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5 Uncomfortable Facts for the Digital Maniacs

2010 September 22
by Greg Satell

Everything is changing!  Nobody watches TV or uses e-mail, advertisers are racing to shift money into digital media as fast as possible and those fat cats who are too lazy to change will all soon be toast.

These things all must be true, because you can read them on the Internet. You can either accept it or…check the facts.

The amount of crap that’s regularly spewed around never fails to amaze me.  Self-styled gurus often relish in mouthing off without the first clue about what they’re talking about.  Here are some facts, like ‘em or not!

Digital Makes Up a Small Share of Total Media Spend

“Well, as we all know, everybody is moving their ad budgets to digital…”

Okay, now this drives me into a murderous rage (although, I must admit, I’m pretty excitable anyway).  It’s not that I have anything against digital media, It’s just that I’ve been much more involved with it than most of the idiots who blather on about this stuff.

I’ve run fairly large digital media operations in the past and can assure you that convincing an advertiser to move their budget into digital is anything but easy (although they love to see cool digital presentations).

Moreover, my current employer, ZenithOptimedia, tracks media spending trends in every ad market in the world, so I have a pretty good idea of what the data looks like.

The truth is this:  Digital media accounts for a bit less than 15% of media both globally and in most developed countries.  There are some exceptions, like UK and Scandinavia, where the share is in the mid-20’s, but fifteen years into the “digital revolution” the impact of digital media is amazingly small, especially as it encompasses everything from search to video.

Traditional Media is (very) Profitable

Enough fooling around though.  In the end, we’re talking about business so eventually the discussion becomes an financial one.  Here’s where the digital maniacs become quite serious, explain that it is a matter of “simple economics” and then trot out some wacky historical theory that supports their point.

I’m always a bit puzzled by this because I have always been under the distinct impression that finance has something to do with numbers.  As the latest numbers show, traditional media companies are very profitable, even while Facebook struggles to earn money with 500 million users.

But wait – didn’t we hear that they were losing billions?  Yes, that is true, but those weren’t operating losses, they were write-offs.   The money that big media companies lost was on investments they made, to a large extent in digital media.  In effect, media companies lose money when they are dumb enough to listen to hyped up digital gurus.

TV Viewership is Increasing

Why do I constantly hear that nobody watches TV anymore?  Because some yo-yo, who just got out of school moved to the big city and is spending all his time chasing girls?  I watch TV.  I LOVE TV!  It raised me, comforts me and talks to me when no one else will (besides, my wife would kill me if I chased girls and I’m too old to catch them anyhow).

Does that make me strange?  It seems not.  TV viewership is not only at all time highs, it has actually been increasing in both the US and UK.  This is not a matter for dispute, it’s an empirical fact.

Why are people watching TV?  The crappy economy surely has something to do with it, but it’s more than that.  People aren’t only watching more TV, they’re also buying more of them, especially expensive ones.  I guess that’s because there is an ever increasing amount of stuff to watch and bigger and better TV’s to watch it on.

Consumers Don’t Avoid Ads

Another thing I keep hearing is how the ad industry is living on borrowed time because people hate ads.  Apparently, they’re fed up and aren’t going to take it anymore! I get visions of a massive crowd running for their life and screaming at the top of their lungs in their quest to avoid a brand impression.

In actuality, there is no evidence at all that people make much of an effort to avoid ads.  It’s not that hard.  If you want to avoid banners, just download something like this.  It’s free!  Don’t like TV ads, get a TiVo.  However, despite a penetration rate in the mid-30’s, timeshifted viewing on DVR’s makes up only about 6% of the total and even then a lot of people watch the ads.

Ads are like bloggers.  Some are annoying, most are average, but some are really good.  For instance, I love this one:

And this one is great too!

In any case, I don’t do much to avoid them and neither does anybody else.

Advertising Works

Probably the most puzzling view espoused is that advertising is some kind of con game perpetrated on gullible companies.  In the common narrative, hard nosed, profit driven companies all of the sudden become witless fools and drop half a trillion dollars a year on advertising for no good reason.

This should be ridiculous on its face, but there are some who go even further.  They say that we are entering a new era of “pull marketing” where companies won’t promote themselves anymore, but just wait for consumers to decide that they want their products.

Make no mistake, marketers invest in advertising because its profitable to do so and they continue to do it at a consistent ratio to GDP that doesn’t show any signs of faltering.  Most of the money they invest is put toward broadcasting messages because that’s how they let people know what they’re selling.

You Have a Right to Your Opinion – Not Your Own Facts

Usually by this point, digital gurus will assert that they have a right to their opinion.  Yet, they never state their views as opinions, but as facts.  Furthermore, they position themselves as experts who possess knowledge that others don’t and seek to profit off of that expertise.  That’s immoral.

As David Brooks recently pointed out, we all often fall into the trap of not examining the weakness in our thinking enough.  That’s natural, facts are often stubborn, inconvenient things.  However, if you seek to advise others and cast aspersions, you have a moral obligation to make a reasonable effort to check your facts.  If you do not, you are a charlatan – plain and simple.

That is my view and I can assure you it is the correct one.

– Greg

24 Responses
  1. September 22, 2010

    Another superb post! Especially love the part about the new era of “pull marketing,” I’ve seen plenty of that and it boggles my mind. I’ll add that for most small business, promotion isn’t just a matter of profit, it’s a matter of survival. Fail to promote and you won’t exist for very long.

    I’m finding that having some digital in the mix is getting to be more and more important, especially (at least for my clients) having some decent SEM. But it is not the be all end all that so many of these self appointed social media guru’s seem to think it is.

    Greg Reply:

    John,

    Good points! None of this is to say that digital isn’t important. It is and will continue to become more important. However, any marketer that ignores effective traditional channels won’t last very long.

    Thanks for a great comment.

    – Greg

  2. September 22, 2010

    Thank you for writing this! I’ve been arguing the same for years now… I keep seeing new fads that enter full of sound and fury – and then something strange happens. Nothing changes. Well, some changes around the fringe, and then of course as the technology becomes more mainstream the change occurs slowly, over time. Assuming clients will continue to sell products and services, there is a reason to believe that they will keep running ads – and doing those things that move products.

    From the perspective of ad agencies:
    http://sandersconsulting.com/newbusinesshawk/bid/50294/Must-be-Leap-Year-Demise-of-the-Ad-Industry-Being-Reported

    Thanks!

    Bob

    Greg Reply:

    True, true…

    Thanks Bob!

    – Greg

  3. September 22, 2010

    Greg –

    Terrific post – I think you’re spot on about the sheer volume of hyperbole around all things digital. The challenge here – as ever – is to separate the hype from reality.

    Digital channels, and the advertising/marketing opportunities they provide, aren’t disrupting traditional media on a one-to-one basis. They are, however, changing the baseline conversation around pricing/value and audience/engagement.

    Where traditional media ownership groups and agencies have fallen short is in underestimating the impact of this shift. PPC advertising isn’t for every marketer and certainly isn’t for every campaign – but it does provide a useful baseline for evaluating all media spending.

    If I can buy eyeballs through Google, Facebook or Cheezburger for $X a click – why I should I pay 10x that for traditional media?

    Traditional media might be worth a 10x premium – it might even be worth more than that – but in this post-digital landscape, publishers have to justify that value, not simply assume it’s theirs by birthright.

    Broadcast, magazines and yes, even the much maligned newspaper all still have important roles to play in helping advertisers connect to their markets – but not the same role, and certainly not at the same rate, that they’ve had for decades.

    Greg Reply:

    Bill,

    Thanks for your comment. We’re actually getting much better at cross media comparisons. My agency, ZenithOptimedia, has a very successful TouchPoints program that evaluates all consumer contact points (i.e. things like word of mouth and POS as well as traditional and digital media). We’ve done almost 500 studies worldwide and the results generally correlate 80% or better with actual market share.

    TV tends to come out on top (other media can do very well depending on the country and category). Interestingly, digital media tend to do very well with potential influence, but the brands themselves don’t do so hot. So while there is great potential there, we’re not that great at implementing digital yet.

    I think that’s where the digital maniacs go wrong. The seem to assume that just because there is potential there it’s automatically actualized. It isn’t and probably won’t be for a long while.

    – Greg

  4. Your best friend permalink
    September 22, 2010

    Great post, my firend.

    We ran a Rating of salaries last issue. All the idustries grew last year except for IT. IT fell, as the Hay Group that conducted the research stated, because it was overheated in Ukraine before. So we see some of the correction going on in that industry.

    Greg Reply:

    Interesting info Vitaly. If IT in Ukraine is going slow then the global outsourcing market must be slowing down.

    – Greg

  5. Sharat Mishra permalink
    September 29, 2010

    Great Greg,

    I think too much of hype and hoopla on this divide-traditional versus digital-.

    We have been hearing that digital is going to be the next big thing but alas.Any smart marketer today will know that it all depends on the p’s as also the campaign objective at that point in time and he/she will allocate share of spends accordingly.

    I myself am a great supporter of digital but also believe that this divide can never be bridged and will be in the best interest of the world community that we look at facts not on the words of the self styled gurus.

    Best

    Sharat

    Greg Reply:

    Sharat,

    I right there with you. As I like to say, what’s important is the house you want to build, not the tools you use. Objective should always come first.

    – Greg

  6. October 20, 2010

    Greg,

    A fantastic article. I work in digital media marketing, but I’m equally irritated by the social media/digital charlatans out there peddling their questionably statistically significant “numbers.”

    I wanted to share an insightful point from the head of McKinsey’s media practice in Europe… she made the astute observation that no media has ever completely replaced another media, ever in history. Think about it… we still attend the theater and read our news from paper.

    The point being, it wouldn’t be naïve of anyone to predict the internet’s takeover of media budgets, ever!

    Thanks,
    Chris

    Greg Reply:

    Great point, Chris.

    Thanks.

    – Greg

  7. October 21, 2010

    The dumbest thing I heard recently was “Scale and media buying power are no longer a decisive advantage.”

    Greg Reply:

    Yeah, that is pretty dumb:-)

    Nice to see you again Roger.

    – Greg

  8. May 28, 2011

    Yesssss! We’ve learned how to be critical and selective about books, newspapers, radio television – I think we need to learn the same skills about the information we glean off of and about digital media. No small task considering the sheer volume and the difficulty normal folk have in choosing trustworthy digital sources. A little bit of humility on the part of self-declared experts would help, too. And language: “I think…”, “I feel…”, “In my opinion…” cost nothing and actually enhance credibility.

    -Lisa

    Greg Reply:

    Good points! (In my opinion:-)

    Have a great weekend!

    – Greg

  9. Robert H. permalink
    June 13, 2011

    You say “You Have a Right to Your Opinion – Not Your Own Facts” but then in your post “What do you think?” you say “The truth is, we get almost all of our facts second hand.” 🙂

    As you point out in the second post “facts” are somewhat slippery. You can make the point that some “facts” are less slippery than others, and I’d agree but the rub is “which ones?”. You seem to work in a Media company (haven’t been here before) so I’d assume you’d know more about the biases that crop up in Surveys or other ways to measure such things. But you also have access to financial information which is harder (but not impossible) to spin either deliberately or from inherent bias.

    But all of this is secondary to your main point(s) of this post which I’d agree with, mostly. I believe the deluded people you quote come from self-reinforcing circles who believe in their own set of “facts”. But their “facts” may just be slow in arriving. I remember similar kinds of delusions from people who sold the first Internet bubble(s) such as “cutting-out-the-middlemen” or whatever buzzword they used. Amazon seems to be *finally* doing a fairly good job at that for a wide range of goods and services. After long enough that I thought it never was coming. Perhaps other similar over-hyped shifts from that time are coming as well though maybe in an attenuated, mutated, or delayed fashion.

    As Chris said above “…no media has ever completely replaced another media, ever in history” and while I could offer Vaudeville as a counter example, even if it were true what *has* changed is the relative weight of different media through history. And given the relative youth of digital media it may be too soon for lasting judgements. Though not for budget planning cycles.

    Greg Reply:

    Robert,

    Great point about facts! I think the difference lies in making a contentious effort to seek the truth rather than just making stuff up for rhetorical purposes or just selecting some facts while ignoring others. In both posts, the general point was that truth doesn’t come so easily so you need to keep an open mind.

    As to your second point, I agree, but refer back to Keynes’ comment that “In the long term, we’re all dead.” If you use that standard, you can make a case for anything. I’m sure one day we’ll all be traveling in spaceships, but that doesn’t mean our decisions today should reflect that.

    What the “digital maniacs” argue is that other forms of media are dying now, and there’s very little evidence that’s true. Moreover, that kind of thinking can do real damage (i.e. Pepsi’s “Refresh” disaster).

    Thanks a lot for (all three) of your great comments. Much appreciated!

    – Greg

    Robert H. Reply:

    I agree with what you’re saying, as I hope I came across in the first post. The only (minor) point of disagreement is I believe that in most (not all) cases those idiots *do* think they have “sought the truth” in arriving at their positions. They’re wrong but in interesting ways that hint at the mechanisms of rationality failure in people. The people that listen to them seem to be similarly disabled in fundamental ways that speak to the lack of validation in what they say. Your example of Pepsi’s Refresh disaster I would argue is evidence for my point in that no one would cause that level of disaster voluntarily.

    Well, at least not if they aren’t secretly working for Coke. 🙂

    “Thanks a lot for (all three) of your great comments.”

    You are most welcome. Came over here from Hacker News after a couple of your posts showed up recently. A nice surprise.

    Robert

    Greg Reply:

    Thanks, Robert. I agree with you in theory, but in practice when you talk to the “digital maniacs” (who usually have absolutely zero development experience), they shout down anybody who pointed out alternative evidence.

    This has abetted somewhat as the furor has died down, traditional media business have come back strong and new stuff like social has been integrated into more conventional tactics.

    Thanks again for you comments!

    – Greg

  10. Robert H. permalink
    June 13, 2011

    Well, “shouting down” doesn’t say much for their arguments or the fact that it worked for the environment. 🙂

    You may be interested in:

    http://edge.org/conversation/social_psychological_narrative

    But in the mid 1970’s, Tim Wilson and Dick Nisbett opened the basement door
    with their landmark paper entitled “Telling More Than We Can Know,” in which
    they reported a series of experiments showing that people are often unaware
    of the true causes of their own actions, and that when they are asked to
    explain those actions, they simply make stuff up. People don’t realize they
    are making stuff up, of course; they truly believe the stories they are
    telling about why they did what they did. But as the experiments showed,
    people are telling more than they can know. The basement door was opened by
    experimental evidence, and the unconscious took up permanent residence in
    the living room. Today, psychological science is rife with research showing
    the extraordinary power of unconscious mental processes.

    This is explained in the recent book of his on evidence based psychology:

    http://www.amazon.com/Strangers-Ourselves-Discovering-Adaptive-Unconscious/dp/0674013824

    – Robert

    Greg Reply:

    Rings very true. We do tend to form narratives that are hard to reverse.

    Thanks for the book rec. It looks great and is now on my Amazon list.

    – Greg

  11. July 27, 2011

    Greg
    2 cents on digital and its penetration in India. Its dismal and is < 5%. The fastest growing media in India is TV and Newspapers are doing pretty well. Digital's growing but the penetration of Internet is so low, that its going to be a while before it truly displaces TV.

    So many of the BRIC countries are still on the same schedule above.

    Good post.

    Greg Reply:

    Mukund,

    Thx. What’s even more impressive is that you would think that digital media would catch on quicker than average in India, the TV market there is incredibly fragmented. Shows the value of cheap reach!

    Greg

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