Category Archives: forecasting

Can online ads be 2/3 of media spend? No.


We had a friendly virtual debate with Shiv Singh tonight. You should read his blog, he’s a bright mind for Razorfish. Here’s the replay.

Shiv:

If you’ve wondered why the Internet is hot and continues to still be, this chart says it all. Advertising dollars are moving online in a big way… According to Union Square Ventures partner Fred Wilson, he can see this percentage becoming two-thirds of all advertising spend as TV and radio become audio on the Internet and video online. Do you agree?

Ben:

No. I appreciate the enthusiasm but I also suggest that following hockey-stick projections is a sure way to look silly in a few years. The facts are the average U.S. household has more than four TVs — more TVs than people — and the typical consumer watches 5 hours and 9 minutes of live television. The biggest trend is concurrent media usage, in which people, like myself, watch CNN while typing on a computer and using the phone. The Internet is additive but itself is facing the end of its bubble, a la the emergence of mobile as the new Internet, the diminished ad inventory inside smaller mobile screens, and the shifting modalities of consumers who are learning to create and share their own content. Apples’ “app” innovation has put a nail into the young coffin of mobile advertising since most apps have extremely limited visual inventory to insert any ads at all.

Now, if mobile is the future — and Wall Street guru Mary Meeker says it is, with more than 10 billion untethered devices soon to be in human hands — how has mobile advertising fared? Why, we’ve missed every mobile forecast for the past 10 years.

It’s cool to be visionary, but Internet advertising has a big problem — banner CPMs are falling to the floor, consumers are moving to smaller mobile screens with less inventory, and gadget manufacturers have an incentive to put up new walled gardens that make advertising insertion even more difficult.

Image: XiXiDu

What blood-powered cell phones mean for the future


A year ago we wrote about engineer Jim Mielke’s design for a wireless cell phone that slides under your skin and is powered by blood. Since then social networks have continued to scale — Oprah joined Twitter, Twitter saved Iran, Facebook got the stream — yet as they continue to fail to make money, advertisers are starting to wonder what gives. Facebook, the No. 2 darling child of the media, has projected U.S. ad revenues in 2009 of about $230 million, which works out to less than half a penny per hour per user.

Advertisers can understand the challenge of social media if they play the game all the way forward. In a few years, wireless internet devices will be so small they will plug into your body, like Mielke’s prototype above. This isn’t science fiction. Humans are already cyborgs — you already know people with fake breasts, false teeth, glasses, contacts, laser eye surgery, hip and knee replacements. You drive a car, a mechanical extension of your legs, and you fly like a bird on vacation. Yesterday we had lunch with a fine man who had a valve in his heart mended and was back up walking within a week. There are now 4.1 billion mobile subscribers on the planet and their radio toys are getting smaller. Andersonian free-pricing logic says the cyborg conversion is inevitable.

Telepathy is coming. Really.

When human crutches turn into human connections, people will have incredible control over sharing content. Your eyes might record a scene; you’ll touch your earlobe to send the video to a friend. As data transmission moves back to pure human-to-human contacts, social media will revert to our native, pre-history connections. Advertisers face a barrier because in social media, human bonds do not require third-party sponsorships. There is no external content to sponsor. Data collectors, who now hope to turn Facebook’s social streams into the Experian of the future, also may hit a wall when human connections can no longer be intercepted.

All is not lost, of course. People have always craved outside entertainment. You can’t talk all the time, so we’ll watch TV for a while yet. And gadgets with shiny chrome or glass will be around for a while, meaning marketers can track data being sucked through the devices that fulfill our hunter-gatherer-sexual-status-signaling instincts. But the irony of these inevitable media shifts into human minds is they will take us back to where we were in 10,000 B.C.: outside TV, radio and print washing over us to fulfill the campfire entertainment role, and human-to-human social media in which we control the intercourse ourselves. Marketers, like storytellers from a clan far away, will be welcome in one place and not the other.

A colorful look at your business future


Someone painted a fragmented rainbow in our boys’ grade-school hallway. It’s a little ugly, but if you snap it with a blurry cell phone camera, the evocation of hope seems to come across. This someone was pretty cheerful about the future when he or she created this.

Which reminds us of working at a media planning agency — we’re building several businesses, our own plus our clients, and the act of creation is often a messy process. The planning phase requires looking at past performance, which is often sketchy or a short timeframe, and adding in other data such as customer segmentation studies, focus groups, competitor analysis, media research.

And then, at some point, there is a leap of faith. With all the best data in the world, you still have to forecast, and that requires predicting the future. How much do you spend? Where do you invest? What will drive the most sales, most new customers, most repeat purchases?

All the science in the world can’t control whether your predictions are accurate (because if you could, we’d all do nothing but start new businesses and reap the ironclad rewards). Net present value it all you want; the reality is at some point you make art — a beautiful forecast, a dream based on reality, but really a hope that it all comes true.

Sort of like painting on grade-school walls.