10 Shifts Defining Advertising’s Entrance Into 2009

I’m not into end-of-year advertising industry predictions, so I’ll spare you. However, there are several important shifts that have crystallized in 2008 and are further unfolding as we enter 2009.

They will have growing consequence for media and advertising, and many of them are already rocking your world! And if they aren’t agreed upon as absolute fact, they are prompting serious and emotional debate. Interactive is at the root, and it’s heralding a new era that is challenging all the old assumptions of media economics.

Ten shifts defining advertising’s entrance into 2009:

1. Media are commodities. Media are commodities, but media companies often fail to acknowledge that. The fact is that media units are more likely to be sold through open-floor trading, in transparent marketplaces at fair prices. The notion of media sales organizations actively promoting and managing artificial scarcity is eroding.

2. Premium is over. Defenders of “premium” inventory are losing because, still, nobody can define what it really means. Indeed, this is not an absolute rule. The idea of premium is something that probably will hold far more gravity, but in far fewer circumstances. Publishers no longer have a universal right to premium.

3. Remnant is the new premium. “Inventory may be so-called remnant, but there’s no such thing as a remnant customer,” one high-ranking exec at a huge CPG company told me recently. Value matters, and value is result minus price. The fact is that remnant can work very well — and be valuable — if it is managed and optimized to performance. Several ad networks are poised to benefit.

4. CPMs plummet. O.K, this really is a cold, hard fact. CPMs are plummeting and they will continue to drop amidst exploding inventory and marketers’ migration to performance. Nobody knows how far this will go, but it’s reality for the foreseeable future.

5. Demand dictates. “Media supply used to lead demand, but now demand leads supply,” former AOL Media President Michael Kelly recently told me on a panel at Web 2.0. It’s a simple statement, but it describes well the role-reversal of inventory and demand. The relevance of that principle expands everyday.

6. Buyer resurgence. When demand leads supply, it means that advertisers are garnering the power to dial up or down according to their business goals — for no other reason.

7. From clicks to profit. It’s shocking how many marketers still manage advertising based on efficiency of output (i.e,. cost per click) versus goal-based business outcomes (i.e., profitability). However, it appears that advertisers are moving in the latter direction, through best-practice enlightenment and tools that allow tighter management and optimization. Marketers are placing faith in analytics.

8. Instant gratification. For better or worse, tolerance for discovery and latent ROI decline in deteriorating economies. Marketers will be more inclined to experiment, because it’s a best practice that leads to greater profitability. But they want impact that can be tested and optimized with immediate outcome.

9. Economic decisiveness. In case you haven’t noticed, we’re now officially in a recession — and have been for a year. Everything I posed above is already happening fast, but continuing economic downfall will accelerate it.

10. Optimism wins. Despite personal concerns around the economy, I believe we’re entering an important period of business cleansing and rebalancing. There’s too much clutter, waste and distrust. Now, more than ever, it’s important to focus on fundamentals, especially deeper purpose. It is a return to purpose and customer value that will separate advertising companies and models that win versus those that die.

Do you agree? There are certainly additional key shifts defining our time, so please share what you think.

The above also is my latest column in MediaPost.

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Published by Max Kalehoff

Father, sailor and marketing executive.

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