Advertisers No Longer Find Acceptable That Half The Money They Spend On Advertising Is Wasted

Philip Stone December 17, 2009 Follow on Twitter

One of the more famous advertising quotes comes from one of the founding Lever Brothers who knew even then in 1925 a thing or two about advertising – “Half the money I spend on advertising is wasted and the trouble is I don’t know which half.” Today, advertisers are no longer willing to accept that as their way of life.

Viscount Leverhulme, one of the founding Lever Brothers that started business in England selling bars of soap made with vegetable oils instead of tallow (fat from cattle and sheep), relied greatly on newspaper advertising but he was convinced in his later life that he was not getting true value for the money spent, even though his Lever Brothers had become enormously wealthy. Advertisers have those same doubts to this day, but now they are arming themselves with more and more weapons to judge just how effective their spend is, and the advertising game will probably never be the same again.

It used to be that advertisers went for maximum reach knowing full well that huge numbers of people seeing their campaigns would never use their products. The strategy was that enough of those who saw the campaign would buy. But in today’s world that no longer holds true. The magic word now is “targeting”.

And that is really bleak news for traditional media and probably one of the prime reasons why even when the economy recovers, and traditional media benefits from some recovery, it will never be the same as the “good old days”. There is now a fundamental change in the advertising mindset – the most people seeing a campaign is not necessarily best but rather the “right” people – those interested in the product – is now paramount.

Newspapers, television, and radio appeal to the masses. Sure newspapers break down into sections trying to appeal to specific parts of the readership – there’s a reason, for instance, why you’ll find tire ads mostly in the sports section where the guys are whereas household products will more likely be in style and food where the ladies are more likely to congregate. Trouble is, however, that those advertisers are charged for the entire readership, knowing full well that just a percentage of the readers actually will see their message, and while that may have been the acceptable way of doing business in the past, it isn’t today.

True targeting really comes from digital media, and that’s where more and more spend will go. Not that advertisers are going to open their wallets much more, if any, in 2010, but rather they will just take more and more away from their traditional media spend. That’s why Google is the company it is today. Search advertising means those who click on those ads are interested in that product. Easy to check how cost-effective that is, and it obviously must be a great success or else Google wouldn’t be the world’s largest media company today based on its stock market valuation.

And as Google gets richer and richer off that advertising so the traditional media will become poorer and poorer. Survey after survey has advertisers saying they will spend more on digital platforms in 2010 but most say they will not have additional budgets – thus to spend more on digital means spending less elsewhere – and that means less on traditional media.

Niche audiences are far and away a better buy than the general audiences most traditional media deliver. And the niche audience is sold at far less cost. Count on more and more ways to track and follow what each individual digital user looks at, shows the most interest in, and just watch the personalized ads proliferate to those users based on digital surfing habits.

None of this is really news to traditional media, but little has been done to combat the inevitable. Two years ago Earl Wilkinson, executive director of the International Newsmedia Marketing Association (INMA) said in his annual forecast, “Identifying a niche audience with high commercial value – and matching that audience with a product with as few marginal readers as possible -- will become the driving principle in product development. That is a fundamental shift for the past 3 ½ centuries of newspaper publishing when the product came first, an anonymous audience gathered around the product, and advertising was sold based on how big the audience was.”

And back in May last year Cia Romano, founder of the Guru Web consultancy,  told independent magazine publishers that if they didn’t make the jump quickly from print-mostly to multi-platform successfully then they would “not survive what’s coming.” And when she asked those publishers at a convention whether they knew the three main categories in which they could place their Web readers, only two hands went up. “That’s not good,” she scolded them, “If you are not user centric then you have no strategy.”

And one has only to see what has happened to the magazine business this year – hitting all the way at the top with Conde Naste let alone smaller independent publishers – for how advertisers are completely rethinking their spend.

Now, as never before, it is going to be the survival of the media most tuned in to what advertisers are clearly looking for, and how the media can so accommodate. No doubt if Lord Leverhulme was alive today he, too, would be engaged actively in ways to ensure “that half the money I spend on advertising is not wasted.”

See also...

Advertising – The Slump and the Shift

Media and advertising are learning new steps. First the slump, then the Shift. ftm watches the dance for the stumbles and the surprises. 60 pages PDF (June 2009)

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