Speaking recently to a room full of advertising executives, Dan Rosensweig, Yahoo Inc.’s chief operating officer, painted a picture of a media universe with the Internet in the middle orbited by the television, the home stereo, the telephone and any number of hand-held devices.
In this picture–obviously sketched by Rosensweig to revolve around Yahoo–the 30-second television commercial, the advertising industry’s gold standard for five decades, plays only a supporting role to pitching goods and services on that paragon of high-tech personal choice, the Internet.
“When people use the Internet, they’re operating in an environment they control,” he said. “It’s really the first time in history that viewers become actors, creating a media environment all their own.”
This is not just hype.
As Yahoo, Google Inc. and others take more advertising dollars away from broadcast television, corporate marketers, ad agencies and network executives find themselves struggling to understand the changes. Along the way, they are asking some dramatic questions, such as: Is the 30-second network TV commercial too expensive or too broadly targeted, to remain relevant?
“Marketers are starting to throw a lot of stuff against the wall, and trying to determine what works and what doesn’t,” said Joe Jaffe, an advertising consultant and author of “Life After the 30-Second Spot.”
“One thing advertising agencies are finding is that they’re no longer dependent on the 30-second spot,” Jaffe said.
The challenge facing corporate advertisers and their agencies is that people have so many places to get their media. In addition to the major broadcast networks, there are a couple hundred cable TV channels, broadcast radio, satellite radio, newspapers, magazines and zillions of Web sites. Potential ad genres now or in the near future reach even further afield. Besides Internet advertising, there are ads on cellular telephones, video billboards, instant messaging devices and video games. Eventually, ads will be carried on portable music players.
“The 30-second commercial is not going away anytime soon,” says Brian McAndrews, chief executive of aQuantive Inc., one of a new generation of Internet-focused advertising agencies. “But let’s be frank, on the most basic level there’s been a shift of eyeballs.”
That’s been recognized by many companies, most notably by Procter & Gamble, the giant consumer goods company and the country’s second-largest advertiser with a roughly $2.5 billion budget. When P&G announced last year that it would cut back on its TV ad spending, it sent tremors through the industry.
As promised, the maker of Crest, Pampers and Clairol, among dozens of other brands, lowered its national broadcast spending during the first six months of 2005 to $321 million, a 20 percent drop compared to the same period in 2004, reported TNS Media Intelligence. Equally reflective of broad changes in advertising, P&G’s Internet spending soared 55 percent to $8.6 million.
Like any smart marketer, P&G is following the eyeballs.
As of September, Nielsen/NetRatings reported that the total number of high-speed Internet users in the country had climbed to 120 million, roughly 42 percent of the population, a 34 percent increase from a year ago. (The number of dial-up users totaled 54 million.)
The Internet’s most-visited site, Yahoo, claims 379 million unique users per month, and says it generates 3 billion page views each day.
All told, Internet advertising revenues for the first nine months of 2005 totaled $8.9 billion, a new record and a 22.5 percent increase over the same period a year ago, reported the Interactive Advertising Bureau and PricewaterhouseCoopers. Internet’s growth, meanwhile, comes as broadcast TV viewership has turned flat; cable TV viewership, divided among numerous channels, is growing by about 15 percent, said Nielsen Media Research.
While television is thus still king, the Internet is quickly becoming a major force and competitor for ad dollars. This makes for some trying days for network television.
In the first eight months of the year, ad spending on network TV fell 2.5 percent to $14.3 billion, according to TNS Media Intelligence. By comparison, spending on cable TV grew 13 percent to $10.4 billion.
“Advertising money is going to go to the medium that best delivers a relevant message, and in turn can demonstrate that it’s the engine behind increased revenues,” said Matt Freeman, CEO of Tribal DDB Worldwide, the interactive division arm of the advertising giant Omnicom Group.
Unlike the wide net cast by a 30-second TV spot, McAndrews says advertising tied to mouse clicks gives marketers quantifiable measurements of consumer response, and it can drive interested consumers to corporate Web sites.
“Measurability is key,” McAndrews added. “When a client has the opportunity to put an ad on AOL, MSN or Yahoo, and their coverage is nearly the same as a prime-time program, dollars are going to shift; clients are not going to keep paying more to get less.”
Talk that the 30-second commercial is dying can send TV executives like Viacom Inc.’s Leslie Moonves into a frenzy. Asked at a New York investor conference whether there is a shift under way in how corporate advertisers view prime time TV, Moonves turned from analytical to annoyed.
“There’s a game that goes on in this business,” said the former president of CBS. “Every year, the advertising agencies say the marketplace is horrible, it’s way down, and every year we’ve been up for 10 solid years.”
That may be true for CBS’ prime-time programming, but it’s not true across the broadcast networks. For most, advertising is flat or falling. In June, NBC was forced to acknowledge that its lack of a hit show translated into a $900 million decrease in advertising sales.
At this year’s annual spring ad sale, known as the “upfronts,” each of the six networks received commitments for the Fall TV season roughly $100 million to $400 million lower than a year ago. It was the first overall decline since 2001.
Moonves, though, is right to argue that the 30-second television commercial remains the only place where an advertiser can reach millions of people in one sitting. Considering how fragmented media has become, it remains extraordinary that 30 million people together viewed the season finale of Fox’s “American Idol,” or that ABC’s “Desperate Housewives” and CBS’ “CSI” regularly draw upward of 25 million viewers.
But if the 30-second TV spot is to survive, Irwin Gotlieb, CEO of GroupM, a division of the advertising giant WPP Group, says it must incorporate some of the same technologies that have led critics to predict its downfall.
This is critical, he said, if broadcast TV is to continue to capture younger viewers increasingly at ease with digital video recorders that allow for skipping over commercials.
Eventually, TV set-top boxes will be interactive, Gotlieb said, allowing networks to deliver advertisements based on the gender, income and interests of the specific viewer. As televisions become connected to the Internet, a viewer might be encouraged to visit a corporate Web site to watch a video on a new automobile or instantly buy a new pair of shoes online.
“Advertisers want to know that they’re reaching their desired audience,” he said. “If not, they’ll take their dollars elsewhere.”
This spring, Panasonic unveiled an advertising campaign linking separate TV, Internet and print campaigns. Renegade Marketing Group, a part of Dentsu, handled the Internet ads while Grey North America, another division of the WPP Group, created the TV spot.
The key to the campaign, said Robert Greenberg, Panasonic’s head of corporate brand marketing, was fusing TV and print advertisements that could drive customers to the company’s Internet site.
Though television allows an advertiser to “touch base” with as large an audience as possible, companies like Panasonic are really looking for “engagement,” Greenberg said.
“All of the major TV entities, cable and network, are rethinking the paradigm of the 30-second spot,” he said. “The Internet has made it essential to interact with your customers, and TV must learn to do that.”
