mikal rohde

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Media revolution

Some thoughts for reflection

Elvebakken VGSMikal Rohde; October 29, 2009

We are in the beginning of a digitalized media revolution. The changes we see will effect all marketing processes. Change in media consumption happens more rapid than we are able to recover

The users takes control, and we have to live with it

3

”There will be no media consumption left in 10 years that is not delivered over an IP network. There will be no newspapers, no magazines that are delivered in print form.”

Steve Ballmer, CEO Microsoft in Washington Post summer 2008

”Printed news will become occasional luxury items”

Craig Newmark, founder of Craigslist

”The truth is that the newspaper business is still a huge industry and will be around in one form or another for the rest of my life”

Chris Anderson, editor in Wired and author of “The Long Tail”

“News is eating itself: needs new media business models for journalism”. “Search will see its overall share of online ad dollars swell from 45% this year to 48% in 2009 as other segments slow down.”

Paul Brandshaw, Birmingham City University

But Google delivers……

4

So what will the future bring?

We don’t know!!

What do we know…

• Few companies truly understands how to survive and prosper in the internet age

• The understanding will be key to be able to navigate in a world that is under constant radically change

• Effective and international free distribution encouraging new services from new players

• Tagging and tracking users and their interest and behavior will create customer segment down to one

• The user engagement will create new exiting services

• In the “old days” media decided what the ad cost was. Now the advertiser decide

• Our ownership models doesn’t work as well

Two major challenges in the media business today

7

Media businessFinancecollapse

Structuralchanges

What will be the position after the wave?

8

The Economist, August 2006

Schibsted - a worldwide exception within newspaper business

Schibsted

10

Not afraid to cannibalize ourselves

NOK million

8696 98 99 93

72 6856

4426 24 22

2943

6483 95

12

0

30

60

90

120

150

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 E2006

Aftenposten

FINN

Aftenposten and FINN charge approximately the same for an ad, about NOK 200-300

8085 87

107

90

117

Aftenposten vs. Finn - Cars

11

Online activities’ share of Schibsted’s operating profit (EBITA1))

-4

13

2

2420

15

43

62

131

93

6664

46

4330

23

45

1

-2

6 8

150

2929 15

28

53

-20

-10

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Percent

2002

1) Reported EBITA excl. associated companies

2003 2004 2005 2006 2007

Quarterly

Rolling 12 months average

2008

12

Split online vs offline revenues and EBITA

3536

76%75%75%

91%91%93% 90% 88% 87% 85% 84% 82% 80% 80% 80%77%

24%25%

25%

9%9%7% 10% 12% 13% 15%16% 18% 20% 20%

20%23%

3182

2,497 2,6432,432 2,2602,557 2,697 2,907

3,487 3,359 3,450 3,1793,622

3,448 3,574

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Print Online

109%

515

345 322361

443

224

139

40%38%55%41%53%

49%62%

66% 63% 67% 63%43%

59% 51%88%

60%62%45%59%

47%

51%38%

34%37% 33% 37%

57%

41%49%

388407

251 251197

245193

319 299

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Revenues

Adjusted EBITA

NOK million

2005 2006

2005 2006

Note: EBITA excluding operating loss from new initiatives and income from associated companies.

2007

2007

2008

2008

1393 1403 1391

14811522

1571

16551696

18471912

19852047

1384 13681321

1358 1343 1349 13761334 1356

12941228

1168

2281

149

266

364435

537

664

866

1062

1222

1380

0

500

1000

1500

2000

97/2 98/2 99/2 00/2 '01/2' '02/2' 03/2' 04/2' 05/2' 06/2' 07/2' 08/2'

Total

Paper

Online

Daily readers (000)

Source: Forbruker & Media.

Totally we reach more

people

Not less audience, but different

Source: Morgan Stanley, The Internet Advertising Report

Introduction of new technology in USA

19

30

19

20

19

40

19

50

19

70

19

80

19

90

19

25

19

35

19

45

19

55

19

60

19

65

19

75

19

85

19

95

120

100

80

60

40

20

0

Millionusers

Internet(World Wide Web)TV

Cable TV

Radio

Telephone

20

00

20

05

Speed of change increasing

7 trends in media consumption

1. From periodic to “just now”

2. Fragmentation

3. Mobility

4. Ego orienting (web 1.0 to 3.0)

5. Demand for speed in development, but not everything works

6. Modern consumers have “some of each attitudes”

7. Digital overflow creates mental limitation

10%

20%

30%

40%

50%

60%Buyer of newspaper

Under 30 years 30 – 39 years 40 – 49 years Older than 50 years

23%

18%

41%

18%

8%

10%

20%

62%

Part of population

We hope they live forever…

Less time reading printed newspaper

…. not only newspaper……

18

US population vs Newspaper readers

0

50 000 000

100 000 000

150 000 000

200 000 000

250 000 000

300 000 000

350 000 000

1940 1950 1960 1970 1980 1990 2000 2005

Daily circulation up 33%

Population up 118%Gap

Working women

Youth

Single households

Immigrates

New technology

Shift in behavior

Wilkinson INMA 08

19

Evening News, 1945-1970

6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00

News consumption

Wilkinson INMA 08

20

6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00

Morning news, 1970-2000

News consumption change

Wilkinson INMA 08

21

6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00

Diversified , 2000->

News consumption change

Wilkinson INMA 08

22Source: Mediaedge:CIA

Increased complexity

Wilkinson INMA 08

Media companies challenge Disruptive media

Traditional media

PushEditorial

PullSearch

New

Today

High revenue

High cost

Lower revenue

Lower cost

Do we have the right business models to support the new age?

Storm, climate change or hurricane?

Print product

New user habits

Radical innovation

Economical down scaling

Technological innovation

New players

Analog vs. digital

Digital reflex camera

Digital camera

Analog camera

Kilde: NGN prosjektet 2008

Readers use the newspaper different today

• Traditional– General news

– Information

– Last news

– Kept updated

– Get known

– Common information

– Participate in day to day discussions

– Daily routine

• Today

• Conclusion

• Info in depth

• Telling a story

• Inspiration

• Relaxing

• Education

• Self esteem

• Knowledge for analysis

• Individual knowledge

News as product

• Dictated by production and distribution

• Owned and controlled

• Centralized

• Once a day

• One way

• One message fits all

• Perfection as a standard

Network model

• Collaborative

• Not all owned, joint platforms when feasible

• Enabling other to build content to your services

• Extracts minimal value to grow to maximum size

• Critical mass faster, cheaper

• Sharing ad system

• Tailor-make content and distribution systems to be able to sell content

• Build traffic from other sites

31

Digitalization makes everything possible

• Digitalization is changing the media arena

• General content is “free”

• Aggregation services will grow and new services will be built on your content

• Advertisers will demand effectiveness for ad spending via content relevancy – context, geo, behavior and demographics

• New business models will change roles of players • User habits change• Business rules change • New players enter the market• Not only a technical issue

– Prices, terminals, access and regulation

32

What will disruptive technology do?

• Substantial shift in business thinking –threat towards current business models

• New opportunities – also for the media sector if we understand what to do for the customers and advertisers

– New products

– New business models

– New advertising platforms - network

34

Media business model today

Navigation

35

A challenge?

Ad market ahead

• Traditional media channels will be threaten – Offline to online

– Advertisers demand ROI

– Ads and listings will be sold on action basis

– User knowledge in depth will tailor-made ads

• Revenues will follow traffic, service and users – Transaction based payment

– The largest traffic and best service win

Fase 2

Media & Kommunikasjon

39

Factors of Media Use

Factors of

Media Use

Technicalrevoulution

UserBehavior

Available Time

Accessibility Of

informationConvergence

Demo and Socio Trends

Adsolutions

IFRA Scenarios of Media Use

41

Context

Content

User

Ads and

More content

Context Driven Business

Are you willing to pay for content?

42

You have to offer something different• Tailor made content• Exclusive content

• Exclusive distribution• Your content

One to many

Online offer today

One to one

New opportunities

Long tail

Large advertisers

Small advertisers

# 2’s challenge in Europe!

RPM

Time

RPM = revenue per 1000 search

Google network

Alternative network

!

What do we need to do?

• Take the Google medicine!

• Create an advertising network based on “the Google philosophy”– Build the network strong by;

• Seek local strong partners on traffic

• Build and control the ad system our selves

• Build more intelligent contextual systems for advertisers

What do we need?

Ad handling system

Ad format Ad format

Distribution - network

Sales

ContentContextGeoDemographicsBehaviorSearch

Examples

We analyze the text

And proved a Tailor maid ad

Helt ny iPhone 3G 16 Gb selges kr 4.000,-

Ulåst i ny forpakning

Litt brukt iPhone 3G 8 Gb selges for kr. 2.000,-

Åpen for alle nett

Helt ny iPhone 3G 16 Gb selges kr 4.000,-

Ulåst i ny forpakning

Litt brukt iPhone 3G 8 Gb selges for kr. 2.000,-

Åpen for alle nett

Helt ny iPhone 3G 16 Gb selges kr 4.000,-

Ulåst i ny forpakning

Litt brukt iPhone 3G 8 Gb selges for kr. 2.000,-

Åpen for alle nett

Helt ny iPhone 3G 16 Gb selges kr 4.000,-

Ulåst i ny forpakning

Litt brukt iPhone 3G 8 Gb selges for kr. 2.000,-

Åpen for alle nett

Helt ny iPhone 3G 16 Gb selges kr 4.000,-

Ulåst i ny forpakning

Litt brukt iPhone 3G 8 Gb selges for kr. 2.000,-

Åpen for alle nett

Content match between product for sale and the cover text in the newspaper

Mobile – why will that be the new arena for ads?

• New technology will provide much more traffic

• All handset providers will follow the Apple way to make handsets

• Cost of communication will be predictable

• We know where you are

• We know what you do and are interested in

• Everything will be available on the mobile

• We have all kinds of advertisers and messengers to connect to you

Price High Lower Flat rate

Speed Low Acceptable - High and getting

higher

Content Poor (www) Better (time, place &

personalization)

Good

Handset Poor Difficult to use still Good (iphone,

Ericsson X1, etc.)

TodayBirth of the mobile 2009

The time is now!Mobile 2.0

StandardsWeb ServicesWeb as a PlatformUser-centered

Mobile 1.0

ProprietaryWalled GardensFirst to marketBrand-centered

Mobile content usage

06.00 24.00

Breakfast

Commuting

Lunch

BreaksCommuting

On the sofa

In bed

Need for a differentiated ad system

”The most obvious large space of advertising is the mobile internet”

”The next big wave in advertising is the mobile internet ”

”By these products, the advertising gets more targeted because phones are personal ”

”Yes, mobile will be a larger business than the PC-Web. But it will take a few years”

US Mobile Advertising Revenue Silicon Alley Insider

Transaction based ads also on news sites

News aggregatorContent for all news stories, clustered

Other stories

Persons in the news today

Different navigations

New business currency

• User engagement

• New distribution via social medias

• Free distribution

56

Largest sites in Norway

100%

0%

EBITDA margin

Size vs second player

1x 3-5x 8-10x

Desired position

50-70%

30-50%

5-30%

Desired position

“Returns on scale” works for all online

verticals?

Learn how to earn money in the structure

59

Front pages can do a lot of things but not all

Relative importance of search Distance from front page

e

C

P

M

e

C

P

M

We have to index

the specific content

for monetization

and paid content

• Aftonbladet’s web TV had more than 1,13 million unique visitors per week

• “Fanthomas” to date had 8.000.000 viewers.

• VG live TV has an average of 250,000 UV per week, an increase with 18% since 2008

61

Web TV viewers – new record

Mobile

What is mobile?

• We have to define our position in mobile

• Value creation– Content

– Apps/browser

– Ad network

• How to build successful services

• Timing – Handset

– Data traffic

Owned vs. outsource

Ads

DistributionProduction

Editorial

Editorial Ads

Production Distribution

Revenue models

• Where is the value?

• Where are the opportunities?

• New open ad network

• New industry networks

• Hyper local networks

• New ad models (behavior, context)

• New measurement

Today’s traditional revenue model

Ads50 %

Subscription

50 %

Many new revenue models are needed

For å redigere footer > View > Header and Footer

66

Process for monetization via ad network

Methods

Format

SystemSale

Distribution

ContextBehavior

GeoDemo

BannerText links

Web, mobile, TV

Ad handling Auction model

Billing

Self sale Self service

Agencies

Own distributionNetwork

Flexible usage

Conclusion RationaleAlternative

Not attractive To small alone to challenge Google

Limited profitability individually Separate activity

Recommended solution Cost synergies – system and sale

Higher revenue per click due to more effective action and wider distribution

Large network that will attract more local distribution

Cooperation

Not attractive Give most revenue on short term

Not attractive to let the largest competitor to run our prime business

Co-operation with Google

Alternative models for ad network

Online media represent a substantial inventory

Owners

Control fees and revenue share

Distribution partners Increased revenue up to Google

level. Be an alternative to Google

AdvertisersAn alternative network for

performance and action based ads

10-15%

65-70%

Marked - # søk*)Market - # of searchs

Marked - # sidevisninger**)Market - # of page impressions

Why should we build our own network?

The big picture

Self Service

KAMDirect

KAM Agencies

Other

Agencies

Own *)Sale

*) Own sale = sales from independent brands

System

News

Directory

Bing

Yahoo

Classified

Other

SalesSystem

Distribution

Methods

Value creation for an ad network

71

Relevant web traffic

Match rate

Click rate

Price per click

Gross revenue

Main contribution

happy advertisers and distribution partners

Directory

Alternative traffic attractiveness

Search oriented Pull

Content oriented Push

Low effectiveness

High effectiveness

Classified

Vertical

portals

Vertical

news

News

Communities

Search

“No content will be sold, if we neglect to offer the buyer a easy and effective way to pay”

E -reader

Who will control this business?Would you like to own the value chain, or only be a content provider?

Content the users are willing to pay for?

• Exclusive and unique articles (if presented well to the user)– Historical archive, print, pictures and video

– Guides (travel, business)

– Time limited subscriptions (PDF newspaper for a day, football match)

– VOD and POD

– Pictures and other relevant content

• Subscription services – Fix and recurring subscriptions (PDF newspaper, football video, film channels)

– Payment for e-reader news services (tailor-made content)

– B2B services (new agent)

• On time payment for listing fee– Listing of items for classified services

• Goods sold– Books, magazines – on e-reader or as PDF to web

– Music, videos

• All kind of mobile content (alternative to CPA)

75

Summary

• Readers worth less (online less than print)• More competition (All types of channels are challenge your

business with more advanced services and user offers based on your content)

• Lower cost (New productions are more effective to produce and distribute. Ads are available with without any sales effort form several sales network)

• Share some of your platforms (You don’t need to own your own platform to create traffic and visitors. The marketplace is not exclusive any more)

• Content will be free (We dream about that users are willing to pay for content provided. The wide range of producers and contributors (professional and private) will still do the content free in general. Unique content or distribution presented as the user will have it will enable some willingness for payment )

Recipe

• Face the challenge

• Get out of the box

• Use the tools for the new age

• Think network economy

• Just do it

…….if you don’t do it, somebody else will do it for you

“The best way to predict the future is to create it”

Verdikjeden i medieproduksjon

Kreativt Publisering Format

Tekst Foto

VideoRegi

Research

DeskingProd system

PapirNett

E-bokMobil

TV

Brukergenerert innhold

Utviklingsløp

Basis Kunnskap (VGS 1)

Fagkunnskap (VGS 2)

Drift og fordypning

(VGS 3)

Forventninger

VGS 3

VGS 1

VGS 2

Mål og mening

Modell for opplegg

Basis Produksjon

Tekst

Foto/video

Desk

Grunnmur

VGS 1

VGS 2

VGS 3

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