Knowledge Bridge

//Kevin Anderson /April 11 / 2013

Traditional versus digital ads: ‘Reach’ versus ‘each’

In the early phase of any media transition, we rely on what we know and try to adapt the thinking of the current medium to the new media. In the early days of television news, broadcasts were often little more than a radio newsreader sitting in front of a camera. It took time for us to understand how TV was different and how best to use this new visual medium.

The changes in thinking needed to effectively adapt to a new medium are not just editorial but also commercial. Alan Mutter, who has worked in newspapers and in digital media start-ups, has succinctly summarised the changes that digital media has brought to advertising as a matter of the traditional media model of ‘reach’ versus the targeted digital model of ‘each’.

Pre-digital advertising relied on reaching as many people as possible, while not being as concerned with targeting specific audiences or consumers. To the extent that it was possible to reach specific consumers, it was done with special sections in newspapers or magazine content. Digital advertising allows much greater targeting, and Google’s commercial breakthrough was to deliver ads based on what people are searching for. The logic goes that if someone is looking for a holiday flight then they might also be looking for a hotel or rental car. Print media were woefully late in grasping this key difference in advertising strategies. While Mutter is discussing the US market, the changes in digital advertising are universal and relevant to any market. In fact, in some markets in the early stages of the digital transition, his insights are in some ways even more relevant and could help news businesses to avoid the strategic blunders made by the US newspaper industry.

As we’ve discussed a number of times here on Knowledge Bridge, one of the biggest challenges in the digital transition is that news organisations face a new class of competitors for digital ad revenue, and one of the biggest mistakes that newspapers, in particular, made is that they continued to view their competition as other newspapers or other news media, instead of appreciating the competitive threat posed by new digital competitors such as search engines and social networks. Looking at more than a decade of data, Mutter lays out the dire consequences of this miscalculation:

 In less than a dozen years, this upstart start-up built a $46 billion advertising business that was twice as large last year as the combined print and digital ad sales of all of the 1,382 daily newspapers in the land.

He produced a graph, looking at newspaper print and digital ad revenue versus Google’s ad revenue. In dramatic terms, the graph shows how US print advertising has utterly collapsed since its peak in 2005, while Google’s advertising revenue was 15 times greater than all US newspapers digital ad revenue in 2012, Mutter says, based on figures from the Newspaper Association of America.

Mutter accuses the newspaper industry of a lack of imagination and says that it simply tried to apply the traditional advertising model to digital, while completely failing to understand that a different advertising model based on harnessing user data to deliver highly relevant, targeted and efficient ads was dominant in digital. Mutter says:

Newspapers (along with magazines, billboards and broadcasters) represent the traditional but inefficient “reach” model of advertising, which depends on spreading a commercial message to as large an audience as possible in hopes of connecting with qualified customers who happen at the moment to be receptive to it.  Google, on the other hand, represents the highly efficient “each” model of advertising, which lets marketers put customized commercial messages next to only the results of searches containing specific keywords they have selected to target their ads. The Google system not only enables marketers to target exactly the right prospect at the right moment but also makes it remarkably easy to monitor response rates and, thus, measure an ad’s return on investment in real time.

The key question for publishers and media executives is how to respond to this competitive threat. Mutter gives some advice.

• Know your audience. Invest in technology that allows you not just to know how many unique visitors you have on your site but also as much as possible about what they are reading, who they are and what are their interests.
• Invest in ad targeting technology. Companies such as Crowd Science provide ad targeting services that will help you deliver much more relevant, and therefore, better performing advertising.
• Use specialist or niche content to sell ads relevant to that content. It isn’t a digital innovation that if you have a food section that you sell ads for restaurants, grocers or other food-related businesses. If you have a fashion section, again, you’ll want to make sure that your clothing and other fashion-related clients know about the opportunity to reach interested members of your audience.

Understanding this key shift from ‘reach’ to ‘each’ advertising will help you develop strategies that more effectively compete against new digital competitors as you seek to grow your digital advertising revenue. The game has changed, and you need to grasp these changes if you want to win.

Article by Kevin Anderson