Advertising Industry

Pity the phone book. As more and more people turn to online search for finding local businesses, delivering the Yellow Pages to your doorstep may go the way of the milk bottle. Borrell Associates put out a report today forecasting that the yellow pages industry will lose 39 percent of its revenue over the next five years, losing more than $5 billion by 2013.

But while the hefty physical Yellow Pages may be a thing of the past, the report is unexpectedly optimistic about the future of the yellow pages industry (especially considering the title, “Say Goodbye to the Yellow Pages”).

The reason? Via ClickZ, the yellow pages industry is better suited to shifting towards online than local newspapers. From the article:

“Yellow pages publishers have spent the past three years transforming their massive on-the-ground sales forces into marketing consultants who can meet their customers’ demands both in print and online,” reads the report. “Their combined print/online packages are simple, low-priced, one-stop solutions to small-business advertising needs.”According to the report, local directory companies made about 9 percent of their gross revenues from online sales in 2007, whereas most other local media competitors hovered below five percent. Borrell estimates that directory companies will be earning one-fifth of their revenues from online sales by 2011.

Gordon Borrell, CEO of Borrell Associates, says the shift is due not just to the re-training of the directory sales forces, but to their structure.

The yellow page directories “are selling packages of ads in print at a much lower price point than the newspapers or broadcast TV or even radio guys, so they know how to sell smaller ad packages to smaller business,” he said. “So they’re able to make the transition [to online sales] a lot more quickly as opposed to paper guys, who are used to selling $50,000 or $100,000 packages. It’s harder to get their attention on a $1,000 or $2,000 ad sale.”

Over at Adotas, a Q&A  with Rubicon founder Frank Addante about Rubicon and the state of online advertising. Unsurprisingly, he sees online as the safe bet in the coming years. From the article:

ADOTAS: How do you think the softening economy will affect online advertising?

ADDANTE: I don’t think it will. Because there is a discrepancy between where consumers are spending their time and ad spending there is a natural reconciliation that needs to occur. The audience is now, for the most part, all online. Meaning, this is where the best reach is and where the ad dollars should be spent. There might be a softening in the overall advertising spend (including creative agencies) but I don’t think online advertising will be affected. Also, because one-third to half of all site traffic comes from international traffic, online advertising as a whole is less susceptible to feeling the repercussions of the U.S. economy.

Rubicon, which helps publishers find the best rates for their inventory amongst competing ad networks, has a history of optimism when it comes to online. At the beginning of July, in response to the gloomy news out of rival firm PubMatic that CPMs were down over 20 percent for April and May, Addante countered that Rubicon was seeing rates up by 20 percent.

Where Addante’s optimism is more surprising, however, is his hope for advertising on social networks. He tells Adotas:

ADDANTE: Just by taking MySpace and Facebook into account, they are making money and rapidly growing. Advertisers are following eyeballs which are spending time on social networking sites. While direct marketers may not see the benefit of increased spending on social networks, there is definitely positives seen for search and brand marketers. We’ve seen a lot for growth in brand advertising as a whole and, as it continues to grow, I think a lot of that growth will be attributed to social media.

When it comes to social networking, Addante’s rose-colored glasses may need a new prescription. Jupiter Research released a report in June that found branded advertising in social media is still failing to properly engage consumers. And while there may be growth in brand advertising, the current economic slump puts any business counting on brand advertising and ignoring direct marketing in a precarious situation.

Currently, when it comes to pushing an advertiser’s message to mobile phone users 160 characters still seems to be the best length. An eMarketer report out today shows that text messaging is by far the dominant medium for reaching out to consumers via their cell phones, while also showing that mobile advertising spending is still very much nascent. While seven out of ten people who have responded to mobile advertising said that a text message is what prompted their engagement, only one percent of American consumers said that text messaging was their preferred channel for opt-in communication.

Judging from a survey of online marketers, who should be the most responsive to mobile advertising’s promises, many seem extremely wary of putting down the dollars for mobile advertising. While 35 percent said they would dabble in mobile advertising, 33 percent said they would hold off on mobile advertising, at least in 2008. Only four percent said they were heavily investing in mobile advertising.

Still, even dabbling means some ad dollars are flowing into the marketplace. Companies like PromoTxt or MoVoxx, with an exclusive focus on text messaging, should do well in the short term. In the long run, however, the rise of the iPhone and mobile carriers offering increasingly generous data plans means the text message’s reign as king of mobile advertising is brief. As data plans loosen, and the options of consumers to contact each other through text via their mobile phones increase outside of the SMS increase (e.g. the Gtalk platform on the iPhone), the mobile marketplace will slowly shift away from the text message.

Much like with online advertising, mobile advertising suffers from both being over hyped and under served. Online and mobile will no doubt see significant increases in overall ad spending in the next few years. It’s still unclear what exact medium the spending will be invested in.

Via AdWeek, WPP global ad shop Enfatico, created to serve the marketing needs of computer giant Dell, named Lisa Fabiano talent chief today. Fabiano will oversee the development of Enfatico’s human resources department as it attempts to add 200 plus more employees, bringing total staff level of Enfatico up to 1,000.

Enfatico has had a tumultuous history. First dubbed Da Vinci, it briefly took on the moniker Synarchy, which was widely mocked throughout the blogosphere (including in this space), before settling on Enfatico. The firm, which was created to handle all of Dell’s marketing needs, is supposed to represent a new paradigm in the client-agency relationship.

Several ad blogs are already gleefully drawing out the long knives, however, noting that while Enfatico has signed a 10-year lease on office space while holding only a three-year contract with Dell, its only customer. Tribble Ad Agency was the first notice the discrepancy, writing:

What about the other 7 years if Dell throws this into review? A 100,000 Sq/Ft office in Manhattan isn’t a cheap option… and the fact that they signed a 10 year lease (when everything we are reading shows a 3 year Dell contract) is something we hoped the landlord addressed.

 Agency Spy picked up the story, asking:

Does Enfatico, the “single-client” agency, plan on acquiring more clients; are they that crazy; or maybe they measure in dog years?

To the question of whether Enfatico is hoping to land more clients, the answer appears to be yes. While currently listing Dell as its only client, Enfatico’s website states: “If your needs are as untraditional as Dell’s, you might need an agency as untraditional as ours. Somehow we could find a way to squeeze another logo onto this page.”

You can see why Enfatico is eager to find new clients (and why Enfatico’s landlord should be worried) — it looks like Dell doesn’t want to go steady with Enfatico. In response to Agency Spy’s post on the ten-year lease agreement, commenter kikimonkey replies:

So nobody is talking about the fact that Dell recently resigned Mother NY agency to work on their US broadcast tv ads for another six months. You would think that by this time Enfatico would be up and running enough to at LEAST take this over considering they don’t even do that much tv.

AdScam’s George Parker, always delightfully happy to deliver a swift kick to the ribs, caps off his own post about Enfatico with this gem:

Maybe I should start an “Enfatico Clock.” to see how long it is before they come up with a Dell ad!!!

In a particularly inspired bit of sharpening up its online ad offerings, Toronto-based UpTrend Media rolled out some new features for advertisers on music social network Last.fm — ads that move in time with the music. Via Adotas:

Current advertisers, like Converse and Motorola, can incorporate ad messages that move to the beat of the music and serve maps that offer concert listings. Companies can also target users with demographic or psychographic technology.

UpTrend Media, which signed Last.fm in April, is rolling out a whole new redesign of the site. It’s a slick move on Last.fm’s part, nicely incorporating their brand and adding fucntionality to advertisers. For publishers reliant on display ad revenue, every bit counts. An iMedia report out today quotes a recent forecast by Borrell Associates, finding:

Spending on online display ads (web page banners, pop-ups, etc.) have been flat the past two years and are expected to top out at $12.6 billion in 2008, then decline more than 50 percent by 2012.

The display ad marketplace is about to tighten considerably, so innovators like Last.fm and UpTrend should do well even as others falter.

Via PSFK, a story in the Las Vegas Sun shows how one television station is picking up some extra revenue: product placement during the morning news. Specifically, in front of the newscasters now sits tall cups of McDonalds‘ new iced coffee, in reality seven-pound plastic models designed to stay looking frosty and refreshing (the iced coffee, not the newscasters). The new director of the station in question, Fox affilliate KVVU, says its not that bad:

Fox is starting its day with a “nontraditional revenue source,” KVVU news director Adam P. Bradshaw says.

The station and McDonald’s won’t disclose how much the fast food empire paid for the product placement. But lest there be any concerns about mixing fact (the morning news) with fiction (fake coffee), he points out that the cups are put out only after 7 a.m., when the hard news gives way to light lifestyle news.

The story notes that stations in Seattle, Chicago, and New York are doing the same thing. As tradtional ads get less effective, thanks to DVRs and shrinking attention spans, product placement is continuining to take off. Entertainment Weekly conducted a poll which found that three-fourths of television watchers would rather see product placement than a commercial. At the same time, the FCC has made some moves that it may begin to reconsider its stance on product placement, and require more prominent diclosure about the relationship between television shows and advertisers. But maybe the best sign that product placement is truly taking off is that Nielsen has now started tracking product placement as part of its television metrics.

Now if you’ll excuse me, I have the strangest hankering for a smooth, refreshing iced coffee.

Update: My colleague Dan Mitchell tosses in his own two cents over at the BNET Industries Food blog, making the good point that this may backfire for McDonalds.

A more interesting question is, what is McDonald’s really getting out of this? It probably isn’t costing them much, but given all the negative publicity, is it really worth it to associate your brand with bubbleheaded morning show anchors?

Via ClickZ and MediaPost, breaking news today that Rosetta, a New Jersey-based indie digital firm is acquiring Brulant, a fellow traveler in the online waters based in Cleveland. The deal with make them one of the largest indepedent digital shops in the US, with a total of over 600 employees and combined revenues that vary from $125 million to $130 million, depending on who’s s reporting — ClickZ has $125 million, while MediaPost quotes Rosetta CEO Chris Kuenne with $130 million. From the ClickZ article:

The new agency will be called Rosetta, and the name Brulant will be phased out over the rest of the year. The combined entity will have six offices, including outposts in Boston, New York City and Princeton, New Jersey. [Brulant CEO Len] Pagon will take the title co-chairman, while Rosetta founder, chairman and CEO Chris Kuenne will keep his titles.

Pagon sounds bullish on prospects for the combined firms. He tells MediaPost, “We have our eye on about 100 companies, which can help us grow in the areas of mobile, rich media, and social networking.” To ClickZ he’s even bolder, hinting, “We are looking to expand into San Francisco, and eventually Europe and Asia, so we are looking at acquisitions that could help us achieve scale and critical mass in those markets. We are also looking to add expertise in social media, mobile and rich media. By the first half of next year I wouldn’t be surprised if we made another deal.”

eMarketer has a new report out today, showing that auto ad spend, while declining overall, is up for digital. From the report:

Automakers have traditionally been the biggest advertisers in the country. General Motors is the fourth-largest advertiser in the US, and the company spent $535 million in Q1 2008, according to TNS data cited in a July 2008 Media Life article. GM spent $2.1 billion on ads last year, which was the third year in a row of lower ad spending for the company.

Last year total auto ad spending was down 10.8%, to $12.3 billion, according to Nielsen Monitor-Plus data cited in the Detroit Free Press article.

If there is a bright spot in auto ad spending, it is online. Internet spending was up 57.9% last year, to $441.6 million.

Looking at the ad spend of General Motors two things leap out. One, as I’ve mentioned before, the company is scaling back its advertising in every area except online, which in 2007 was up 79 percent over 2006. This is to be expected, as the auto manufacturer pledged to shift half of its ad spend to online by 2011. Two, online in Q1 2008 is still only nine percent of overall ad spend. To put it in other terms, it’s a almost seven times smaller than the amount GM spent on television in the same period.

The point here is that online is a small but rapidly growing market. I firmly believe that over online ad spend will surpass television within a decade at the most – but those who still have their claws in traditional media may be better off, at least in the short run. That means Interpublic, which counts GM as its third-largest client and is just now begining to shift towards online, may fare better than fellow-GM benefactor Publicis, which has made a number of aggressive moves and acquisitions in the direction of online.

French ad holding company Publicis Groupe is pushing even further into online. The company announced today it will acquire leading South Korean digital ad agency Portfolio. The firm will become a part of Publicis’ online division, Publicis Modem, and rebranded as Publicis Modem Korea. Exactly how much Publicis shelled out for the firm was not disclosed. From the press release:

Digital advertising in Korea is a thriving market. According to ZenithOptimedia, internet ad spend grew nearly 40% in 2007 to take a 13.7% share of total adspend of nearly USD 10 billion. By the end of 2007, there were 14.8 million broadband subscribers - representing 78% of Korean households.

Add that data to a report pegging South Korean online ad spend at $1 billion last year, and you can see why Publicis is eager to snatch up a digital ad agency there. This is part of Publicis’ larger digital strategy, which has included a deal with Yahoo and moving its online mobile marketing agency Phonevalley into the US.

It also shows the continuing trend of acquisition by the Big Four as the market tightens. Better to surround yourself with proven companies in local markets than attempt to break into foreign markets.

I’ve written about Microsoft’s plan to actually pay consumers to use Live Search in past (and offer advertisers the chance to only pay per action, instead of click) before. First I said it looked utterly hopeless, and then only probably hopeless.

Now it looks like it may be time to revise that answer again — there could actually be some small sliver of hope for Live Search. Via Silicon Alley Insider, Nielsen Online has released their May and June numbers, and the data shows Microsoft with a bump of 39 percent in search engine traffic since April. From the post at SAI:

Specifically, Nielsen says Microsoft garnered 1.11 trillion search queries in June, up 6.2% from May — Cashback was launched on May 21 — and up 39.3% from April, the last full month before Cashback launched.

Company	June ‘08 MM	y/y	m/m	vs. Apr.	May ‘08 MM	y/y	m/m
Google	4,650,982	19%	0%	-9%	4,654,624	15.4%	-8.9%
Yahoo	1,310,273	-12.4%	-1.4%	-9.4%	1,328,667	-13.8%	-8.1%
Microsoft	1,108,976	12.5%	6.2%	39.3%	1,043,848	72.4%	31.1%

The article goes on to note that ComScore, the other big name in online metrics, flatly refutes these numbers, showing only a 9.9 percent jump in overall searches for Microsoft between April and June, with the numbers actually falling in between April and May. Also, Internet Explorer automatically funnels mistyped URLs into its own search engine, which may or may not be affecting over all traffic stats.

With the conflicting data, it’s difficult to tell whether the cashback program is working to help draw users (and therefore advertisers) into using Live Search. It’s easy to laugh at the cashback promotion as chintzy and desperate, but coupons, discounts, and sales are at the heart of the retail market. Especially as high gas prices see consumers staying in and shopping online, it’s possible that Miscrosoft has tapped into a way to finally start gaining market share against Google, and perhaps even to surpass waning Yahoo.