Thursday, September 9, 2010

More economic bad news drives marketers to the web for better results and ROI

As we've forecasted previously, the US economy remains weak, and shows further evidence of more long-term weakness driven by domestic policy choices:

US economic growth forecast cut, again

US competitiveness slides again, worse than Sweden, Singapore, China

Although current policy is providing some support to domestic demand in the short run, with the apparent hope that this will turn into stabilization of long term demand, unprecedented budget deficits, tax increases, and high unemployment rates have virtually eliminated all visibility for the US economy, at least from a business perspective, and combine to point toward continued poor economic performance in the US for, up to, the balance of the next 5 - 10 years.

With all of these challenges, that were unimaginable to many people even 18 months ago, we are still seeing growth in online advertising spending. The reason for this is that the current horrific US economic conditions have made it more vital than ever for marketers to achieve strong ROI and deliver accountable results for their efforts.

It's been relatively easy to forecast the path of the economy based on the domestic policy choices being made in the US; the greater challenge is in determining how to respond to the extraordinarily negative implications. We're seeing more and more marketers focus on drilling down into their campaigns to maximise their results, twisting every dial possible. We're also seeing greater acceptance and understanding of the audience model for online advertising, which we explain here.

Check us out at www.intermarkets.net for all your online advertising needs, as well as some fun!

Monday, August 9, 2010

New economy grows, even as the old economy grinds down

At Intermarkets, we constantly monitor economic conditions in the US, to make sure that our clients and publishers are well served by our pricing and service offerings. For some time now, we have expressed concern about general economic conditions in the US for the second half of 2010, and the Federal Reserve Board has just recently issued a report consistent with our outlook and forecasts.

Here is a link to the story about the Federal Reserve report: Fed set to downgrade outlook for US.

So much of the economy is still dependent on old, and disproven, methodologies and industries, and political intervention in the markets has predictably distorted economic development even further.

Online media, however, continues to grow, as shown by increasing prices driven by higher demand, increased reliance by users on online content and recreation, bottlenecks in the online media supply chain, growing hiring plans by online firms, increasing financial transactions in online companies, and more.

As the rest of the economy continues to grind down, online media continues to thrive. The clear and obvious benefits to marketers of online advertising provides sound reasoning for more budgets to be directed to online media, and in some cases away from other types of media.

For our economic outlook, we continue to expect the general economy to slide back into recession, possibly severe, or at least experience monthly or quarterly economic shrinkage, during and through 2011. This is due to substantial tax increases in the US set for January 1, 2011, continued minimal private sector hiring or further net job losses in the private sector, weakness in most if not all asset classes, and continued uncertainty in the future of the US economy.

We are not able to find comparable scenarios in recent history that provide guidance for this period, because the current conditions and current policies have not been combined in OECD economies before; conventional economic theories and policies call for reduced taxation during economic downturns. The only somewhat similar situation is the conversion of the Venezuelan economy, under Hugo Chavez, several years ago, but with that economy's benefit of having net oil exports, there are material differences in potential outcomes for the US.

For the online media sector, we believe that there will be continued growth in spending and further development of new advertising methodologies and technologies. Greater rich media creatives, more testing of mobile media, and refinement of how to advertise on social media will also provide added growth opportunities.

Check out Intermarkets.net for information on how you can best reach the right market, everyday.

Thursday, April 22, 2010

Let's evolve: What's an audience?

New lingo in the Web advertising world: "audience." But this time, it really matters.

An "audience" is a group of people with a set of common characteristics, which can include demographic, behavioral, or psychographic traits.

For example, "married women, ages 24 - 39, working outside the home, no kids, left-of-center politically, interested in buying an SUV, and environmentally conscious," is an audience.

And why does that matter?

Well, as John Wanamaker, the respected US deparment store executive in the late 1800s and early 1900s said, "Half of my ad budget is wasted; the problem is I don't know which half." By targeting an audience, rather than a publication, you're able to solve Mr. Wanamaker's riddle.

Say you are targeting that group described above, and you're a car dealer in suburban Washington, DC. Why would you pay to advertise in a mass medium, like radio or TV or print?

While many of your target market may be using those media, you're also addressing many, many more people using those media who do not fit your target market at all; what's worse is...you're paying for the privilege of advertising to people you don't want to reach! Plus, say your creative message pokes fun at husbands; what if the majority of people seeing your ads are...husbands? You've just alienated more people than you've reached.

Not smart.

Now, with online advertising, you can certainly target this market segment. The challenge is finding the right venue for doing so. Many old media companies have online advertising options, but the challenge is reach; the old media companies don't have enough people visiting their sites to have an impact on your results.

And assembling enough local sites to create economies of scale efficiencies in reaching that target market just magnifies the inefficiencies of working with dozens or hundreds of media sellers.

So online advertising offers you the ability to reach the target market specifically, but what a pain in the neck it is to assemble the sites to do so.

Until now.

Right now, probably one of the most profound strategic advertising opportunities in online advertising is taking shape: audience networks.

These audience networks allow advertisers to define a wide range of target market characteristics, create ads to appeal to the target market, and then deliver those ads to the target market, minimizing Mr. Wanamaker's waste.

In addition to the crucial benefit of your paying to advertise to only the target market you want to reach, the audience networks allow you to manage your campaign in a single control point, without having to manage and negotiate with dozens or hundreds of media companies. Imagine the savings for local, regional, and national advertisers. How much time and money would you save?
Think about what it is you're really doing with your online ad budget. Are you targeting specific media, or would you rather target actual people?

We've put together an audience network service at Intermarkets. Check out the Aurora Audience Network. We've assembled reach to 200 million unique US Web users and more than 500 million unique global Web users, all in one place.

Tuesday, March 23, 2010

How health care reform impacts Intermarkets

Several people have asked me over the past few days about how the federal health care reform legislation currently "in play" in Congress will affect Intermarkets. The answer is difficult to discern because like so many issues, such as tax policy, there's very little clarity in exactly what is actually in the legislation, and little to no knowledge on how the legislation will be interpreted or enforced.

It's amazing how weak the reporting on the legislation has been. Most of the media coverage has been focused on supposed name-calling (most of which has been proven false) and the shenanigans of the politicians, their colleagues, special interest groups, and others.

Based on what we've heard about the bill--broad and extensive tax increases, extension of health benefits, changes to rules and regulations governing health care, and the like--we do know that on the down-side, the tax implications of the legislation appears to be customized to directly penalize companies like Intermarkets that provide solid health care and other benefits, are profitable, and are not government-aided enterprises.

On the other hand, the social benefits of significantly increasing the number of people covered by health insurance, instead of relying on the goodwill and charity of health services providers or governmental agencies, may be a choice the society agrees is worth the price of the potential economic impact.

Here's what we know for the moment (and it's a fluid situation, with lots of changes):

1. Coverage: On the plus side, our insurance coverages should not change, with the exception of extension of dependent children being eligible to remain on their parent's health plan until age 26. While the Intermarkets health plan is pretty good, it does not appear to be classified as a so-called "Cadillac Plan" and does not therefore appear to be targeted for punitive taxes. "Cadillac Plans" are classified as such if they cost a certain amount (combined employer and employee contribution) on an annual basis. Our costs may be reasonable because of our corporate domicile in Virginia.

2. Company taxes and investment: There are significant tax increases that the company will have to pay. This will increase our "forced" costs and therefore may constrict our resources for investing in the company or spending in general. Think of it like this: there's a certain amount of money generated by the company; a portion of that has to go to taxes, the rest into other areas such as benefits, travel, compensation, etc. If more money needs to go into taxes, there's less left over for the other areas. Payroll taxes that the company pays will be going up, reducing money available for other areas.

3. Employee taxes: For the most part, most employees will not see a tax increase, although certain staff will see double-digit percentage increases in the taxes that they pay. These increased taxes are supposed to pay for increased national health care costs. While these tax increases will not be paid by the company, they will be paid by staff through increased withholding.

4. Timing: Historically, US tax policy changes have not been retroactive or in "real time," however that has changed recently such that tax changes have taken affect immediately upon passage by Congress and signature by the President. Again, consistent with the lack of visibility over the past several months, it's not clear when all the taxes and benefits will become in force. While it's great that the benefits are supposed to be immediately available, the challenge is how to reset budgets, spending plans, investments, etc. to calibrate with significant tax policy changes.

This is generally difficult for most people to comprehend because of the relatively light touch that federal income taxes have on most individuals; for privately-held companies, it's a much different matter, especially when the true, effective tax rate reaches into the 50% or higher range. Imagine if 50% or more of every dollar you earn was simply taken out of your pay with little or no notice, and that the percentage kept changing, unpredictably. That's the situation the company faces. This makes it virtually impossible to plan the business in this type of environment, much as it would for an individual who never really knew how much of their earnings they were permitted to retain.

5. General: How this will impact the economy is hard to determine. It's obvious that massive tax increases will be harmful to economic growth, as seen in the late 1970s, the mid-1980s, the early 1990s and in 2007 when payroll taxes were abruptly increased by the new majority in Congress.

With extraordinarily high unemployment, reduced economic activity could prevent improvement in the jobs market, which would likely self-feed to lower income tax revenues and higher federal budget deficits. Higher deficits could lead to increased federal borrowing, which either results in higher interest rates in the short run or higher inflation in the intermediate term. Increased taxes discourages businesses to grow or hire, suppressing wages further.

Conclusion

I've learned over the years that those in positions of power or in positions trying to gain power, no matter whether it's in politics, business, law, relationships, whatever, often like to keep us guessing in order to prevent planning on our part. It's the way of things. Intermarkets remains committed to providing good benefits, including health care, for staff, along with opportunities for professional growth for all staff.

While we may not be able to do as much in the future as we have in the past, we'll do our best to do the right thing. We may have to make hard choices but we'll always do so to achieve the best results for everyone involved. So as our society makes its own choices for what it wants, we'll do our best to accomodate the changes in the Intermarkets Way.

Closing thought

Benjamin Franklin, one of the original founders of the United States, is credited with this quote:

When the people find that they can vote themselves money, that will herald the end of the republic. Sourced here.

Or, as Kyle Broflovski said, "this whole carnival is a rip-off."

Tuesday, February 9, 2010

How to be

"He didn't envy nor slay any one, but honored and exalted all good men without exception, and hence he neither feared nor hated any one of them."
--The Roman Emperor Trajan, as described by Cassius Dio, Roman History, Epitome of Book LXVII

Truly the way to be.

Matt Drudge does it again!

Ever vigilant for hypocrisy in our modern era, the iconic Matt Drudge has done it again. He's got a link on his home page titled:
Blizzard Rearranges Announcement of Feds New Global Warming Office...
which links to this story on The Wall Street Journal's Web site:
http://blogs.wsj.com/washwire/2010/02/08/noaa-blizzard-rearranges-climate-change-announcement/

This is classic Matt Drudge and classic Drudge Report. Thanks, Matt, for keeping us sane.

Wednesday, January 27, 2010

Pax Venditum

Advertising peace
On today's Drudge Report, there's a link to a story about Newsday's efforts to sell subscriptions to its content on the Web, here. I don't know the full background of the story, but the gist of the article is that after three months, only 35 subscriptions were sold, traffic to the site is said to have plummeted, and with that drop in traffic it's fair to assume that the online ad revenues have fallen off as well because most advertisers are buying on CPM models.

To be fair, there's not a lot of information from Newsday, so they may be doing very well, and if so, that's great news, and they should be commended. There's not much discussion of Newsday's strategy in the article, either, so we are likely missing some pretty important information which could indicate that Newsday is succeeding.

Newsday, which has a tremendous reputation and is highly regarded, is not the subject of this posting; the ad-supported model vs. the subscription model is.

This story reminded me of how often we see a wave of this type of thinking in the online content world. Every few years, publishers start talking about how they're going to charge for access to their content, assuming that their traffic won't be tremendously affected, and that the combination of retained ad sales and new subscriber revenues will bolster their fortunes.

Well, then.

The Newsday example, if accurately reported in the New York Observer, once again proves that Web users are not interested in paying for most content. They know that they can find most any news or information for free on the Web. Why would someone pay for access to AP news on one site when they can get it for free on another?

I'm also reminded of my days in print publishing in which the publishers treated the ad sales business, and our clients, like second class citizens. I understand a lot of that had to do with lack of knowledge and weak experience, but it was definitely symbolic of the love/hate relationship between content providers and advertisers.

At some point, content providers need to make peace with the fact that it's okay to have advertising on their site. Some users are going to scream that they absolutely cannot read anything on a site because of that holy-awful 180x150 ad for--heaven forbid!--Taco Bell, and that they'll never, ever, ever visit the site ever again because of it. And they'll probably add an insult to the publisher's parents in their unsigned, anonymous email deploring the ads on the site.

But publishers have to keep in mind...these visitors aren't paying for the content, and if you ask them to pay in exchange for not showing ads, they're unlikely to take you up on the offer. If a user is that sensitive to advertising, maybe they need far more help in other, more profound ways, than by having a publisher switch their entire business model away from advertising supported content, to a paid subsciption model which has been proven time and again to not work.

I totally agree that there are some bad advertisements and some bad advertisers in the field, no doubt.

But on the whole, it's time to make peace with the ad-supported content model.

Let's be grand and call it "Pax Venditum" (Advertising Peace).

You read it here, first.