When an Online Ad is in a Wrong Place

If someone was today reading a BBC News’s coverage about the tragic Air France Mid-Atlantic jet crash (June 1st, 2009), they would have noticed Korean Air’s “The world is my destination” marketing campaign run in a totally wrong place. Naturally the subject is not the best context for the advertiser and it is also reasonable to assume that it doesn’t serve BBC’s purposes either. It has to be purely an unfortunate result of fully automated ad placement process.

Recommended Reading: Reinventing Your Business Model

A quite a while since the previous post, but a break makes just good.

Harvard Business Review (12/2008) had an excellent article called Reinventing Your Business Model by Mark W. Johnson, Clayton M. Christensen, and Henning Kagermann. As the title says, the authors guide reader through the process of reinventing business model. The key steps in that process are

Creating a customer value proposition
A successful company is one that has found a way to create value for customers—that is, a way to help customers get an important job done.

Designing a profit formula
The profit formula is the blueprint that defines how the company creates value for itself while providing  value to the customer.

Identifying key resources and processes
The key resources are assets such as the people, technology, products, facilities, equipment, channels, and brand required to deliver the value proposition to the targeted customer.

Successful companies have operational and managerial processes that allow them to deliver value in a way they can successfully repeat and increase in scale.

I find their article very inspiring with practical examples and illustrations. In the past I have found combining critical success factors (here key resources and processes) and value chain analysis as very useful management tool. Reinventing Your Business Model gave new ideas and confirmed some old practices.

You find both the abstract and an interview of Clayton M Christensen from here. At the end of the interview Christensen also comments the challenges of newspapers. Take your time and check the video also.

Challenges Within the Newspaper Industry

Mikko Hämäläinen posted a great article – The Faulty Logic of Hanging on the Past – about challenges within newspaper industry. He also touches blogging, citizen journalism and evolution of media business in general. Below is his [shortened] list of key issues. I recommend to read the whole post.

• Organizational inflexibility leading to suboptimal performance and inflated cost base.
• Cultural inflexibility and resistance to change.
• Losing touch with the online generation, and with that the cultural phenomenon.
• How do you compete with free (ad-supported or not) while being profitable?
• How do you cope with the fact that cheap mass distribution of information is available to anyone?

Think Before Search – Save Energy

My colleague’s email signature says “Think before print, save a tree“. We may have to make a new one: “Think before search, and stop global warming”. Harvard University Physicist Alex Wissner-Gross estimates that one Google search creates 7g of CO2 emissions. Boiling one cup of tea creates 15g. He was interviewd by Times Online.

With more than 200m internet searches estimated globally daily, the electricity consumption and greenhouse gas emissions caused by computers and the internet is provoking concern.

Times Online also refers to Gartner’s estimates that ICT industry accounts for 2 percent of global CO2 emissions. It is about the same level as the whole airline industry. Wissner-Gross explains that “Google is very efficient but their primary concern is to make searches fast and that means they have a lot of extra capacity that burns energy”.

Newspaper Advertising Continues to Fall Sharply in US – Combination of Crisis and Declining Trend

The Newspaper Association of America (NAA) published its quarterly newspaper advertising data after third quarter of 2008. Compared to Q3 of 2007 total advertising fell 19 %. It is also really interesting that online advertising fell 3 % compared to the period a year before.

Just a short while ago I posted some publishers’ comments after Q3 interim results. They all told about significant challenges in classified sector. The NAA data reveals the same: Total print classified advertising dropped 30.9 %, Real Estate 38.6 %, Recruitment 43.6 % and Automotive 29.2 % compared to Q3 of 2007. Amazing numbers!

Though, it was already 2007, when we learned new word, subprime, and when the real estate sector started to stumble, it would be misleading to claim only the recession for the Q3 numbers. The financial crisis had not even started in full scale on the Q3 of 2008. Therefore, the summary tables above just show that current crisis accelerates the long term declining trend of newspaper advertising in US. Though not untouched from the effect of recession, I believe that online advertising will gain market share from print faster than anticipated.

Schibsted closes Segundamano and all printed classified business in Spain

An update is needed to my post couple days ago.

Based on Clarification, I wrote on Sunday that Schibsted closes its classified flagship paper Segundamano in Spain. She updated her post today. According to Schibsted’s Q3 report they are going to close all printed classifieds before the end of the year. This is how they write about it in their Q3 statement [pdf]:

Schibsted Classified Media (the former Trader companies) had Q3 operating revenues of EUR 38.4 million, 19% less than in Q3 2007. The decline is primarily due to the negative trend for print publications in Spain.

In Spain, the operating revenues from print publications fell by 54%. The closure of titles accounted for 5-10 percentage points of this reduction. It has been decided to close down all the Spanish print classified ads operations from November 2008. This will lead to restructuring costs of EUR 10 million, which will be expensed in Q4. The restructuring is partly related to a head count reduction of 217, which totals EUR 7 million of the restructuring cost.

Publishers’ comments on classified advertising after third quarter results

During the past month media companies have published their Q3 financials. I picked five of them – New York Times Company, Gannett, Sanoma Corporation, Schibsted and Alma Media.

As a summary one can say that all are already affected by the downturn or are at least anticipating some negative impact to their operations. Print seems to be the most vulnerable, but online is also negatively affected. No surprise that recruitment and real estate are most affected.

New York Times Company [html, pdf] had again a difficult quarter and will also have a difficult full year.

Total News Media Group revenues decreased 9.8 percent to $658.3 million from $729.6 million.

Advertising revenues decreased 15.9 percent due to weakness in print advertising at all of the Company’s major properties. In particular, classified advertising revenues decreased across the News Media Group.

Gannett [pdf] told huge drops in classified revenues both US and UK markets

Classified advertising revenues (year on year) were down 28.5 percent. Lower pro forma classified revenues were driven by declines of 41.5 percent in real estate, 34.0 percent in employment and 21.4 percent in automotive. For U-S. Community publishing classified revenues were down 26.5 percent comprised of 33.4 percent in real estate, 36.5 percent in employment and 18.7 percent in automotive. In the UK, classified revenues were 29.1 percent lower, in pounds, reflecting declines of 51.3 percent in real estate, 25.2 percent in employment and 25.3 percent in automotive.

Sanoma Corporation [html, pdf slides] was a very brief regarding classifieds. For people outside Finnish markets it is good to know that daily Helsingin Sanomat is the biggest recruitment advertising channel in the country.

An increase in overall economic uncertainty affected job and real estate advertising. Job advertising in Helsingin Sanomat was down 2%. Online products, such as the newspaper’s online service and the Oikotie service entity for classified advertisements, continued to develop strongly.

Schibsted [pdf] told strong performance of Schibsted Classified Media, but warned that recruitment advertising is threatened by downturn.

Continued good online revenue growth (22% y/y) and high margins in Q3. Fuelled by strong development for online classifieds in Scandinavia and Spain.

Online classifieds operations in Scandinavia will continue to develop well, but recruitment category most vulnerable to economic deterioration. Print classifieds weak.

Migration towards online media will support most of Schibsted’s activities in Spain, France and Italy, but with lower growth rates. SCM online operations expected to continue to perform well in a challenging market.

Alma Media’s [pdf] classified arm is called Marketplaces. Compared to other companies it is relatively small, but it has strong focus to online classified publishing.

The July–September net sales for Marketplaces were MEUR 8.4 (7.6). Net sales growth slowed down to 11.1%. The growth of Monster’s sales in particular slowed down due to a significant decrease in the growth of the recruitment market. The decrease in the home sales market during the third quarter did not have a marked effect on the net sales development of the Etuovi.com online service.

Picture above: Autumn colours in Töölönlahti, Helsinki, Finland. Photo taken October 2005 from Sanoma House.

Downturn and media business

The ongoing financial crisis hits directly to media. During the past weeks, companies have reported their Q3 results (e.g. NYT, Gannett). Though the financial markets have been in turmoil for whole year, it was not before October when the biggest shock hit the public; it was the worst month for decades. So, the biggest impact to advertising wasn’t visible during Q3. If there is no surprise change – or a real miracle – during the last months of 2008, we may see nasty looking numbers when Q4 results are published.

Consumers postpone major purchases like new home or car and they will consider much carefully spending in general. So the downturn is not going to hit traditional classified advertising only, but retail advertising too. Robert G. Picard estimates how decline of economy would impact to newspaper business:

In the case of advertising, a 1 percent decline in GDP produces about a 3 to 5 percent decline in advertising. So a 3 percent decline could produce a 15 percent decline in income for many media firms. Print media tend to be most affected by recessions and their declines tend to be 3 to 4 times deeper than television because of differences in the types of advertising they carry.

Yet, not only newspaper or magazine advertising are affected. It seems that CPM’s for online advertising have already dropped in US markets and therefore 2009 is estimated to be a tough year for whole advertising market including digital advertising. Tough means, that we will see more announcements of restructurings and news about dropping credit ratings.

The interesting questions are: How much online advertising will gain market share during the recession? When the private consumption starts to grow, where will advertisers allocate their money? And finally, does this increase the speed how old media declines? My bet is that online classifieds as well as other digital media will be the winners of this crisis.

Picture above taken Sept 2008 in Cafe Smyrna, Istanbul, Turkey.

LinkedIn Applications Introduced

LinkedIn has just announced their brand new Applications service. As almost everything else in online world this is also in beta phase. The selected applications such as Amazon Reading List, Box.net Files, Google Presentation and Huddle Workspaces are mostly meant for information sharing and collaboration.

Not bad selection at all for the first set of applications. In my opinion it is a good fit for their target audience – career oriented persons. More entertaining apps are left to Facebook, though sharing travel destinations with MyTravel, following Twitter discussions about your company by Company Buzz or telling what you read with Amazon tool could be considered as more lighter tools.

Introducing these applications differentiates LinkedIn further from ordinary CV databases. I consider LinkedIn as a serious competitor for recruitment portals and this is a one step that strengthens their market position. Timing for this renewal is also good, as more and more people are just now updating their profiles and entering their CV’s in various platforms. For obvious reasons.

High grade enhanced structured credit leverage fund

We’re living most interesting times: The state of Iceland is almost facing national bankrupty, central banks lowered interest rates and IMF told that this worst since 1930’s. Just amazing news!

But, was this unexpected? Well, John Fortune and John Bird (Together the Long Johns) had a good hunch in October 2007 that something is not right at all. Thanks to Heikki for sending the link.