Why Rent When You Can Own?

A few weeks ago my wife and I had dinner at a friend’s house. We raved about the meal. When we got home we were greeted with a friendly e-mail from our hosts with links to the recipes. The links all pointed to KraftFoods.com. A quick look at Quantcast confirmed my suspicions — our hosts weren’t the only people getting recipes from the makers of Chips Ahoy! and Miracle Whip; KraftFoods.com is one of the largest recipe sites on the Web.

Online, we tend to think of media as falling into two buckets: “professional” digital media properties that make money through advertising; and social media, courtesy of consumers who eagerly update blogs, tweet and share videos. Increasingly, there’s a third kind of media, and that’s media owned by brand marketers. These “private-label media” sites are governed by a radically different business model that promises to transform the digital advertising business and how consumers interact with brands.

Brand marketers have begun to realize that in the digital space, it can be a lot more effective to own their own media than “rent” audience through advertising on third-party sites. Owning media promises to result in a lower cost of generating audience impressions, higher audience engagement and more brand loyalty. No wonder that increasing levels of media dollars are shifting away from display advertising and into directly producing content.

Why is owning media so much more effective than traditional digital advertising? I’ve observed four forces driving this trend:

1. Banner blindness: It’s no secret that, increasingly, consumers ignore banner ads. They don’t just fail to click on banners; they don’t even notice they exist. We did an internal study at Huge where we exposed approximately 1,200 banners to consumers engaging in normal browsing behavior. Only 2.2 percent of participants had any level of recall of online advertisements. With these kinds of efficacy issues, marketers are forced to get smarter about how they market online.

2. The dominance of search: Most users start almost anything they do online by Googling — and most Web sites get the majority of their traffic from Google. Google doesn’t care if the search result is an article from a blog, a media outlet or a brand Web site — it only cares if it’s most relevant. The result: smart content development by a marketer can shift traffic from an ad-supported media outlet directly to the brand Web site. Once content is created, the traffic is free, and it comes every day, forever.

3. Social as traffic driver: You might be reading this article because someone forwarded it to you in an e-mail or you clicked to it from a tweet. After search, the most common way information spreads online is socially. Marketers are increasingly realizing that the best way to harness social isn’t to get consumers to produce funny videos about your brand, it’s to produce content and applications that are sent around the Web and facilitate interaction. The most effective social marketers are those that control a media property that can be the anchor that spawns a continual stream of high-reach social marketing.

4. Digital as CRM: These columns are also heavily read from Adweek’s e-mail newsletter, and that’s a great example of effective digital being no different than effective CRM. Marketers are realizing that when you remove the buzzwords, eCRM concretely translates into finding a reason to get a consumer’s e-mail address and then sending them e-mails they’ll actually open and read — creating long-term customer engagement. Consumers tend to read two kinds of commercial e-mails: ones that contain amazing deals about products they want; and ones that contain relevant content that helps their lives. The data and content generated through a private-label media offering makes effective e-mail marketing happen.

With these forces at play, it’s no surprise that the private-label media trend goes beyond Kraft Foods. General Mills’ BettyCrocker.com is roughly the same size as KraftFoods.com; Lego.com is one of the largest children’s Web sites; Johnson & Johnson owns the No. 1 baby and pregnancy site, BabyCenter.com; S.C. Johnson runs RiteAtHome.com, a home living/cleaning site that powers a massive eCRM program; and both The Home Depot and Lowe’s boast two of the largest collections of DIY content on the Web. 

The pace of brands embracing their own content is only quickening. I’m aware of five major brands that are making their own media the centerpiece of their digital marketing efforts in 2010. For example, the National Association of Realtors is launching HouseLogic.com next month as a way to communicate to consumers the value of a realtor beyond just buying and selling a home.

In this new world of private-label media, what becomes of the digital media company, with its legions of editors and writers working hard to produce a great, advertising-supported Web site? As if the advertising recession and collapsing CPMs weren’t enough to do them in, now their advertisers are starting to become direct competitors. And they can be fearsome competitors at that, because private-label media properties don’t need to make money — losses are just part of the marketing spend.

Welcome to the new media landscape.

Aaron Shapiro is a partner at Huge. He can be reached at aaron.shapiro@hugeinc.com.