With online advertising's projected 20-plus percent growth rate this year far outpacing other media outlets, traditional media is feeling pressured to become more like it, according to ad executives and industry analysts.
Google, the leader in online advertising, is already capturing more advertising dollars than newspaper giants like The New York Times and Dow Jones, and its market cap is well above Disney's. Its success has been driven by an ad system that delivers targeted ads, measurable results and stock market-like pricing.
Now, marketers are beginning to demand that level of accountability from offline media, which make up the lion's share of their ad budgets. "I think traditional media is beginning to see the impact of a powerfully effective and measurable medium," said Fredrick Marckini, CEO of Aegis-owned iProspect, an Arlington, Mass., search-advertising agency.
An early sign of change comes from the much-maligned newspaper industry, which is suffering from declining readership and circulation scandals. The Boston Globe this month began an experiment to offer dynamic pricing, much in the manner of Google's ad auction, to tie its ad pricing more closely to performance. Advertisers and agencies bid for the premier placement on The Globe's Sunday print employment section. The minimum bid is $15,000, with increases in $500 increments.
"You don't have to be a genius to look at Google and say, 'What's going on there?'" said Tim Murphy, general manager of BostonWorks, The Globe's job classifieds division. "I can't think of any reason why the dynamic pricing model and pay-for-performance can't work in print."
While the rate card for the front-page employment ad is $39,500, the minimum opening bid for the ad space is $15,000. Murphy hopes the auction, once it is fully in place in a few months, will give him a better idea of the ad space's true value. "We're seeing a lot of clients asking us for accountability—the kind of accountability they get online," he said.
The Globe's experience could herald other changes in traditional media driven by online ad models. Google is eyeing the general brand advertising market as an opportunity to expand its reach. The Mountain View, Calif., search giant last month expanded its AdWords auction system to include Web display advertising. Likewise, Microsoft is developing an ad system called MSN adCenter, which allows advertisers to place bids for search and display advertising in a single auction. Microsoft executives said the system would eventually include other media, including interactive television, though that remains years away. "I believe that as many challenges TV faces, they have more opportunities," said Joanne Bradford, MSN's chief media revenue officer.
The introduction of interactivity to TV will make it more measurable, said Joseph Jaffe, author of Life After the 30-Second Spot (Adweek Books/Wiley), and this will inevitably lead to pricing based on actual audience, not potential. "Interactive is a microcosm," he said. "It's a glimpse into the future of all media."
Interactive TV and ad-supported video-on-demand markets will become common in U.S. households in the next few years, said Forrester Research analyst Josh Bernoff. In a world of time-shifted media consumption, the future TV advertising model, he said, would be a cross between user-initiated long-form advertising and pricing tied to clicks. "I'm going to have better accountability about what audience I reached," predicted Jeff Marshall, svp at Publicis Groupe's Starcom MediaVest Group.
Bradford said traditional media's adoption of targeting and efficient pricing models will allow advertisers to establish deeper connections with consumers who elect to interact with their messages. "The kind of interaction you have online will ultimately come to TV," she said. "There's a world of possibility of really understanding how people respond to messages."