TV Missionary

Arbitrage Strategy

What if Wall Street traders ran Madison Avenue? I find myself asking this question because superior data is rendering Nielsen demographic ratings less and less relevant.

TheStreet.com's financial glossary defines 'Arbitage' in part as: "the technique of simultaneously buying at a lower price in one market and selling at a higher price in another market to make a profit on the spread between the prices." http://is.gd/sSzl.

Conceptually, marketers and their agencies have been doing this through the use of any number of syndicated or proprietary qualitative data. A program "skews" female or indexes at 120 for "professional/managerial" audience. This type of analysis wouldn't cut it in a Wall Street training manual. Financial "quants", as they're known (Get it? "Quant"), work with hard, cold facts. If your chances of exploiting a market inefficiency are >50% place the bet.

The television marketplace is naturally inefficient due to supply/demand and an imperfect currency. Considering today's data capabilities the arbitrage opportunities are enormous. On Wall Street your dollar and my dollar are equal. Commercial inventory is never worth the same to all advertisers. It is sold based on entirely generic, increasingly less relevant demos.  

I think a good quant could slay 'em during the network upfront season.

(Ir) Relevant News

Sometimes, in the wake of all the dynamic change in the television and media industries, I'm really disheartened.  This morning Broadcasting & Cable published an article online about a CBS affiliated TV station abandoning its local news programing. http://www.broadcastingcable.com/article/195997-WYOU_s_Disbanded_News_Operation_May_Be_The_First_of_Many.php

The story quotes a "broadcast veteran" who said “The bottom line is: Do all markets need three or four newscasts in the same time period?" 

WTF??!! I almost don't know where to start. There are already more than "three or four" newscasts in the time period. If a viewer in Wilkes Barre is watching Fox News, it's local. The news that viewer is consuming doesn't have to occur in their town for it to be relevant. News is entertainment. 11P newscasts don't compete only against other 11P newscasts. Audience fragmentation both to other television programming and to other media is an old story. Dayparts don't matter anymore. 

Station executives who look at today's industry challenges from a (very) outdated perspective are on a one-way path to extinction. This morning's B&C story actually reads like it's from the 1980s. 

Macrotargeting: The future of advertising

Macrotargeting is the application of consumer or business-to-business targeting data to segmentable mass media. When you break this definition into component terms none them are futuristic. However the media industry is currently cascading into its golden age because two important disciplines have reached critical mass.

1. Data analytics. The information age has spawned innumerous consumer segments. Standard demographics such as age and household income seem oversimplified by advanced psychographics which, in turn, can be rendered irrelevant by behavioral targeting.

2. Mass media can be highly segmented. For demonstration purposes let's look at the internet, television and newspapers. The internet, as a segmentable mass medium, stands alone. By this summer Canoe Ventures says it will be offering cable network targeting into two national "zones". Two national zones is practically meaningless from an indexing standpoint. Heck, there are 210 spot DMAs. Canoe is exciting because it's now one step closer to household addressability.  Besides, there is scaled television segmentation today. Marketers can create over 2,000 national geographic segments via cable MSO zones. And from the ashes of the newspaper industry will likely rise a scaled aggregator of journalistic content with a customizable, digital edition capability. This model will create millions of daily editions. Millions.

The leverage of large scale content aggregation (divided by) highly targeted segmentation = Macrotargeting. To the data analysts go the spoils.

Jack Myers Says

Jack Myers noted today that for several decades advertising's share of the total marketing communications mix has declined.  From 1963 - 2007 advertising revenue growth has averaged 5%. Total marcom has averaged 17% growth. Jack Myers says advertising has become less relevant than other marketing forms. I disagree.

We simply don't know how relevant advertising is compared to other marketing communications choices. We do know there are more choices but I don't believe fragmentation of message distribution is the cause of advertising's stunted growth. The fact is that advertising agencies have sold out.

In the case of agencies I'll focus on media and describe it this way. An agency holding company promises a client the best media efficiencies based on clout. Smaller agencies promise the same in order to compete and will find ways to achieve low cost. Keep in mind that "value" doesn't count in this equation. Soon, price of media is commoditized and the agencies undercut each other on fees. (Remember the days of 15% commission?) The agency value proposition became "Hire me. I work cheap".

Clients took the bait but truth is they are smarter than we think. If agencies work cheaply, their thinking must not be very valuable. Think about that. Agency product is ideas but they've demonstrated their ideas aren't worth much. Clients hire consultants with Ivy League MBAs who, by the way, never discount their ideas. There you have it. Advertising professionals (especially on the media side) have become paper pushers. Clients take guidance from marcom-neutral consultants. Advertising loses.

Fritz Henderson's Excellent Adventure

When you are the nation's largest advertiser there is a lot expected of you. Luckily for Fritz Henderson General Motors now ranks only 3rd and expectations couldn't be any lower.

From a branding standpoint the bar is also quite low.  While "Keep America Rolling" felt good in the wake of Sept. 11, I don't think "Employee Pricing" and "0% for 60 Months" did much to increase consideration. The incentive game is one that really can't be won by anyone because it simply reduces profit for all.  At the same time the real story was how far could GM's market share drop, why do so many think GM products stink and how can Chevy Malibu become an import fighter instead of an Impala fighter?

Enter Mr. Henderson. From a marketing perspective the short- and long-term upside is enormous. GM will rightly re-brand itself. Think "New GM" or "America's Car Company". How ironic? America's Car Company, literally. (New) GM should start with it's own customers.  Whatever attributes have drawn current owners should be nurtured very carefully. The good news is that today social media can do for a brand what used to take years of word-of-mouth marketing.

Next, GM needs to address the perception gap. This will be tricky because GM's perceived value varies greatly by geography. It'll be harder in California than in Indiana and Ohio. Also, media is more expensive in the coastal markets where GM has more work to do. Segmentation will need to be leveraged.

Most importantly GM will need to commit to long-term execution of a single brand communications strategy. Tactics can be revised but GM can't be impatient. 

Outside of a Bear Stearns-like total evaporation it is almost certain that for General Motors the next 8 years will be better than the past eight. Let the excellent adventure begin.

 

Purchase Intention: Finding Media ROI

It is troublesome that television currency is still derived from generic demographics. Especially so in the digital age where behavioral targeting has taken data mining to new heights. Purchase behavior data is critical but perhaps not as important as the consumer position within the purchase cycle.

Today's economy has dramatically reduced purchase frequency, lengthening the cycle and making it more difficult to find real purchase intenders. When the average consumer was consistently buying a new car every 3.5 years, registration (purchase) data enabled us to find intenders relatively easily. Media choices could be qualified by their ability to reach those who plan to buy or lease a new car/truck in the next 6 months. Even syndicated ratings could be viewed through this prism and assumptions could be made regarding media ROI and even measured against share-of-voice/market share trend lines. 

Historical data is now much less instructive and media ROI will be maximized only by those marketers who are savvy enough to understand how and why consumer behavior is changing in their category. Advertisers must be more willing to take risks because behavior patters will not stay the same for long. The best investors optimize asset allocation and aren't afraid to change course. Investing for media ROI today requires the same commitment.

Relevant News

Television news is a cash cow. Relatively inexpensive to produce, highly qualitative audience, generally DVR proof. The challenge for networks and stations is maintaining relevancy.

Network affiliated TV stations are at highest risk. Time relevancy is killing newspapers (v. internet) and it threatens stations as well. Late news (10P or 11P) sports and weather is old by the time it airs. Local interest stories break most often during daytime hours and are more timely at 5P or 6P. National stories have already been over analyzed by the cable networks.

Cable network news is losing its edge in two important ways. The 24-hour news cycle is not really 24 hours. AC360 airs live on CNN at 10P and repeats itself at 11P, followed by a Larry King repeat at 12M. Secondarily, TV news divisions are entertainment divisions first. To say the news programs are more about the personalities than the news is a vast understatement. News bias through personal and political agendas becomes transparent very quickly (Glenn Beck).

Truth seekers can still get the facts more quickly and accurately on niche TV news programs and via other media. Network and TV station "news" is losing its relevancy but it sure is entertaining. Catch Maddow last night? 

Yahoo Widget: New toy for early adopters?

The new Samsung LED TV 7000 now comes with the Yahoo widget engine. The Yahoo widget engine is an application that allows for television viewing and web surfing on the same screen at the same time. I think the majority of television content will continue to be viewed on "monitors" just like the Samsung 7000.  In other words on HD TVs (large and small) in living rooms, bedrooms, kitchens, etc., as opposed to our laptop or desktop computers. (Broadband video content now accounts for only 2-3% of all video viewership.)

The problem with the Yahoo widget in the TV is that while web surfing and broadband video viewing on computers works for some, when you flip it around (as the widget technology allows) it gets lost in translation. The HD TV viewing experience is too dang good.  Why buy the 52"-er to look up baseball statistics..even if you're watching a baseball game?  If that's what you're into you can just as easily (maybe more so) watch the game on TV with your laptop, get this, on your lap. If you've ever observed a fantasy football player on a Sunday afternoon in October you'd know what I mean. 

Ultimately I could be wrong. We owe a lot to the early adopters who, driven by curiosity, just don't care if it makes sense to the rest of us.

It's Segmentation Stupid

All politics is local and most national advertisers could learn something by studying recent presidential television advertising campaigns.  Let's face it: are there any brands more "national" than presidential candidates?  

Campaigns know who we are, where we live and study our behavior intently.  They use digital media to leverage behavioral targeting but they are expert at geo-targeting as well.  As CNN (and others) demonstrate through state of the art graphics, swing states are won/lost in swing districts, swing zip codes, etc.  Districts and zip codes can be closely matched to sub-DMA cable systems.  If we sorted swing districs/zips by how closely the candidates are in the polls then ranked them by spending on a CPM it would all become clear. They know how local national really is.

Many national brands have an equivalent geographical skew.  They know this and act according to the television industry's legacy thinking. They buy spot television.  They may even be aware that they can further segment but here is where I think the industry lets them down. How should it be executed and what is the price/value relationship v. spot and network alternatives?  The media themselves can better solve execution. At last sighting I think the 4As was still debating a unified currency. If it takes much longer smart clients will create their own, use third parties and we won't need a single syndicated source.

Television Upfront

I'm surprised we're even talking about an upfront this year.  The economy is hanging by a thread and marketers are spending their budgets sparingly and judiciously. Maybe that's the point.  The old tried and true.  You can't go wrong placing your chips on network television. Low CPMs, and the ability to use the upfront market to lock into the networks most promising programs.  Right?  No.

In a consumer contraction it becomes even more important to reach the right consumer. There's even more waste than ever because folks are buying fewer cars, less clothes, less of everything.  I don't even think clients and their agencies are suffering from counter-intuition. Everyone knows this.  Then why act against one's interests? 

They just don't have enough reasonable options.  While the TV industry debates CPM, CPP, C3, one currency, etc., the lifeblood (clients) are dying. The perennial dance will go on.. and it's the best we can offer right now. There's ample behavioral data that can be applied geographically and through program targeting that should have already rendered A18-49 useless and obsolete.

Hopefully we can do better soon.