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How Great Media Companies Fail on the Internet

2009 October 22

There is no media company today that is unaware about the great opportunities in Digital.  Many of these are fantastic companies, with strong management, fabulous brands and some of the world’s most talented people.  Yet when it comes to Digital Media, industry paragons flounder.  Why is that?

There seems to be a pattern to Digital Failure.  Senior management makes interactive media a “top” priority.  Success is to be achieved at “all costs.”  Consultants are hired, offsite meetings held, strategies proposed and vetted.  All of this is done with the diligence, thought and big budgets with which they became so successful in the first place.

Unfortunately, it is this same approach that has served them so well in the past that dooms successful media companies to Digital Failure.  The problem is that best practices in Offline Media can become worst practices Online.

Common “Old Media” Mistakes

Failure to scale the business to the opportunity: Part of the reason that many media companies fail is precisely because they make the stakes too high.  They go too fast and spend too much.  They often find that they spend much more than the immature, heavily segmented Digital market can earn a return on.  (See Disruptive Innovation)

To make matters worse, their competitors are doing the same so competition for scarce resources becomes fierce, raising investment further and making it harder to earn a profit.

Top-Down Management: Usually, top management wants to be involved personally with Digital initiatives because They are so important.  Not only does this contribute to the scale problem, it squelches innovation on the ground.  When the boss is around, people’s jobs are on the line – risk taking inevitably loses out to conformity and “yes men.”

Overemphasis on Process: Successful media companies have developed a lot of processes and best practices, and that is a big reason that they have succeeded.  Naturally, they want to do the same in the all-important digital arena.

Unfortunately, nobody understands interactive media that well and new standards are being created every day.  Process needs to be created and that takes a lot of trial and error.  Digital Media is about becoming, not being.  You have to be constantly learning.

Strategic Rigidity: After big plans are made and big budgets are set, nobody wants to admit it when things start going the wrong way.  There is too much riding on the initiative.

It’s an unfortunate situation, because traditional media companies have a lot to offer the digital world (See 5 Things “New Media” Can Learn from “Old Media“)  However, in order to succeed, legacy companies will have to do some paradigm shifting.

How to break the cycle

In order to break the cycle, traditional media companies need to do more of the same, but totally different.  By more of the same, I mean that these companies already know how to inform, engage and excite audiences.  Top media companies have already built brands that people not only love, but help them define themselves.

When a woman says see reads Cosmo or watches MTV, she is defining herself quite differently from one who reads Good Housekeeping and watches Lifetime.

However, as consumer media behavior changes, media incuments will need to learn how to do the old things in new ways and that will entail breaking some old taboos.

Common infrastructure, but decentralized strategy:  There are enormous economies of scale with technology.  Building a basic infrastructure is crucial for keeping costs down and maximizing functionality.  If basic technology is sound, universal, secure and stable, innovation on the component level is fast, cheap and scalable across the entire network. (See 5 Crucial Aspects of a Digital Transition.)

On the other hand, once you have basic technology standards in place, separate brands should be given a small budget and the freedom to set product strategy.  Let individual teams drive innovation and you will gain speed as well as improve quality and performance. (See Building Effective Web Product Strategy)

Tear down that Chinese Wall! : Because so little is known about digital media and there are so few standards in place, people will need to learn to work together much more closely than most media companies are used to.  Old silos need to be taken down and companies need to be reintegrated.  Best practices need to be shared across brands and functions.

Regular best practice meetings should be held without the presence of top management.  In my experience, monthly meetings seem to be the right frequency, but every company needs to find what works for them.  I never attended a best practice meeting (which is probably one reason they were so popular!)

Use Digital as a Multiplier: Rather than chase the latest fad, which will probably have peaked by the time you hear about it, incumbents should first try to use Digital to multiply the effects of what they already do well. There is no “Great Digital Threat,” only missed digital opportunity.

Make Frienemies: If you put up walls between you and the competition, they will leak anyway.  Audiences and advertising money are much more fluid in the Digital World.  Legacy media owners will need to learn how to cooperate and compete simultaneously (especially with banner sales, which are transactional rather than strategic).

Change Accounting Templates: New media is a different business with different metrics.  It requires greater integration, which means that costs revenues will be mixed together from different brands to a much greater extent than most companies are used to.

As business practices evolve, accounting practices will have to evolve too.  CFO’s won’t like it, but they will have to learn to adapt accounting practices to the business practices and not the other way around.

Muddle Through: Digital Media is exciting because it keeps surprising us.  Strategic planning goes hand in hand with implementation, which means that you don’t really plan ahead much at all. You’ll be most likely be wrong anyway, so there isn’t much point.

In Digital Media, you have to be willing to make mistakes.  By the time you finish a standard planning process, the facts on the ground will have changed.  You can only plan for what you can predict.  Mistakes won’t kill you as long as you make them cheaply and correct them quickly.

It is probably this last point that is the hardest for seasoned managers to swallow.  But once you get past that, what you’re left with is probably the most exciting opportunity in the history of business!

– Greg

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18 Responses leave one →
  1. Ibrahim Moss permalink
    October 23, 2009

    Hi Greg:

    Per usual, you well understand the dynamics of both the marketplaces and businesses in this digital sphere.

    I wonder whether it would serve everyone’s interest by just taking a step back and closely observe what is really going on. From my perspective, I believe there is a general decline in consumer interests in mass media, irrespective of whether that media happens to be TV, print media, or the Internet. I also believe during these times there are few opportunities, if any, for traditional to do well. Last, I believe many media strategist have and will continue to make mistakes in the digital space because they correlate consumers’ migration from mass media with the rise in popularity of the digital phenomena. These movements may be more coincidental than direct. I will explain the latter below.

    Lets begin with an analogy. Lets say that a woman has decided to end her relationship with her long-term significant other. Chief among her reasons may be that she became disinterested, the boyfriend became self-absorbed, etc. She ends the relationship, and thereafter starts enjoying her own company. During this time she starts dating someone else. Lets say that the new boyfriend is resourceful, affords her an opportunity to express her opinions, and facilitates her meeting others with whom she shares similar interests. If there is something we can bet on, it is that there is very little, if any chance that the woman is going back to the old boyfriend — even if the old boyfriend changes.

    Although to the casual observer there is a close relationship between the woman’s old break-up and new relationship, there may be no correlation between the two. She changed, and thereafter directed her attention to other interests. Extending the logic, even if the new boyfriend never came into the picture, the woman would still have left her old boyfriend and without any intention of returning to him.

    The dating analogy, in some ways, is simplistic, but it may be a fairly accurate explanation of consumer behavior during these times. Consumers increasingly disapprove of media. They became disinterested, irrespective of content, the manner in which media changes to accommodate new consumer taste, or other factors.

    There are perhaps new approaches to reaching audiences, but these strategies will require media to not only re-calibrate their strategies, but also change their fundamental characters.

    There are some concepts out there that have not been well explored that offer hope. These concepts reexamine things like relevance, aesthetics, and value. Each is a paradigm shift. Unfortunately, explaining them requires more energy than I have this evening.

    [Reply]

    Greg Reply:

    Ibrahim,

    Thank you for your thoughts. However, I have a different view. While conventional media is less effective than it used to be, none of the new media is as effective as the old media used to be.

    I think a better analogy would be with evolution. While it might seem that there is a tendency for organisms to become more complex, Stephen Jay Gould argued very strongly that the only real trend is toward greater diversity.

    It seems to be the same thing in the media world. We are seeing more of everything. More magazines, more TV stations, even more billboards.

    – Greg

    [Reply]

  2. Ibrahim Moss permalink
    October 23, 2009

    Greg:

    I would love to say that you are correct, but we will have to see how all this plays out.

    I would agree that consumers favor more diversity, but I would not equate choices with increased consumption.

    There used to be a time when I remember there were but four or five options on OTA TV. Then cable came along, and exponentially increased viewer options. Such, however, did not lead to a corresponding increase in TV viewership (well at least not after the initial uptick),

    Consumers can simply grow tired of media in all their forms.

    I believe the iPod, growth in social media, and other things digital are currently the new flavors of those things consumers enjoy tasting. Who knows whether these things will become passe’. In all likelihood, these fads will be replaced by something else.

    The bigger players in the media space started seeing declines in audience interests in the 90’s. It was a worrisome issue back then. Now much of all media is on its last leg. And the big money advertising support from the auto and Rx industries is not returning to resurrect TV and print. The same declines will likely happen in the digital space — even if advertising and media strategies begin to concentrate on growing opportunities in digital.

    Remember the sony walkman? It was not new technologies that killed it; people just lost interest in the medium. People sometimes just leave media because they loose interests. There is nothing that can stop it. Kind of like the woman who decides to leave her boyfriend. Once she goes away, there is not a chance she will return.

    There are some options that can save media. However, these options require an entirely new approach to looking at consumers.

    [Reply]

    Greg Reply:

    Ibrahim,

    Sorry to disagree, but specific TV audiences started falling long before the 90’s. The Ed Sullivan show routinely reached over 50% of the country in the US. Ratings over 20 were fairly common in the 70’s. Now, anything over 5 is great.

    However, Nielson reports that Overall TV viewership is at an all time high (including digital and internet TV). Although the unusually high audiences over the past year are probably due to mostly to the poor economy, there really doesn’t seem to be any decline of overall activity. Although, with more clutter, the ads aren’t as effective.

    The one big decline seems to be with newspapers, which are genuinely in trouble. The decline in newspaper advertising fully accounts for the rise in all digital media. Everything else has been fairly stable since 1996, not only in the US, but across the world.

    I realize that this is an unconventional view, but the numbers bear me out. While the new media are very exciting and can be expected to grow, the overall impact is much less than you would expect.

    – Greg

    [Reply]

  3. Stuart Nicholson permalink
    October 23, 2009

    Dear Ibrahim,

    I, like Greg, beg to differ with your opinion about consumers being tired of “old media”.There is no evidence for this view at all.

    In many ways there is not a migration at all, simply an appetite for more which is manifesting itself in people spreading themsleves more thinly across platforms which are multiplying.

    In many ways, so-called “old media” like TV is cloning itself in different forms which have now become technologically feasible, such as the move to online video in long-form content.

    One could point to the decline in newspapers, and here i think there is the only place that your opinion may hold some water.However, this is not due to existing consumers actually deserting the medium, it is more that young people are not taking the reading habit up as there is more pressure on their media consumption time.The older readers are again just spreading their newspaper reading between the paper and the online version.I do not view online reading of the same title as evidence of someone getting tired of old media, simply another way to consume the same thing.

    [Reply]

    Greg Reply:

    Stuart,

    You bring up a great point. A distinction needs to be made between “old media” in new appliances vs. new media. There are some distinctly new media (i.e. social media) and there is also old behavior using new technology.

    Another thing that I think has changed is that people are using the new technology to consume more media over all. Video snacking and tweeting while waiting in a grocery line or at the airport isn’t replacing other media activity, it’s adding to it.

    – Greg

    [Reply]

  4. Ibrahim Moss permalink
    October 23, 2009

    Hello again my friend.

    I think we could likely come to some more clarity about this topic by having some off-line the under-the-hood discussions. In many ways, we are on the same page, but for the sake of a public response, I am going to say that I respectfully disagree with you. I think you well know the TV and other media better than me, and also well understand my position is not something I made up, but a general sentiment within the industry. I am also certain that you have had a discussion or two with the leading advertising agencies in the US about these decline. You well know that there are discussions that remain private, and not the subject of things that show up in the NY Times or in Neisen ratings.

    Rather than to prove myself correct, however, I will just say that the data does not bear up your position. Certainly categories of overall TV viewership are down, and this trend has presented the advertising industry some challenges since the 1990’s. Your reference to the Ed Sullivan Show — although a wonderful got ya — is not significant in this discussion because TV viewership increased appreciably during those times. By the same token, it would be a bit disingenuous for me to reference the American Idol, in support of your position. I will stop at this juncture.

    Ok, here is where the discussion becomes nuanced. When one says, “media” he is not defining it in the manner as one defines, “social media”. They are not the same nor would one expect them to be equated. From an advertiser’s perspective, these are diametrically opposing ideas. This you already know. With this in mind, it is something of a logical flaw to argue that one’s migration from traditional media to social media balances out measured viewership and readership levels. Nope. Not even close.

    Lets apply this practically. Let say, for example, I stop watching 60 minutes on Sundays. In place of such, I Twitter with a friend who now lives in Eastern Europe. What happens to measured media? It declines. The answer is simple. If, however, you argue that Twitter is a medium, in and of itself, I — along with a zillion dollar advertising industry — would vehemently disagree. (Well, I would kindly disagree; the ad executive would simply cancel an option on his Bentley order). The ad executive would rightly state that Twittering is a past-time that is not too different than a meeting at the watering hole. A Tweet is a virtual chat. Nothing else.

    The case of calling a shadow a living entity. Not so long ago, there was a thing called Blackberry. It was a wonderful digital communications device that kept employees enslaved to “the man”. Well, people lived on it, long before social media came along. Not one of those soul equated one’s time with the Blackberry as being a social media tool. Certainly the advertisers did not, nor any respectable thinker. But, along came the iPod, and suddenly were started blurring distinctions between media and communications. And herein is where the problem lies.

    There is a decline in media revenues, viewership and readership. TiVo, Hulu, or DVR it all you want, the numbers still do not ad up. Consumers are simply migrating away.

    BtW, I like this virtual argument.

    [Reply]

    Greg Reply:

    Ibrahim,

    That’s exactly my point. The numbers aren’t declining. They’re increasing (at least they were before the economic crisis). There’s more of everything (except for newspapers).

    – Greg

    [Reply]

  5. Ibrahim Moss permalink
    October 23, 2009

    Greg:

    I just sent you an article on Hulu and media strategies. Optimedia’s CEO wrote it.

    There are a lot of things going on. From a bottom-line perspective, I would be worried. These CPM’s are across media, and they way they will be valued in the digital space, is enough to cause one to loose lots of sleep at night. Rethinking is in order, and that rethinking, minimally, begins at CPM re-valuations. These re-values go to content on handhelds, computer screens, billboards, etc. I think you know what those underlying assumptions are, and would likely say they need to be re-evaluated. Of course, Hulu, would argue that their CPM’s need to be significantly increased. I would disagree for the moment. (But, God willing, when I go from the sidelines and re-enter the fray, my argument will be the exact opposite ;-) )

    I think it is fair to say, irrespective of our different perspectives on the overall viewers numbers, that something different has to take place in order to bring some stability to the ad industry.

    [Reply]

    Greg Reply:

    Ibrahim,

    Thanks for the article. It’s interesting to see another view from Stuart’s counterpart “across the pond.” For everybody else, the article can be found here:

    http://adage.com/mediaworks/article?article_id=139869

    Interestingly, one of the big problems with online video is lack of measurement. The data has not kept pace with the audience and advertisers know a lot more about their TV audiences than they do about their online audiences. This, in part, probably accounts for some of the ad rate problems.

    Another point is the sub text of the article. The author is clearly more comfortable with offline media and wants to define online media in offline terms. For instance, he is uncomfortable with viewers switching out of “prime time.” It will take a while for advertisers to understand how to buy all the new media coming online.

    Change is happening too fast. Marketers a loathe to spend top dollar on media they don’t fully understand. As they work more with the new media (the author mentioned that his agency has moved some budgets there) their confidence will increase and ad rates will go up.

    Again, thanks for the article.

    – Greg

    [Reply]

  6. Darrkman permalink
    October 27, 2009

    I find the back and forth in here highly interesting. As someone who has been planning and buying media for the last 12 yrs I have to admit I’ve seen a lot of the sentiment in here before. There is this belief that “traditional media” is dead and that no one is watching TV anymore. Yet that same people aren’t noticing that big screen TV sales are going through the roof, time spent with “traditional” television is growing.

    I have to agree with Greg, while new media is doing well and traditional media is re-evaluating itself that doesn’t mean that traditional media is dying. Magazines aren’t dead because they create a true relationship with the reader. I will use Essence Magazine as an example. How many publications you know can have over 400,000 people travel to New Orleans for their Essence Festival IN A RECESSION. That’s a captive audience of people that have demonstrated that they have disposable income and are engaged with the Essence brand. I have yet to see a digital platform create that type of response.

    [Reply]

    Greg Reply:

    Darrkman,

    Good points. Thanks.

    I just came across another interesting statistic. Although nearly 30% of households in the US have DVR’s, less than 5% of viewing is actually time shifted. It seems that consumers do prefer programming and use new technology to augment, not replace, their regular viewing.

    – Greg

    [Reply]

  7. Ibrahim Moss permalink
    October 27, 2009

    Ok Boys:

    The numbers are in on ad spending.

    WPP’s TNS on media (mainly TV & print) spending for 3rd and 4th quarters 2008, and first quarter 2009 show the following:

    -2.0% – 3rd quarter 2008
    -9.2% – 4th quarter 2008
    -14.2% – 1st quarter 2009

    A second leading advertiser estimates a -8.7% decline for all of 2009. These declines actually move in a direction that is opposite other economic trends, and well underperform when compare against GNP’s during similar timeframes.

    While these numbers may seem little to most, they are like a tsunami within the industry. Since measured times, even during depressions, we have not seen these kinds of decline.

    (I do understand that there is a difference between ad spending and audiences numbers, but for the sake of simplicity, lets just say that there are correlations between the two. I also understand that some declines are attributable to print.)

    These declines are serious and can’t simply be glossed over.

    So, say what you want about TV, the industry is literally, not buying it. ;-)

    Greg, remember a few years ago, when data showed significant declines in TV viewers who were men between 18 and 35 years? Well, those numbers may have been a bit off, but the trends were in place. Really, these things lead to serious talks CPM’s, the amount of monies were going into time slots, and moderated increases in the overall ad industry. And, that was during the good ol’ days.

    Sure, there are many things that the industry can do to remake itself. I believe it, media, has to become more relevant than entertaining. It also has to begin to comport itself to the lifestyles of teenagers and disaffected viewers. Last, media has just got to get to a place where it is ok with knowing the good days are gone. Those legacy players’ egos can say what that want to say, but at the end of the party, they will have to admit that celebrations are indeed a thing of the past.

    Related, things like Hulu, will likely experience a plateau that would otherwise be out of line with its own long term projections. I think some of the attraction for things like Hulu is due in part to it being new kind of digital viewing experience. But at the end of the day, Hulu-esque business models are still premised on the increasingly challenged idea that people enjoy watching TV. Knowing how consumers act, one should expect them to enjoy the newest of Hulu for a while, and thereafter move-on to something newer. That newer could be non-TV content.

    I just think we, as a society, are just moving on from a phenomena that literally gripped consumers’ attention from the time of our parent’s generation, to that of the earlier part of our now teenagers’ lives. The whole iPod phenomena changed everything. People bought big screens, but increasingly downloaded content onto their small format portable media players. And that content increasingly became something of a non-commercial species.

    These mass media just do not resonate in value much anymore. We should, even if the numbers were in the other direction, just accept this reality.

    Don’t argue with me, I’m just the messenger’s assistant.

    [Reply]

    Greg Reply:

    Ibrahim,

    Thanks for the data, but I don’t think a few quarters at the height of the economic crisis constitutes a trend.

    As for TV viewing, people seem to be using new appliances to augment their viewing activity, not replace it.

    As for revenues, Digital Media only makes up for 10% of total spending.

    None of this should be seen as a knock on Digital Media. Even 5% of viewing has a real impact and 10% of ad revenues is bigger than Radio or Outdoor. The poin ti s that while the impact of Digital Media is significant and real, it needs to be seen in the perspective of an enormous amount of activity.

    – Greg

    [Reply]

  8. Ibrahim Moss permalink
    October 27, 2009

    Greg:

    In so many ways, I think we are saying the same thing. In other ways, we are saying the opposite.

    I will go back to my earlier analog about the woman who decides to leave her guy. She will go on to other things. She may decide on interests in software programming or photography, or dating other men. In addition, on occasions, she may agree to have lunch with the ex. Some may argue that the woman did not really leave the guy because they occasionally see one another. This perspective is wrong.

    As this analogy applies to media, one can rightly say that consumers are leaving popular media and going on to other things. These things include social media. Some may argue that social media is like TV, and therefore not a shift in consumer behavior, nor TV consumption. Some may also point out that many still watch TV. Both positions are incorrect.

    The first reason that the position is incorrect is because it confuses traditional media with social media. The two are fundamentally different. We can just start with some fundamental differences. The first is that social media is essentially user generated content. While this definition is not wholly true, it is in fact mostly true. Social media is a kind of letter writing exchange of old. It just more polished, sophisticated, and technically laden.

    Second, social media’s production is not dependent upon nor support by investors or advertisers, respectively. People simply post content.

    Last, the term social media is really an idiom. Social media is not really a medium in the classical sense of our understanding of, the media. It is not TV, radio, print, or outdoor. It is kinda an organic social interaction that uses the web as its watering hole.

    I could go on, but I think we understand the fundamental differences.

    What is important is that we do not equate the two diametrically opposed mediums.

    The money that media buyers are dumping into social media is kind of R & D stuff. Ad strategist are just testing the waters; they want to see where this whole social medium is headed. They also do not want to be on the outs of something new. So the Hulu’s of the world become attractive, but in a kind of artificially induced manner (that does not comport with smart accounting practices). Examples of “questionable acquisitions” like MySpace and Twitter serve as examples of high risk moves by media companies to control the digital space. Smart money says these, “acquisitions” are simply ego driven power buys.

    That said, you are certainly correct to point to the digital space from a trending perspective. Yes, there is a consumer migration there. That migration is, in part, reflective of consumers’ increased appetite for more diverse content. No argument there. I would, however, argue that the trends suggest consumers’ are just more diverse in the manner that they used their time.

    Speaking of time, I have go to get some work done. EST is quickly running into the evening. ;-)

    [Reply]

    Greg Reply:

    Ibrahim,

    Yes, I do think we’re starting to split hairs. I think we both agree that things are changing and Digital Media is having a real impact, it’s more the pace of change that is at issue.

    Have a good night.

    – Greg

    [Reply]

  9. December 1, 2009

    Fascinating.

    [Reply]

    Greg Reply:

    Peter,

    I’m glad you liked it better than some of my other posts:-)

    – Greg

    [Reply]

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