Posts about chaos

Chaos 2.0

I’m late to this since my AdAge subscription lapsed, but Bob Garfield (of On the Media and Ad Age) has written an important followup to his seminal Chaos Scenario two years ago. In the original, he argued that advertisers saw the decline of old media but that new media weren’t ready for them (as we indeed are not — see my AdAge column on the topic) — and so the advertisers are left without the means to market. In Chaos Scenario 2.0, Garfield argues that marketers have new ways to do their business directly with customers that no longer require advertising. He warns of “the post-advertising age.”

This is fundamental and important. In media, we have long argued that a new medium does not replace the old one and that ad spending may shift around in new mixes but do not decrease. No more. Now marketers and customers can have their transactions and conversations directly. That is to say, we the customers can get the information we want about products straight from sellers and the more that happens, the less those sellers need to waste money on giving us messages we did not ask for and do not want (aka, advertising). The more that happens, the less money they will spend on ads. Total ad spending will, indeed, decline.

That horrible crashing sound you hear is a gravy train derailing.

Media — news and entertainment — have long been supported by advertising and by the faith that even though it may be a zero-sum game, at least there were billions of dollars of support there for the earning. And profitability for those who got those dollars was very high because of scarcity: scarce space, scarce time, and now scarce consumers. What if there is less? What happens in post-scarcity world? What happens to the media economy? What happens to us?

I’d say that depends on who the “us” is. If it’s big, expensive, monopolistic, overpriced media giants — TV networks, TV studios, radio companies, newspaper companies — they are guaranteed to shrink radically and rapidly. They are screwed. But if “us” is new, small guys who are not addicted to big production luxuries — for whom the definition of big enough is many, many times smaller — there is still plenty to go around — but only if, again, we have the infrastructure in place to make it make it easy for advertisers to support us. We little guys are stuck in Chaos 1.0; we’re not ready for the advertisers. The big guys are stuck in Chaos 2.0; they’re seeing advertisers find better alternatives. And if we’re all not careful, the pie will, in fact, shrink. That’s new.

Says Garfield:

It’s a world in which Canadian trees are left standing and broadcast towers aren’t. It’s a world in which consumer engagement occurs without consumer interruption, in which listening trumps dictating, in which the internet is a dollar store for movies and series, in which ad agencies are marginalized and Cannes is deserted in the third week of June. It is a world, to be specific, in which marketing — and even branding — are conducted without much reliance on the 30-second spot or glossy spread.

Because nobody is much interested in seeing them, and because soon they will be largely unnecessary. . . .

He recites a requiem litany in the media business since his first chaos piece: MTV, Time Inc laying off. . . CBS spun off from Viacom “lest the broadcast business impede growth and depress shareholder value” . . . broadcast networks shutting out their distribution partners to give us shows directly online. . . NBC giving up on the 8 p.m. hour to give us dreck . . . big, bad Clear Channel doesn’t take over the world but is taken over by private equity. . . Knight Ridder and Tribune melt like witches on water and McClatchy doesn’t turn out to be in Oz. . . DVRs will reach half of U.S. households in three years and once we’re all skipping ads, advertisers say they’ll skip TV. . . TV upfront is down. . . Coke and J&J pull out of upfront. . .

Yup, screwed.

But marketers aren’t crying, or shouldn’t be. He continues:

What is certain is that the Brave New World, when it emerges, will be far better for marketers than the old one. What is nearly as certain is that many existing ad agencies and some media agencies will be left behind. And the reason they will be left behind is their stubborn notion that they can somehow smoothly transition to a digital landscape.

He argues that TV has been kept afloat artificially:

But TV isn’t really in the program-distribution business. It’s in the audience-selling business, and there the economics of scarcity still stubbornly reign. Because no other medium offers the reach of TV, advertisers have continued to pay more and more per thousand viewers — which is why Mr. Moonves is commanding higher CPMs; the upfront market has not yet plummeted; and video advertising on the internet, according to eMarketer, will amount to a paltry $775 million in 2007. On TV, it is $65 billion.

But economics will have its due. The law of diminishing returns will eventually prevail. Those who have perennially spent more and more for less and less will finally say, “No more,” and take their money online — whether there is sufficient ad inventory or not. . .

Mass advertising flourished in the world of mass media. Not because it was part of God’s Natural Order but because the two were mutually sustaining. . . . So why assume that either must transition to the new model? Not only is it economically nonsensical, it squanders the very nature of the digital universe, the ability to speak with — not to, but with — the narrowest communities and individuals themselves.

And they will use new methods that have nothing to do with advertising: Word-of-mouth, social, or just direct contact with customers who want information and can now get it from the marketer or — see my favorite example, my Treo — from fellow customers.

Garfield cites the story of an OgilvyInteractive creative director who didn’t buy ads to give away 45,000 tockets for Six Flags’ 45th anniversary; he posted on Craigs List and after five hours, the tickets were taken. But who gets paid for that? Not even Craig.

Garfield predicts some of the means of death of old media and agencies. I’m not sure he’s right about them all. He heralds — as I’ve heard heralded for more than a decade now — that we’ll watch a TV show and click on a car to buy it. I don’t buy that. He argues that we’ll end up paying for more content, supporting it with our money instead of advertisers’. Not sure I buy that, either. But I do agree with this arguments that we don’t like ads, we do want information, and we are in control.

And what he’s really saying behind all that is that the fundamental economics of media are, if not imploding, deflating. That is a big deal and has implications we can’t yet imagine in media and marketing as well as in the proliferation of small media that can afford to live without big marketing — if it’s ready. Hang on. It’s going to be a bumpy ride. Downhill.