HotHouse makes brands work for people online

Podcasts, shared video and declining TV audiences are ringing in the new marketing age writes Simon van Wyk.

Twelve months ago a respected Advertising Age columnist wrote a controversial treatise heralding the online revolution that is threatening to swamp the advertising and marketing industry.

The early warning signs were the dramatic decline in network TV audiences, a tripling of the cost of reaching households through prime time TV, a dramatic increase in the time spent on the Internet compared to watching TV, and an eight-fold increase in broadband penetration on the last five years.

The columnist, Bob Garfield, bemoaned the lack of action on the part of the advertising industry to prepare for the coming change and predicted the appearance of “The Chaos Scenario”, which he labelled, “a period of serious disruption moving like a tsunami through the marketing business as well as the economy and the broader society itself”. This is revolution and first we will be awash in the blood of the old guard.”

That article was written before Rupert Murdoch bought social networking site MySpace and before video-sharing site YouTube was even launched. According to Nielsen/Netratings, YouTube now accounts for 3.9 per cent of global internet traffic each day.

Australian marketers take note

The flood warning has now been issued for the local industry. A recent speech by Kim Anderson, COO of independent television company Southern Star Entertainment, echoes many of Garfield’s themes, particularly regarding the long-term effects of broadband availability on the television industry.

Anderson noted that the official Big Brother website (produced by Southern Star) has had more than 2.2 million page impressions per day and six million live streams downloaded by more than 530,000 registered members since the latest series kicked off almost three months ago. She said this proves that young viewers are demanding more from the TV networks.

She said the Internet is within two years of “completely changing the landscape of television”, but warned that Australia’s commercial TV networks have not prepared for the change.

Quoting recent OZtam figures that show TV viewing audiences have declined by nearly 6% in the past five years (fuelled by a 17% decline in the 16-39 age group), she stated that “television networks as a priority need to develop the standard business model for distribution of their content over the Internet, in order to stay relevant.”

Anderson said broadcasters are also facing the “perhaps more potent movement” of democratised content, represented by sites such as MySpace and YouTube.

The new landscape

I don’t know if she has read Garfield’s article, but her metaphors are identical. “The internet for TV is like an impending tsunami,” she told her audience at the Trans-Tasman Business Circle in late July. “It appeared on the horizon 10 years ago and, like a tsunami, promises to completely change the landscape.”

“I believe the next two years, largely due to the take-up of broadband, will be the time when the existing landscape will no longer be relevant and a new landscape will dictate everything from our approaches to our audiences and advertising.”

She said broker Merrill Lynch expects Australian commercial TV’s share of the total advertising pie to decline from 31.8% today to 28% by 2010. But she said current responses to the threat, such as streaming current TV shows over the net with a few ads attached, do not represent a viable business model, particularly in Australia.

Of the $161 million to be spent on Internet advertising here this year, only 32% is for ads surrounding online content. A 13-part drama series now costs a TV network about $7.8 million, so to recoup those costs on the internet it would take 4 million downloads over the series or 308,000 paying, online viewers per episode.

It’s not only the commercial TV networks being affected by online trends. The Sydney Morning Herald recently reported that podcast (audio archives of past radio broadcasts) downloads from the ABC website are predicted to top 2 million per month by the end of the year - for some programs, more people are downloading podcasts then listening to the live broadcast.

Meanwhile, following a strong recruiting effort, it is estimated that nearly 1 million Australian homes have taken up Foxtel iQ, the digital video recorder that enables programs to be recorded to a hard drive, making it easier to skip past ads during viewing.

Media has changed

I believe these developments show that the definition of media has changed. It used to mean 9, 7, and 10 - now media means your own website. There is a shift from using ‘rented media’ to ‘owned media’. Having your own website means you have more control over your image.