January 29, 2019 Dan Wilson

There are no winners in the current media model

There was a very interesting article on The Drum last week. The topic was about the business cycle mainly, but what caught my eye was some stats from Samuel Scott.

After the 2008 stock market crash, newspaper advertising spend in the US fell by 27%; radio, 22%; magazine, 18%; outdoor, 11%; TV, 5% and online, 2%. The entire ad market declined by 13%

These are pretty significant numbers. Whilst the fallout from the financial crisis was bad on many levels for many people, this is the first time I’ve seen macro data on ad volumes. I’d love to know the source if anyone has any insight (I’ve pinged Samuel on Twitter).

One of the key tenets of LMX is that advertising is the ultimate barometer of economic activity, but what happens in practice for media owners, media buyers (agencies for the most part) and actual advertisers is up for debate.

What is clear is that there are no winners in the current model, especially when a business cycle turns.

In the current model, media owners obviously get squeezed first, and I seriously doubt if any media owner would claim that programmatic actively helped them trade out of a recession.

In the current model, Media buyers are stuck in a dichotomy of needing to service their clients properly and attempting to deliver return on ad spend, whilst being held to their own internal targets. Some papering over the cracks has gone on for many years here, potentially to the extent of using rebates from media owners to prop up their balance sheets. The real effect, or the perceived optics of this, is a terrible business outcome.

Advertisers themselves – the ultimate losers in this scenario: fixed prices from agencies in most cases, no real insight into true market pricing, which in turn drives suspicion of the agency business model.

We speak to lots of people with years of experience in the financial markets, and they are incredulous that media trading is so basic. They laugh at programmatic being limited to private dark pools with opaque rules (SSPs in our world). They shake their head in disbelief when they finally understand that only a handful of people really understand what the price of a TV spot was.

The buying and selling of advertising has to be made better – more flexible, more transparent, more trusted. LMX is driving that change.

Here is the link to The Drum article: If there’s a recession in 2019, here’s what marketers should do

STAY IN TOUCH

Say hi, send us a partnership opportunity, request a demo, or send us a CV