and 8.4 million by 2013), 1.05-million of them already have access to broadband.

South Africans are also flocking to social media applications like Facebook, MySpace and Twitter and this is driving increased openness to and comfort with online interactivity. It’s not all plain sailing, though – Goldstuck’s research shows an ‘Experience Curve’, which reveals that the average Internet user needs to be online for five years or more before engaging actively with high-level applications like online retail and interactive applications.

“The Experience Curve means that new users will still take five years to be integrated,” says Goldstuck, “meaning that the have-nots are more than ten years away from Internet integration – for online media, an ongoing growth path.”

By MarkLives editor Herman Manson
From Tony Koenderman’s AdReview, published with Finweek, May 1, 2009
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Mark Magazine Issue 2 – Blueprint

Read the second issue of Mark Magazine here.

Twitter to the people

Brands are venturing onto micro-blogging platform Twitter – with mixed results.

Twitter has a funny side – though you might not think so, considering the current media and PR push (into Google’s arms, if reports are correct) surrounding this very useful microblogging service.

Take this one-word piece of advice that comes as part of the lowdown on how corporates can use Twitter for marketing and PR purposes at http://howtousetwitterformarketingandpr.com. The one-word piece of advice is, of course, DON’T. Luckily, on Twitter, you get another 135 characters to discuss.

Just a quick note for the uninitiated: Twitter is a rather nifty broadcast service that allows users to send and read text-based posts of up to 140 characters. You follow people, brands or news channels, and they have the option of following you.

Great resource

Marketers should embrace Twitter in a personal capacity, because it is a great resource for gathering news, picking up on industry gossip and networking across your industry. For media workers, Twitter is a tool to interact with their audience and provides another platform from which to disseminate their content.

Brands also have a role to play on Twitter, but brand owners should not expect it to happen on their own terms. Advertising is losing its edge as consumers increasingly demand two-way communication. Twitter is about communication, and people, which also means it’s complicated: not the technology itself, but the psychology, the interaction and the sense of humour and flexibility required to work with people in a fairly anonymous space.

Yet a number of brands are successfully using Twitter to answer questions, dispel misconceptions and engage directly with users.

Vida e Caffé (@vidaecaffe) has quite a vibrant Twitter community following. It addresses all sorts of questions relevant to Vida e fans, including the lack of credit card facilities at two of the shops, and discussions about the closure of three others. Or it’s used to announce special deals. It doesn’t do corporate speak here, that’s for sure.

Ian Jepson is the guy behind the Vida e account and he says the group initially joined Twitter after noticing there were numerous comments coming from Twitter users about the company.

“Quickly snowballed”

“Our plan was to simply join, get in contact with those people, and sort them out with a free coffee or two,” says Jepson. “This quickly snowballed (as things do on Twitter) and before we knew it there were 30 – 50 messages in our inbox from Vida-fans enquiring about the giveaway and all asking the same thing, ‘Can I have some too?’”

Vida e Caffé was now officially ‘on Twitter’.

“It’s an amazing platform, especially because of how easy it is to see what the average person thinks about your brand and products,” says Jepson. “We’ve had amazing compliments, polite criticisms and many, many mentions since we’ve joined. Twitter allows customers to instantly ask a question. We’ve gotten everything from business requests to ‘what time does your _____ store open?’ and we reply to every single one of them. Our account isn’t overtly active – we make about two or three posts a day – but we are constantly watching and listening to our customers to see what they have to say next.”

Not everybody is successful

Not everybody is successful. I find the @SteersFastFood Twitter feed, um, cheesy. Is cheesy really the Steers brand image? I always thought Spur had first dibs on cheese.

@Nedbank has only one post on its feed, which reads: “Need more info on Nedbank service? Want to complain? Want to compliment? Follow us, or DM us to tell us what’s on your mind.”

What, no news on how to ride out the financial crisis? No “Good news, folks, interest rates are dropping”? “Make things happen”, indeed…

Media brands are doing better, especially @MyNews24, which could be a case study in the successful use of Twitter by a media organisation. It has a human being posting breaking news updates, replying to reader queries and following followers. It has recognised that Twitter is about more than simply dumping headlines.

Key point

A key point to remember when venturing onto Twitter is that it is about people, not brands. Actually, that is also true about business, a point many managers have conveniently forgotten, but which is once again being brought home by the big noise that 140 characters can make.

First published on Bizcommunity.com

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King James gets Unconventional

From MarkLives.com22 October 2008

When Alistair King and James Barty founded their very well regarded agency King James ten years ago they agreed it was going to be an unconventional venture. They set out building King James sideways, expanding into digital, eventing and public relations amongst others, and now the group is pushing into book and magazine publishing.

The group recently partnered with Shaun Johnson to launch a new book publishing house and has bought a substantial stake in pop magazine One Small Seed. It’s not a gimmick either. Alistair, who sat down with MarkLives to discuss the new ventures, insists that the business aims to transform how books, especially fiction is published in SA. He is currently investigating alternative printing methods, packaging formats, pricing models and distributions channels. In March next year the group will publish the South African PEN, a collection of short stories, followed by a collection of South African literature. He hints that the collection of short stories might reveal the talent he requires for building a stable of new South African writers.

One Small Seed is the first magazine King James has bought into. Alistair believes the pop culture title will allow his agency a window into the world of pop culture. Forget about focus groups – he is plugging his agency into the cutting edge. Further investments will be announced in the months ahead to build critical mass and to ensure the new ventures contribute to the bottom line of the King James Group.

Taking an ad agency into media ownership might sound odd to many executives but Alistair explains it wasalistair king from king james born from a personal and professional need not to come stuck in a single medium and from frustration with the general state of the ad industry. Tired of being forced to grow at breakneck speed and to win the maximum number of awards possible or risk being described as losing its edge the group decided not to pitch for any accounts in 2007. Instead the focus shifted to building relationships with employees and customers. “I wanted to build a more sustainable business and a happier agency,” says Alistair.

The results has been dramatic, with the agency becoming one of the most awarded in the country this year (for achievement with real client accounts, he notes). Business is growing at a speed that suits the group, and so is its people.

Alistair’s belief in multiple careers is driving the business to look beyond the obvious niches an ad agency could expand into. His privately owned record label has produced eight records to date. The expanded King James is exciting enough to keep him in the business, provides King James with access to a diverse group of people, and adds color to the agency. Time will tell how media ownership impacts on the group. In the meantime life at King James just got a lot more interesting – not to mention creative.