Not just a bad dream

Back when I was at Leo Burnett in the early 90s, doing direct mail for McDonald's and first getting a glimpse of new media, Rishad Tobaccowala was the guy in the Burnett media department whose job it was to pay attention to things like America Online. Fast forward a decade and if there's a story on the new era in advertising and marketing, he's bound to be quoted in his position as the top exec at Starcom and Publicis whose job is, uh, to pay attention to things that might be the next America Online. For instance, in this article:

Fragmentation and consumer control will drive the cost of digital media upwards by 20 to 30 percent annually over the next several years, predicts Rishad Tobaccowala, chief innovation officer at Publicis Groupe Media and president of SMG Next.

"At some stage it becomes more expensive to buy Google than to buy network television," said Tobaccowala...

The gist of the talk he gave seems to have been a sensible warning that prices for online media are likely to go up-- especially when you have somebody like Google in very nearly a monopoly situation. Of course, this is only logical, since so many sites are dirt cheap right now, priced nowhere near equivalent mass media which reach the same numbers of eyeballs. The top political blogs draw more viewers than the top political shows on the cable news networks, for instance, and they probably have a substantially more engaged readership to boot, yet it seems safe to say that Daily Kos and Instapundit are hardly pulling in revenue comparable to CNN off their Blogads. Some upward price adjustment is bound to happen.

But I fear this is not how many people inside ad agencies are going to read it. Their logic will be something like this:

Google will soon be more expensive than TV.
TV is back! We don't need to change a thing after all!

In fact, while there will be probably be a leading edge of top-name new media vehicles capable of jacking up rates because they are seen as having superior positions (Google, of course, being the primary example), there will surely be just as much pressure keeping prices low coming from the fact that there will be more and more sites selling space out there. So Google may get more expensive, but online as a medium is likely to offer even more variety of price points than cable TV. There's absolutely no reason to believe that online as a whole is about to price itself above TV as a whole, or even close to it.

Sorry, TV creative directors. It wasn't all just a bad dream. The world you know really is being replaced by a new, less cushy reality.

But it's not only the cost of the medium but the cost of operating in this new way that he says is going to be higher:

"We have a different economic model for our television-based plans, and a different one for the re-aggregated plans, and the second one costs 10 times as much."...

Some of those costs will be driven by targeting and measurement technologies necessary to reach increasingly fragmented audiences, while others will stem from the need to make creative more attention-getting, Tobaccowala said.

Okay, Rishad, they cost more. They're not as efficient. But how does what they deliver compare?

One of my key points in the Introduction (I'll link that eventually) is that mass media had to be so efficient at delivering lots of potential buyers because it was so incredibly inefficient at converting them into actual buyers. But you don't need a low cost per thousand if you're converting a lot more than one in a thousand.

This Business Week article from last year had one of the few solid comparisons for how fragmented marketing performs that I've seen in print:

In 2003, P&G spent $4.4 billion, or 10.1% of sales, on advertising. In 1998, the last time its spending reached 10%, unit sales volume rose by nearly 4%. Today, P&G's unit growth rate is running closer to 9%. "You can draw the inference that they are spending smarter on advertising," says William H. Steele, an analyst at Banc of America Securities. "They are spending about the same money and getting three times the lift."

Not a dream. Reality.