Monday, August 09, 2010

The commoditisation of advertising and the rise of social media

How the dynamics of media economics was turned on its head and how thinking and planning must become the most valuable assets in marketing communications.

The world of marketing communications has dramatically changed in the past few years. You will be familiar with the statistics that are frequently exercised to demonstrate the rise of social media. If Facebook accounts were national population then it would be the third most populous on the planet – succumbing only to China and India. More than 500 Billion minutes are spent viewing Facebook pages every month. I don’t even want to think about the implication that has for the world’s productivity…YouTube has 24 hours of new video every minute.

There is no doubt about the gravity of social media as an influential force in the world. As a subset of the world – that means it influences marketing and marketing communications.

There has been decline in ‘legacy media’. But that decline is less interesting than the rise of social on the business radar.

But here is the nub of the problem. The economics of contemporary media are somewhat different to the economics of post World War 2 mass media.

Rewind: Before 1984 (in NZ) advertising agencies derived most of their income from media commissions. Owners of the media appointed agents to sell time and space (hence advertising agency) to marketers on their behalf. Agencies were ‘accredited’ by the media. This was the equivalent of a license to print money.

If an advertising agency’s client spent a million dollars under the system of accreditation (pre 1984) they received $150,000 for booking the media and a further $50,000 for ‘prompt payment’. Given the terms of accreditation prompt payment was assured.

So, aside from the difficult business of coming up with ideas with which to fill the time and space, making money in advertising was a doddle.

Here’s the other twist: Advertising agencies would relinquish their golden goose if they rebated any of the commission to their clients. They had to keep the cash.

The problem arose when the business was deregulated in ’84 – a curiously out-of-character move by the Muldoon government which had a propensity toward central control and status quo.

From there on marketers (AKA clients) were able to negotiate terms with the agency. A client that spent millions in media could now argue that a week of media planning and buying for a year campaign was worth three percent and not 20 percent of the budget.

Where creative work had been underwritten by media spend it was now something of an orphan. Clients had been spoiled by the fact that creative was thrown in at the cost of an hour but the thinking behind execution was subsidised by the commission and could not be recovered. Planning and house cleaning suddenly had exactly the same monetary value.

While execution could be valued the thinking behind it could not.

And then…along comes no-cost media.

Media buying and selling is a low value service.

Coming up with headlines and pretty pictures is a low value service.

Creating innovative business ideas and communicating them well at the lowest possible cost is a high value service.

The future of marketing communications doesn’t depend on the skill in tweeting or setting up a Facebook fan page.

Marketing needs big ideas that differentiate you from your competition. It relies on people feeling they are part of something bigger than themselves alone – without  simply becoming part of the herd.


  1. Fine to know all this interseting stuff. nice wokrk!