The Oscar winners have, in their Slumdog glory, all been revealed, so it’s left to me to announce the biggest loser at this year's 81st Academy Awards.
And the grand loser is (drum roll)… the advertising business.
The economic crisis hit the Oscars big-time this year, with ABC snipping prices on its television advertising slots by up to 20 percent and losing L’Oreal completely, while American Express, MasterCard, and Coca-Cola all cut back on their ads from last year.
But it’s not only the Oscars and ABC that have been hemorrhaging advertising revenues. The financial crisis has triggered a full-blown economic crisis throughout the advertising ecosystem. And the crisis is constant across media sectors -- from television to radio to print and the Internet.
The dramatic decline in advertising revenues for print newspapers has resulted in massive editorial layoffs and a series of high-profile bankruptcies. Advertising revenues for radio in 2008 were down 9 percent from 2007. Comcast Corp. (Nasdaq: CMCSA, CMCSK) reported a 32 percent drop in earnings in the last quarter of 2009, mainly fueled by dropping advertising revenues on its cable television networks.
Everyone in the advertising business is hurting -- even, amazingly enough, Google (Nasdaq: GOOG), which, having recently discontinued both its Print Ads and Google Audio Ads programs, is now going through the first redundancies in the company’s 10-year history.
Things have gotten so bad in the advertising business that alcohol and sex commercials are now successfully infiltrating prime-time television. During the Grammy Awards earlier this month, Absolut Vodka commercials ran on 15 local networks, including those in Los Angeles, the first time this had happened for many years.
Even Facebook and Google have relaxed their rules about alcohol advertising, with Facebook now allowing software developers to run promotional programs pushing alcohol over their social networks.
As the Kathy Doyle, SVP and director of local broadcast at Universal McCann, explained to the Los Angeles Times, “The bottom’s dropped out of the market.” Bottom perhaps being the appropriate word -- with one Los Angeles radio station (KROQ-FM) now running breakfast ads for an online dating service that promotes extramarital sexual relationships.
While it would, of course, be unfair to blame the Internet for the collapse of the advertising business, the digital medium does bear some responsibility for the current crisis. The problem is that our culture of ubiquitously free online content has meant that advertising has become the only viable business model now for the vast majority of Internet publications, music labels, and video companies.
But the advertising model -- with what NBC CEO Jeff Zucker memorably described as its destructive tendency to turn offline dollars into online pennies -- doesn’t enable the financing of high-quality online content. And as the cost of online advertising impressions continues to plummet, so the increasing commodification of Internet advertising is contributing to a general crisis for all content companies -- from The New York Times and Random House to EMI and Newsweek and to popular blogs like “Fake Steve Jobs,” which are all struggling to extract cash out of eyeballs.
As Bill Keller, The New York Times' editor-in-chief, wrote on the Web last week: “A lively, deadly serious discussion continues within The Times about ways to get consumers to pay for what we make."
Yet getting consumers to pay for the content that they consume on the Internet is, oddly enough, one key solution to today’s crisis of the advertising industry. The Web 2.0 model of giving away content for free and then realizing revenue via advertising isn’t working on any level. Consumers have been spoilt by free content and advertisers by cheaper and cheaper CPMs (cost per thousand times an ad is served), while highly trafficked but still unprofitable sites like YouTube Inc. and Facebook are struggling to realize the scale of advertising revenues to make them genuinely viable media companies.
Could Madison Avenue go the same way as Wall Street? Unfortunately, yes it could. The financial tsunami has triggered a dangerous crisis in the advertising industry. And it is in nobody’s interest -- advertisers, media companies, or consumers -- to allow this crisis to spiral into a full-blown meltdown.
Still, unlike Wall Street, the U.S. government is not going to bail out Madison Avenue if it completely fails. And just as a broken financial system is wrecking our economy, so a fully dysfunctional advertising sector could, I’m afraid, destroy our media.
— Andrew Keen, Silicon Valley author, broadcaster, and entrepreneur, can be reached on Twitter at @ajkeen.
This does indeed seem to be uncharted territory. From my understanding, entertainment thrives during recessions[depression], however this doesn't seem to be so as you've mentioned.
I hadn't a clue that alcohol commercials were allowed again...was it triggered by the ad revenue bleeding?
Not to knock newspapers, however their advertising rates were RIDICULOUS...I expect the same shake up to occur (if it hasn't already) to yellow pages advertising.
Maybe it's time to try bartering for content. No, I don't mean I'll send a dozen eggs to you for a dozen articles. But maybe those who post interesting content will be granted free access to other interesting content, while the non-creators will be charged a low, reasonable fee.
Nah, it'll never work. How 'bout a gallon of milk AND a dozen eggs for a year subscription to the Times?
yeah, this is a great post. I think that tv companies will buy newspapers. the big question is how they reinvent business models that combine tv and newspapers in the face of free content. I suspect that we'll get a third model that will vault over tv and newspapers
The newspapers may fold, but all the content of newpapers and magazines will never go anywhere, nor will the writers, they will all still be around and writing.
What we are going to see disappear is the reputation for quality that stands behind that content. When we see something on the New York Times, or Wall Street Journal website, we know there is a 157 year old company and a 120 year old paper with a solid reputation of "quality" reporting and "honesty" behind it.
If you all of a sudden remove those old source with solid reputations for the news, who are you going to end up with?
I think we are going to see television and news stations buying up names of these newspapers and magazines, the internet has not severely affected television yet, and I think television/cable news will start to morph further into the newspaper business, and possibly the online newspaper business.
I think ISPs might start thinking about partnering with content providers to sell packages to their subscribers. Tack on an extra $2 to your monthly cable bill and get access to the sports package content from Sports Illustrated, ESPN, FoxSportsNet, SportingNews, or the financial subscription for another $2 a month for the Wall Street Journal, Money Magazine, Time, New York Times, Washington Post and the LA Times.
"Cable" for the internet... Sign up for the basic package and then add some of the premium packages...
Way to go! Please don't make IE pay! As it is theres way too much competition in the Online space& if you do go pay there is a chance that you may lose many valuable readers.Lets face it,even Facebook is scared of the competition ,otherwise one of the best ways for them to raise Revenue (instead of all this ham-fisted approaches they are pursuing so far) would have been to put in a small Log-In/User Fee.How about USD 12/year ???It doesnt sound that much,but you have to realise that if they do that,how is the competition[Read Myspace,Orkut,Bebo,Hifi, LinkedIn, etc) going to react?Especially some of the players with super-deep pockets like Myspace and Orkut-They will go on National TV during events like the Super-Bowl ,NASCAR and NBA Finals-With ads like these,
"
kid with Glasses speaks [Looking suitably Downcast]to his more Trendy Shades wearing Friend -You know Facebook went Pay!
Trendy Kid-Don't worry I use Myspace/orkut and "They have promised me that They will never Go Pay
Kid with Glasses- Really?
Trendy Kid- Yeah and not just that they are now giving Facebook users new tools to make a completely Painless Transistion for me and Friends to Myspace for FREE "
Kid with Glasses- Really? I am moving with my friends to Myspace,right now!"
And then Rupert Murdoch will come on screen and Say," MYSPACE because we beileve that the best things in life are free!"
Okay the Murdoch coming on-screen is a little over the top,but you get the picture don't you?Competitors would love it!!!
Lets face it,Except for the relevant and famous examples mentioned here[FT,WSJ,Porn],I can't think of any other websites which are pay. Even Businessweek and The Economist[I work on both their Panels] are both mainly free & whatever else anyone says you can't beat these two great Magazines for Business Insight and content.Also, the pay per view thing has never really caught on in Asia.And we are all agreed on one thing.Asia represents the World's Future and if they are'nt going to pay,I can't see how Content Providers/Websites are going to force them to do so.
But I agree that we need to look at ways to re-invent revenue streams in the online space.Maybe by giving more Highly specialised content for pay or,giving advertisers more qualified(?) information on Page viewers(Like where he/she is from and how long they spent on a particular page and which pages they tend to ignore,etc.And also,getting viewers/readers do some of the websites work for them like Advertising through Word or Mouth/Clicks/Diggs,etc. What else? I can't figure out that much right now....
Oh wait there is one more thing.How about Hosting Company Information for the company?Similar to Peer to Peer networks,All loyal readers who want to access content for Free will have to download a Piece of Software on their own PCs which takes care of some simpler processing tasks for the company.This non-obtrusive (lightweight)SoftWare would ensure that there is less need for companies to spend Ginormous amounts of money on Datacentres and especially servers and cut Power costs for companies.[My idea is'nt exactly original- I picked it up from IBMs World Community Grid Project-which does some cool calculations for Medical Diseases and Food projects ] on community machines during downtime.
Think about it,the more you think;the more awesome ideas you come up with!!!
Right now,whoever can demonstrate a better value for money for the Sponsors will get an increasing share of the Shrinking Ad-spending.
And as for our friend Andrew who probably thinks just Ads won't work ;I have to say that Things are darkest just before the dawn.We have already had 14 months of Recession in America it will be over soon,maybe in another 4-6 months and then we will be spending money on Promoting products,etc,etc as normal again.
Online advertising is particularly susceptible to scammers. We've seen criminals misrepresent themselves as legitimate companies in order to get flash creatives inserted on very high-volume adservers. This happened because sales staff, motivated by commissions, tend to be less vigilant (that's as nicely as I can put it).
We're also seeing some pretty fearless enterprises dedicated to the delivery of malware recently. The techniques employed render most defenses employed by home and corportate users irrelevant. Ads are being corrupted on big sites powered by the biggest advertisers. Social networks are also all the rage with online criminals.
A faltering economy is a threat to the Internet's business model, but if it becomes a place where the average user can't expect a certain level of safety in their online activities, the deterioration of the advertising model will accelerate.
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The problem with much analysis of the old-versus-new media wars (including some of my own, I confess) is that we always assume that there’s a moral struggle going on, that the real battle is between fairness and injustice, and that, in the best Hollywood tradition, good will eventually triumph over evil.
In an age of a myriad of media devices and platforms, what does the digital consumer want? The answer, in a word, is simplicity. When a consumer buys a book, a movie, a magazine, or a musical track, they want to watch, read, and listen to their product on every device and platform -- from their two-channel hi-fi to their home theater-powered television to their Internet-enabled computer to their 3G smartphone to their revolutionary new touch tablet.
Thus reads a thesis from American political scientist Robert Kagan, meaning that Americans are intrinsically warlike while Europeans are the natural pacifiers; Americans destroy things and Europeans fix them.
Good news for those with a religious faith in Sarah Palin: She’s done the impossible. Miracle of miracles, she’s made me -- the Antichrist of Silicon Valley -- fall in love with the Internet.
Smarter Collaboration: How to Thrive in a Challenging Business Environment Market conditions are changing faster than ever, and organizations need to improve their agility and adaptability in order to provide better service and improve processes. The ability to work with customers, business partners, and employees as effectively as possible - while at the same time holding down costs - is a key to success. READ THIS eBOOK
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Saunders is wrong on Hulu, Fritz thinks. By most measures it's been
a success, and there's no reason this model won't become even bigger in the next three years. Oh, and he hates Steve's hat.
Comparing Internet services is tough because service providers price and market their services based on a best-case scenario connection that most consumers will never enjoy.
Research shows that the youth of today like Facebook – but not blogging or Twitter. Does that mean Facebook has won, or just that it's not yet out of favor? Will all the services we see today fade into Ovaltine-or-Wheaties status in just a few years?
What kinds of companies are doing the most innovation in the data center? Turns out it's midtier enterprises that are taking the "Just Right" approach.
Ray Kurzweil's Blio and Apple's iPad tablet will make it easier than ever to have books "read" to us, says Dr. Kim, who believes that talking tablets will become interwoven into our consciousness as we "merge" with the increasingly elegant machines we hold in our hands.
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