What really happened that caused traditional media to shrink so much over the past decade – and why are so many still struggling to come back?
That’s the subject of this presentation, which I’ve given several times over the past few years.
Value-added is the currency of the new economy. The idea is this: You do business by giving people what they pay for, but you gain and retain customers by adding a little something extra on top.
When the Eat ‘n Park restaurant chain gives each child a free Smiley cookie after dinner, that’s value-added. When UPS and FedEx provide tracking numbers so you can follow the progress of your package, that’s value added.
But beware of providing value-added that fails to add value. That can actually harm your business.
Here’s an example from the business-to-business world: In the course of my work, I recently placed some small advertisements with a local media outlet. Ever since, I have received a weekly e-mail letting me know that my online customer profile has been established and that if I fill it out I will receive a free listing in some under-explained and over-complicated online system. They call it value-added; I call it extra work with dubious benefit for which I won’t be paid. But ignoring it leaves me with the inescapable knowledge that maybe – though not likely – I am shorting my client on some meaningful opportunity.
Here’s another, from the business-to-consumer world: The pharmacy placed four automated calls to my house the other day.
One was important; it directed my daughter to call the store about a question on a prescription she had transferred from another location. Over the next few hours she called several times and nobody ever answered the phone. In the end, she drove to the store and waited in a long line to speak to the overwhelmed pharmacist.
While she was there, I asked her to pick up another family member’s prescription that had been submitted electronically the previous day by the doctor. Not only wasn’t that prescription ready, nobody in the pharmacy could find any evidence it had ever come in. But 20 minutes after my daughter got back home, another robo-call arrived to announce the prescription was ready.
That phone call was intended to be value-added, but instead, it emphasized that the pharmacy is understaffed and has flawed processes – resulting in the inconvenience of another trip to the store.
By the time I returned home, there were yet two more calls – “courtesy” reminders that it was time to refill some maintenance medications.
I never asked for these reminders. In my household, we order refills after observing the pill bottle is close to empty. The pharmacy just assumed my family would value these calls and opted us in.
I’m sure there is a way to change the settings for these automated calls. But why should that be my job? I didn’t ask for all this value-added in the first place. Aside from the momentary pharmaceutical chaos in my household, we’re basically healthy and view our business with the drug store as a transactional necessity.
This, of course, is what the pharmacy corporation hopes to change. By offering all this value-added service, it hopes to turn our transactions into a relationship.
It’s having the opposite effect. So rather than figuring out how to change my preferences, I simply seethe in the background while the answering machine records each call.
The lesson is this: If you’re going to offer value added, make sure it really adds value. Otherwise you’re just spending money on something that actually harms your business.
A new study by the IBM Institute for Business Value concludes that the troubles faced by traditional media aren’t going to go away when the recovery picks up steam.
The study, according to a report by BtoB magazine, concludes that as more and more people move online to get their information, advertisers aren’t willing to pay as much to reach them. Why? Presumably because these prospects become easier for the advertisers to reach – a conclusion that’s hinted at by the study’s other finding: that advertisers are willing to pay some kind of premium based on context and relevance of the audience.
This is nothing new to readers of this blog. But it’s a big stick in the eye for B2B media types who still think their future will be secured simply by providing great content.
Editor & Publisher – was shuttered in December by its owner, Nielsen Business Media – has been sold and will continue to publish, according to a report by Folio: magazine. E&P is more than 100 years old, and has been the leading trade publication of the newspaper industry for most, if not all, of its history. Its demise was a blow to the gut to journalists everywhere, who for the last few years have watched the apparent meltdown of their industry’s fundamental business model.
The new owner is Duncan McIntosh Co. Inc., based in Irvine, CA – a white knight that rides in, not on a horse but on a powerboat. Duncan McIntosh is a consumer marine media company whose properties include Sea Magazine, The Log newspaper and, most notably, Boating World.
There’s no deeper meaning to this. It’s just nice to write about a company that sees the value in a storied brand, tradition and a franchise that serves the media industry. No surprise that the company isn’t one of the diversified media giants, for which earnings multiples are the only meaningful metric.
Add another surprise that’s not a surprise to the long list of publications that died in 2009: Editor & Publisher, the No. 1 title serving the newspaper industry itself, is folding at year-end.
E&P was such an institution – it’s been around since 1901, but existed under a different title since 1884 – that it’s hard to imagine a media world in which it doesn’t exist. That’s why it’s closing is so surprising.
On the other hand, The Nielson Co. had been trying to sell its media publications group, including E&P, Adweek, Brandweek, Mediaweek, Backstage, Billboard, Film Journal International and The Hollywood Reporter. Most of the group was just sold; E&P was not included in the deal.
I don’t know anything about E&P’s finances, but you don’t need an MBA to understand what that means.
Trade books that cover the media industry are chronically short on advertisers. They all live a subsistence existence. E&P’s folio has been razor thin since I first saw it in the early ’80s.
If E&P ever made good money (high margins), it never made big money. And in times of recession, small-money magazines do worst in the effort to maintain their margins.
I’m sure E&P is in the red, and that any forecast in which it could become proftable again doesn’t deliver enough earnings to justify the turnaround project.
And with the dire condition of many newspapers, E&P’s expiration is a symbolic event that was probably inevitable.
In that context, that E&P should die broke and alone isn’t a surprise at all.
I’m sorry to see it go, and feel for everyone on the staff. It was a great institution right up until the end.
In a recent article in Media Business magazine, Glenn Hansen, president and CEO of BPA (the dominant auditor of controlled circulation media) said this about his organization’s website auditing service:
“Our numbers are going to be lower than any other numbers that you get from any other source, whether Google or any commercial Web-analytics company.”
It’s impossible to tell from the article, but I infer that he was proud of this.
Several years ago – the last time I seriously looked into auditing websites – my research told me that I could expect a 50% drop in reportable traffic by doing a BPA web audit. At the time, my company was using an analytics tool that, when implemented, had already cut traffic 33% by weeding out search engine spiders.
In the end, I didn’t need the BPA audit, and I sold around the numbers delivered by our analytics system by focusing on products that gave customers what they were asking for: guaranteed impressions, delivery of clickthroughs, and various levels of leads. When we did these things, the prospects didn’t worry if we had the largest or busiest website.
It’s natural that BPA, like any auditor, would seek to extend its product line by pushing website audits. But boasting about the great difference between BPA’s traffic measurement and those of other analytic systems demonstrates that BPA is as far away as ever from understanding the grim future that it faces.
The problem BPA members are having is that an audit – whether it’s for a print product or a website – addresses advertiser questions that are now obsolete. Not all advertisers have figured this out yet, but the number that has is growing. A recession hastens the education process, as marketers are forced to coax more measurable impact out of a reduced spend.
An audit is testimony to the nature of a media outlet’s audience: it’s size, the sources from which it was recruited, and any additional information that members of the audience themselves volunteer to offer.
That’s not what advertisers want – or ever really wanted. What they really want is a measured response to their marketing activities. The audit always fell short of that goal. Whether any of us knew it, the circulation audit was just a long-term stop-gap – an alternative set of metrics until technology created a way for the desired metrics to be used.
Today that technology exists. It’s called the Internet, and advertisers (if you haven’t heard) are swarming to it.
BPA hopes to secure some kind of future for itself by pushing website audit services. But those services aren’t necessary, because advertisers can get all the measurement they want with intelligent programs that generate clickthroughs and other direct responses. And unlike audits, which provide a snapshot that is 6 to 12 months old, clickthroughs and leads arrive in real time. Within 30 days, an average marketer can tell if he or she is getting an adequate return from a specific program.
Worse, not only is BPA measuring the wrong stuff in its website audits, it’s bragging that the numbers members will be compelled to report are well below the numbers that non-members get to use.
To summarize: It provides undesirable information that people don’t need. I can’t help comparing it to Burger King putting a dollop of coal-tar on it’s bacon triple cheeseburger.
If there is ROI in this for the publisher, will somebody please help me understand?
I don’t know why anyone bothers with a BPA website audit; if I were a buyer, it would be an immediate sign to me that the website’s owners are slow to understand or respond to the customers’ changing needs. The best thing a BPA web audit could tell me is to look elsewhere.
According to AudienceDevelopment.com, audited circulation levels are declining at historic rates.
This actually points to two trends — one economics related, and one customer-induced.
The first is that publishers are cutting circulation in order to reduce cost. AD states that “183 publications decreased circ 5 percent or more compared to 142 a year ago and 101 the year previous. Conversely only 41 publications increased circ five percent or more compared to 76 the year previous.”
OK, so publishers are cutting circulation to reduce printing and postage costs. It happens in every recession, and it won’t come back much, if at all, following this recession because advertisers won’t accept rate hikes in exchange for a larger rate base. There’s simply no money in sending more publications to more people.
But the second trend is bigger and more meaningful to advertisers and publishers – and it could put the auditors out of business. That is that publishers are dropping their audits altogether because the audit process provides decreasing ROI.
AD states: “Departing titles far exceed newly audited titles. A record 69 titles were discontinued or ceased being audited and only 23 titles were added to the audited ranks. The total number of audited “consumer magazines” fell from 545 a year ago to 499.”
More and more advertisers are changing their perspective from wanting to reach a verified audience to wanting to achieve a measurable response from whoever they reach – a painfully fundamental change that I’ve previously addressed, and which most publishers – especially in the glamorous consumer world – are still trying to tiptoe around.
A hundred valid responses from an unaudited audience is worth 10x more than 10 valid responses from an audited audience.
From a publisher’s perspective, if you can deliver the responses, the audit becomes irrelevant.
Based on this, the audit bureaus ought to be frightened.
And while abandoning your audit is still a bold step in the magazine business, I assume that most publishers who do so are reinvesting in products that deliver the kind of results their customers really want.
The parties I’m most concerned about are the publishers who haven’t talked about leaving the audit behind. Because if it hasn’t occurred to you, then you clearly haven’t been listening to what your customers want. And this is one of those watershed times when the only security is to be so close to your customers that you can feel them breathe.
BPA Worldwide, a leader in providing third-party circulation audits, has announced that it’s freezing membership dues and audit rates at their July 2008 levels — good through June 2010.
If you’re in the business, you know that BPA is especially strong among magazines with controlled circulation. If you’re not in the business, you need to know that third-party circulation audits are how publications validate their readership claims to advertisers.
BPA is facing obsolescence at an astonishing rate. If BPA is a dinosaur, then the killer meteor has already hit the Earth and the toxic cloud of extinction is on its way. Holding rates will make as much difference to the organization’s future as putting on a sweater.
Am I being a little harsh here? Perhaps. But set aside the fact that for the previous 20 years of my career BPA was one of the most sluggish, obstinate, arrogant and regressive entities I had to deal with. Set aside the fact that — even though it was owned by its customers — it always, without exception, acted as though its role was to prevent me from innovating in my job. Set aside that I don’t know anyone in publishing (though I’m sure there are a few) who doesn’t take some quiet pleasure at seeing BPA suffer.
What BPA faces aside from all that is the fact that its member magazines must find ways to radically reduce distribution costs. That’s required to offset declines in two key performance indicators: advertising pages sold, and cost-per-thousand (CPM) paid for an average page of advertising.
In other words, advertisers are reaching readers less often, and every reader they reach is worth less to them today than it used to be. The only thing advertisers care about is how many people take a measurable action as a result of seeing an ad.
And what is BPA’s ultimate value to publishers? Proof of readers reached. There is nothing that it does, or wants to do, to measure the responsiveness of those readers.
In my last year running business-to-business magazines, I withdrew two of them from membership in BPA. Not because I was so frustrated with the deplorable service BPA provided; but because my advertisers no longer cared about BPA audits. They told me they wanted to know how my audience would respond to their advertising; if I could provide better response per thousand readers than my competitors, nobody cared to see the expensive and painstakingly designed BPA audit statement. (To be fair, advertisers had been telling me that with increasing urgency for about eight years; it just reached a watershed last year — probably brought on by the recession.)
Since that time, I’ve heard of about two-dozen magazines that have terminated their BPA membership — something that used to be as acceptable in media circles as, say, passing gas in an elevator. Entire divisions of media companies have simply walked away from BPA because the organization’s work has ceased to be of value.
I suppose that freezing rates is a reasonable first response. But I don’t give BPA enough credit to understand how inadequate that step will prove to be as its irrelevance grows like a toxic cloud.
Two large, orange bags just appeared on my front porch the other day. Each contained several pounds of phone books. There was the Yellow Pages, the White Pages, the Business-to-Business Yellow Pages and the Yellow Pages Supplement. Two complete sets of them.
Without taking them out of the bag, I put them on the curb for recycling.
“Hello, AT&T? It’s Alexander Graham Bell calling and he wants his business model back.”
Seriously, this is just one of at least three sets of phone directories I’ll receive this year. Two other companies produce similar volumes of phone books and surreptitiously drop them at my front door at various times during the year.
It’s been about five years since I’ve even opened a phone book.
In every industry I know, printed directories are disappearing faster than money from the cash-for-clunkers program. For the companies that produce them, printed phone books are like crack; they’re addicted to the revenue, but it’s not doing anyone any good. The effort to keep phone books alive is distracting their publishers from the need to find a more useful business. And you don’t have to be a tree-hugger to cringe at the tremendous waste in resources these unwanted products represent.
OK, I confess that having a residential phone book is a small comfort (though I still don’t remember the last time I used one). But if you’re running a business I wouldn’t spend much on Yellow Pages advertising. No matter how small or local the business might be, your resources would be better spent building an affordable little website and making sure it’s listed on every free online directory you can find.