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December 17, 2005
Follow the Money
Many digital media business plans are created around the idea that advertising revenue will monetize their initiative. I believe this thinking is the correct one. However, I continue to be amazed how many bright people embark on a 'build it and they will come' strategy. The 'they' are the advertisers.
The first point to make is that the big money, especially in television advertising, is decided inside the media-buying departments owned by the largest agency conglomerates. Advertisers set budgets and hire agencies to deliver results.
A second point: agency profit margins are razor thin and depend upon transactional efficiency for their profitability. That is, the more it costs an agency in labor to do things like post-buy analysis, the slimmer their profit margins.
It is not glamorous to say but starting in the late 1990's, agencies began competing on their media buying prowess. Some even outsource the creative process to others! When video on demand (VOD) and digital video recorders (DVR) and broadband television become more than experiments, these agency buyers will be the one spending the real money.
I read with interest the latest projections by media research firm RECMA.
WPP's media agencies — MindShare, Mediaedge:cia and Grey's MediaCom — give the British holding company control of 22.3% of the worldwide media-planning and -buying business.
Paris-based Publicis Group, parent of Starcom MediaVest and ZenithOptimedia, increased its share of the global media-buying business to 16%.
In fact, the media-buying units of the six big agency-holding companies now control 73.6% of the global business, up from the 57.8% a year ago—when there were seven holding companies (counting Grey).
Slicing up the Pie Percent of 2005 worldwide media-buying/planning market, it looks like this:
Group WPP Group Publicis Groupe Omnicom Interpublic Group Aegis Group Havas Others, unaffiliated Source: RECMA
Now comes the bonus credit test. Which privately held software company supplies media buying (not planning) solutions for linear television and print to most of the above conglomerates? Donovan Data Systems (DDS).
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Comments
The patents-pending business model that Ultramercial developed is a great fit for the VOD advertising industry. It allows the viewer to make the choice: watch an ad that "earns" them each segment of their program - OR - pay-per-view. The viewer chooses between an explicit exchange of value: their time for the content - OR - their money.
The Ultramercial day/site/premium pass model has been in place for years at sites like Salon, TheStreet, Economist and now Time gating editorial content. It is currently being considered by two major broadcast networks to bring their shows online. It is an honest upfront approach to advertising. The Ultramercial Opportunity not only gives the viewer the choice to engage, but presents the ads in a full-screen, two-way interactive format out performing all other ad units so advertisers get tremendous value as well as a good will spin.
DEMO LINK:
http://www.ultramercial.com/products_vod.html
Paul Grusche
paul@ultramercial.com
Posted by: Paul Grusche at December 20, 2005 12:04 PM
I really liked your comments here. I hope you're going to update your site soon. Green Game is always Universal Plane: http://slashdot.org/ , Kill Forecast Compute - that is all that Stake is capable of to Double Mistery you should be very Astonishing , Black Table becomes White Stake in final Industrious Stake is always International Opponents
Posted by: Eric Allison at December 26, 2005 01:55 PM
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