Mark Ritson: The story of digital media disruption has run its course

Your boss ushers you into her corner office, smiles and then hands you a two-page document. You scan it. It’s your performance review and annual pay rise.

On page one you are scoring a solid B across all the key metrics. Not bad. On the next page is your new salary for 2019. You were on £32,942 when you walked into the office. You’ll be on £33,300 when you walk out. You’ve won a 1% rise. How do you feel?

Probably a mixture of gratitude and disappointment. It is a rise but one that doesn’t even keep pace with inflation. Compared to others in the office who did get a big increase you’ve been hard done by. But there are several colleagues whose bonus has been cut for 2019; one even got the push.

You could try and make the case for a larger pay rise to your boss. More likely you will smile, shake on it and exit the office. But what you would be very unlikely to do is proclaim your career dead and, in a panic, throw yourself from the nearest window. A 1% increase is, well, the status quo.

And that’s how we should feel about TV’s share of ad spend in 2019 according to GroupM’s new media forecast for the UK. WPP’s media agency network usually gets its numbers right and, if the predictions in its ‘This Year, Next Year’ report are to be believed, TV will once again retain a significant slice of the advertising pie.

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We should be clear-headed about TV’s position in the marketing media firmament. A long decade of predictions of TV advertising’s death spiral have come to naught. Once again, the ad spend data suggests that there is life in the old box yet.

As GroupM notes in its report, the reasons for TV advertising’s endurance are clear: “Ad-supported TV remains hands-down the most effective advertising medium. It consistently and convincingly argues for its safety and certainty, with proofs of ROI.” Efficacy multiplied by evidence equals impact.

Business as usual

But it’s far from party time in TV land. There is a big difference between ‘not dead’ and ‘vibrant’. Audiences for TV are falling consistently year on year. All the talk of cord-cutting and mobile video might have been misplaced, but most people are watching less TV than they used to. If these declines continue at the current pace – a big and contentious point in itself – the dynamic behind TV’s position in the media status quo will eventually change.

There are many reasons to invest branding budgets in TV advertising but predominant among them is reach. It can be expensive but no other medium offers the winning blend of creative potential, emotional messaging and spectacular demographic reach. But it has been a long while since TV could claim to be the “giant funnel” that Rosser Reeves once proclaimed he could use to reach every household in the nation.

As relative reach gradually diminishes year on year there is the palpable threat that, in the not too distant future, the flat line of TV ad spending might turn south because the medium no longer provides its trademark scale. The tantalising prospect of addressable TV advertising is not too far away and would eliminate that scalar requirement. But for 2019, it’s business as usual. Again.

Source: GroupM

And TV is not the only advertising medium scheduled to continue relatively unscathed into 2019. Both outdoor and radio continue to enjoy increases in spend next year.

Again, this is the story that no one wants to talk about because the myth that radio is somehow struggling to maintain its place in the digital world has taken hold of the marketing mindset in too many organisations. Too often articles about radio are accompanied by a monochrome photograph of a 1930s family huddled around an ancient transmitter. In truth, both radio and outdoor are not growing despite the surge in digital media, but because of it.

More metro outdoor advertising now arrives via digital screens than on paper. And mid-way through this year we passed the watershed point where more radio was listened to on a digital device in this country than via broadcast radio. Break it gently to your digital media mate the next time you see him down the pub, but he is going to have to learn all about outdoor and radio because both are now demonstrably more digital than they are traditional.

There is a recurring myth that the rise in digital ad spend has come at the cost of ‘traditional’ media as the old world is replaced by the new.

Of course, the big headline from the GroupM report remains the rise of what me might term totally digital media. Pure-play internet advertising continues to attract ever greater levels of investment. In 2019 spending on internet advertising will grow by just under 9%. That’s another impressive leap but growth has been slowing for several years as digital disruption segues into media maturity.

The biggest narrative from the GroupM data is the same one that has dominated the last 10 years of media charts and been consistently missed by most pundits. There is a recurring myth that the rise in digital ad spend has come at the cost of ‘traditional’ media as the old world is replaced by the new. As this year’s results and next year’s predictions demonstrate, that’s not actually the case.

The growth in digital has come from incremental increases in total ad spend and then, almost exclusively, from the rapid decline in newspaper and magazine advertising. Other so-called traditional media did not have a bad time of it this year, or the ones that preceded it.

For over a decade news brands and magazines have been the source of most of digital’s rampant growth and that will be the case again in 2019. News brand ad revenues are set to drop again by around 9%, with magazines also falling by 6% for consumer titles and 1% for B2B. Just because it’s tough for news media does not mean it will get any easier next year. Capitalism is a brutal business.

Shift to subscription

The only good news for news brands is that advertising is increasingly unimportant to most of them. Make no mistake, their sales teams will still break your arm off for a full page ad or a wraparound. But the hard reality for most titles is they have had to look elsewhere for their money in recent years.

Before the financial crash, when the world was rich and digital media was nothing but a glint in the eye of a young Mark Zuckerberg, a big newspaper would typically derive 70% of its revenues from advertising and just 30% from subscriptions. Today that situation is reversed for most successful news brands, with 70% or more of their revenue derived from subscription and a minority from advertising income.

That’s partly because ad revenues have dwindled so much that subscription became the majority revenue source by default. But it’s also because well run news brands have realised that their future, like that of radio or outdoor, lies in digital editions.

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Print editions will remain for legacy readers and also as a loss-leading, symbolic reminder of the origins and advantages of newspapers. It’s hard to get emotional or feel any of the romance of news media from a home page, but the paper edition carries with it the great cultural power of journalism. Print editions will become the ‘couture’ offering of the news brands – loss-making but important assets for building and retaining authority and influence over the market.

But the future for news brands is digital and that brings with it new challenges and opportunities. Many great mastheads – starting with The Economist, The New York Times and News Corp’s global stable of titles – have all become masters of marketing funnels and, wait for it, digital marketing.

It’s an impressive transformation. The arrogance and insularity of newspaper executives was once legendary. But it’s amazing what an existential threat to long-term survival does to a business.

These days most good media executives can show you their pipeline of customers with numbers and conversion rates. They know the main drivers that push an occasional visitor across the paywall and into subscription and the subsequent drivers that ensure the all-important renewal after 12 months of subscription. They know the ‘page zero’ that resulted in an initial subscription and which columnists to reward – not because they write good stuff or are liked by the editor but because they drive and retain subscribers better than others. It has been a hard road for news and magazine media but despite the continued decline in ad spend there is a sense that the very worst of it is now over.

In a strange way, 2019 offers a curious kind of stasis for all of the various media companies. For pure-play digital there is growth mingled with a growing realisation that momentum is slowing and maturity awaits. For radio, TV and outdoor there is small but not insignificant growth, with the caveat for TV that its audience continues to slim, albeit from a huge initial base. For news and magazine media there is yet more advertising pain to come but the comfort that comes from better run operations, a new business model and a transformed set of capabilities.

Peace on earth and good will to all media, then.

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