Monthly Archives: March 2013

Video Killed The Video Stars

All signs are pointing to a major disruptive event in video distribution and consumption in the very near future. Like tomorrow, not next decade. Cord cutting, over-the-top boxes, smart TV’s, streaming video, the growth of zero TV households and a YouTube upfront with original content will have major impact on traditional producers’ and distributors’ ability to draw audiences and acquire quality programming.

A few years ago the world went crazy for UGC videos. Some were marginally entertaining—OK, funny cat videos NEVER get old. Most were big wastes of time but tons of people showed up to view them. These were fun content snacks but, in most cases, not the quality writing, acting and production values that we are used to. As long as the traditional distributors could acquire video product of higher quality they could stay ahead, we thought. Well that is changing as we speak.

27 million Netflix video streaming subscribers is something to take note of. The fact that they are acquiring high quality first run content—House of Cards tells you that they are giving HBO (29 million subscribers) a run for their money. Add to that 5 million ROKU, 3 million Hulu PLUS subscribers and the cumulative total of Aereo, iTunes, Blockbuster OD, Amazon Prime, Cinema Now, Vudu, Android Market, etc. and we’ve got a fast changing game.

YouTube is having an upfront ad-selling season. Their live streaming stunt with Felix Baumgartner (Red Bull Stratos Jump) was a success. This doesn’t bode well for traditional video providers who once prided themselves on live content.

Here’s what CBS is doing about it. They are now airing older episodes of one of their best programs, “The Good Wife”, on Amazon Prime BEFORE they air in the traditional secondary market and a Stephen King miniseries within days of its original network airing.

Let’s see where this leads. Read more below:

http://nyti.ms/13CiERV

http://bit.ly/XU4e8N

http://bit.ly/YY0iTN

http://bit.ly/10NPDSN

The REAL Downside Of Measuring The Wrong Thing.

Last week I sparked some interest in the discussion of market mix models not properly measuring the impact of advertising. So, let’s continue that discussion, and as always, I invite comments/critique.

One way that ROI can be calculated is shown in the following financial equation:

Image

If a marketing mix model cannot properly measure advertising “Lift”, as I insinuated last week, then the model equation is always going to look for ways to drive advertising spending down, by way of cutting weeks, cutting unit length and cutting the highest priced inventory in the ad mix. These cuts are all to the benefit of things that the models are better at measuring, – price and trade promotion. As ad budgets are cut, promotion budgets are gaining.

Think of it this way; I mentioned last week that the models are understating the impact of advertising on sales because advertising is being evaluated on total sales rather than penetration/trial. Therefore the cost-based adjustments the model suggests are self fulfilling.  Because the advertising “Lift” outcome is artificially low, advertising decisions become driven by cost efficiency.  Years ago CPG companies spent the majority of their marketing dollars on advertising and now, because of the bad advice given to them by a flawed modeling approach, the ratio is more like 2:1 in favor of price/trade promotion.

What’s a marketer to do? Buy tons of cheap cable and :15 units instead of Prime and higher rated shows. What we’ve seen from companies who have adopted this approach are years and years of low single digit sales growth driven by the math financial formula shown above.

On the other end of the spectrum, we’ve seen instances when CPG companies have had to reallocate Prime inventory originally secured for a new product launch—the rare times these brands ever get any premium priced TV time—because of a delay in the launch. The established brands, even with only a few airings of Prime, show penetration gains in those weeks by 75% or more.

Time and time again we see brands that have the richest mix of Prime in their TV mix have the highest incremental penetration—assuming their copy is good. We’ve seen penetration multiples of 3X vs. off air weeks. Going back to the formula above, if we can increase the lift we can improve the ROI – even if we spend the same amount of marketing money in marketing. Don’t get caught up in the race for efficiency at the expense of growth. Don’t measure your media against audience metrics/CPM. You can achieve remarkable growth if you stop listening to the marketing mix modelers.

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