Digital First? How Exactly Did It Come To This?

Digital First? How Exactly Did It Come To This?
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What best describes you?

Always one to rattle the industry cage, in his latest B&T column, Robert Strohfeldt, says rather than the ubiquitous “digital first” mantra, perhaps the “what’s best for you? is the better approach for agencies…

Extraordinary to think in over 30 years in advertising and business in general, I have never seen anything to rival the complete loss of objective thinking and total disregard of the facts. (Possibly in 50 years’ time, the early 21st century will be known as “The Great Digital Con”.)

In the past two years in particular the digital first myth has been countered with astounding facts, from two seconds of video constituting a “view”, to 66 per cent of Australians following no brands on social media.  There has been increasing coverage, facts and figures debunking the primacy of digital, but to no avail.

“Digital First” has become the unshakeable philosophy of both marketers and media agencies. How did we arrive at this situation? There is no precedent to compare it with, but with the benefit of hindsight, having watched “digital”, or the commercialisation of the internet and the rise of social media, grow from zero at the turn of the century to its position of dominance today, three obvious causal factors stand out.

  • Follow the Money
  • Follow the Fashion
  • Big Brother Syndrome

Follow the Money:

An old saying (and approach) that has been around since commerce began. In any venture, be it legal or illegal, if you want to get to the heart of what is happening and why, follow the money. If you have been in the industry for 10 years or less, you probably would not know that media was once a low, very low, margin business.

And prior to the digital era, a relatively simple business – three commercial TV stations, two major newspaper houses (Fairfax and News) and though a high number of magazine titles per capita, a small number of publishers/owners. And a few radio networks. Regional TV markets (some only had two stations plus the ABC) were aligned to one of the three networks for all but a small amount of local programming.

Up until accreditation was dismantled in 1996 (which was when the internet first appeared on the horizons of advertisers) media agency revenue was solely 10 per cent commission (there were some sneaky rebates, but nothing like today), out of which the creative agency took 4-5 per cent and debtor insurance had to be paid. (For the privilege of being able to buy media, under the accreditation system, the agency took responsibility for the debt).

So, for every $1 million in media bought, the media agency would be lucky to make $35,000 to $40,000 gross. By the time overheads such as salaries, rent, equipment, research subscriptions (access to TV ratings cost more than $350,000 pa alone, newspapers, radio and a range of other alternatives such as Morgan Media Index, for planning) came out, not much was left. (This is a simple overview, but pretty accurate. To go into all the detail would bore the socks off you).

Again, for those who were not around when traditional media was the only game in town, it is difficult to imagine the huge impact these limited media options offered. Major advertisers would use a technique called “road blocking” – Sunday night was regularly the night when most TV sets were on. (Families were at home for the start of the week). Buy a 30-second TVC at the same time across the three networks and in one 30 second hit you could reach 80 per cent of Australian households.

Imagine trying to achieve that today? And a lot of thought and money went into these TVCs because of this. (The era of outstanding TVC creative). The Google/Facebook duopoly has convinced most of the myth of micro-targeting and the irrelevance of reach. They propose the world is comprised of seven billion-plus totally different individuals, who are best spoken to individually, or very small groups, as they have nothing in common.

At the start of the new century, “digital” took off. But to succeed it required the cooperation of the big media agencies to “sell” the benefits of digital to clients (An inane term as all media is essentially digital today. TV began broadcasting in digital in 2000).

Instead of 10 per cent commission, 20 and even 30 per cent was being offered. With a 200 to 300 per cent increase in revenue, low margin operations suddenly became highly profitable. Then the rise of social media only added to “hysteria”. I can recall reading “papers” (nothing more than long winded sales pitches) in around 2007 claiming any business without a social media presence would not be around in five years. (Apple seemed to do pretty well though).

It wasn’t only the big media houses who were seduced. Facebook ran workshops for every manner of small business, selling the benefits of social media – billions of people used social media and for bugger all cost, they could be there.  Try and go into a coffee shop, hairdresser, butchers, baker or candle stick maker and find one without a sign saying, “follow us on Facebook”.

In addition to the vastly increased commissions, rebates added to the already large financial incentive of taking the “Digital First” route. Facebook has recently introduced an initiative that makes media house virtual “distributors” for Facebook. (Incentives to have Facebook “trained and qualified” staff. Covered in an earlier article).

So, follow the money and it shows a key reason for the rise of “Digital First”.

Follow the Fashion:

From 2000 onwards, the rush to digital was on. The internet, creating an interconnected world, was generating a brave new world order. It was an exciting time, Start- ups were almost a daily occurrence. (Still are). The Rivers of Gold, newspaper classified advertising, the majority of their revenue, was shifting to the internet. Employment, car and real estate advertising, was being snaffled by cheeky little start-ups such as Seek. (A business that started in a garage and is now the largest online job advertiser in the world with a market capitalisation far greater than Fairfax).

So, there was an enormous peer pressure to be on the digital band wagon. Traditional advertising became known as “legacy advertising”, and even though it still produced audience numbers and quality digital could only dream of, the facts were ignored. Below is an article, from only last year, which is indicative of how traditional media was compared to new/digital:

Younger viewers switch off:

  • Nearly one in five (17.8 per cent) of 14 to 24-year-old’s don’t watch any free to air TV. That could be written as “Over 80 per cent of 14 to 24- year old’s still watch free to air TV”. Conclusion – free to air still most single powerful advertising medium to this age group.
  • In seven years’ time that figure will increase to one third. “Excuse me client, but in seven years only 66.66 per cent of 14 to 24-year-old’s will watch free to air TV. So, you should drop it from your schedule now.”
  • Gets better. It is now nearly one in seven Australians watch no free to air TV during the week. (Not weekends). Again, could say that 85.7 per cent of Australians watch free to air TV during the week.

Professor Mark Ritson said it best, “Today’s marketers are the magpie generation. If it is bright new and shiny, they want it.”

Fashion beats facts every day and no one wants to be seen by their peers as not being part of the digital world.

Big Brother Syndrome:

There is no denying the disruption, for the better, caused by technology. Fortunes have been made in five to 10 years that are equivalent, or greater, than fortunes which traditionally had taken generations to build. Technology was responsible for vast improvements in every field of endeavour, from medical science to recycling, alternative energy sources, driverless cars – we live in a world dominated by technology that is sometimes moving faster than people and traditional norms can sometimes cope.  This article is not questioning the impact and advancements due to digital technology, rather the blind acceptance of the value of online and social medial platforms over traditional media.

Facebook and Google have grown into bemouths. They have become the Big Brother from the science fiction book 1984, by George Orwell. But instead of an all knowing and pervasive government, the Facebook/Google duopoly has taken this role. The information they gather on individuals would cause riots if a Western government collected the same level and detail of information on its citizens.

A recent report questioned the validity of the metrics used by Facebook. Where once Google and Facebook needed the big media houses to make in-roads into the advertising market, the roles are reversed and the media buyers are now at the mercy of the duopoly.

The federal government is struggling with how to deal with these companies. Media rules and regulations (70 per cent reach and two out of three, in particular), were drawn up prior to the internet. Google and Facebook are not subject to the same set of rules that traditional media must play by as they are classified as “technology companies”, rather than media companies. My God, who are they fooling?  But politicians the world over are wary of getting off-side with these two giants due to the enormous power and influence they now wield.

Where once governments (and opposition parties) went cap in hand to traditional media moguls, it is now Google and Facebook calling the shots. And to add insult to injury, they don’t have to pay for their own content, they just “steal” it from other sources and charge advertisers to be around it. No wonder traditional media cannot compete on cost.

What Can Be Done?

It takes a brave person or business to bite the hand that feeds it. Media agencies have enough on their plate fending off challenges from The Big 4 advisory and management consulting firms.

And digital has turned their low margin businesses into profitable ones.

But possibly this gives them a point of difference – though when your revenue is tied mostly to commissions it is difficult to claim impartial professional advice. (Sales people and organisations are paid by commission).

Are any of the big media house going to stare down the internet media giants and present to their clients objective advice on the “best” media strategy and plan for them? (As opposed to the what gives the best financial outcome for the Media Agency).

Rather than “Digital First”, the approach should “What is Best for You”. There are clients and businesses who do benefit from a Digital First approach, but plenty more who don’t. Advertising in social platforms will be part of the mix for most clients, but not to the level the blind digital first approach demands.

I never talk about our clients in these articles. They pay us to help promote their business and generate sales, not to make public their strategies to promote ourselves. I will make an exception. One is a large national retailer, a household name and clear market leader. Digital plays a small role, mainly via the website, but the drivers of business are TV advertising and catalogues. (A digital first approach would be a disaster).  Competitors have “played” with social and digital, only to lose ground to us and to go back to basics and in many cases, copy what we are doing.

But while media agencies are more sales than advisory (that is how agencies, or agents as they were once called, started out. They would buy newspaper advertising space at bulk rates and sell it for as much as they could to advertisers. There is some debate as to the dates, but a basic revenue model that started in the 1860s, has probably run its course and a new way of thinking about and advising on media is well overdue.

Unless we all want to end up working for Google or Facebook.

 

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