Fortune magazine's David Kirkpatrick talks about trends in internet advertising, saying that the model for mobile internet advertising has not yet been worked out. When it does it will be personalized, localized and highly effective.
Transcript: David Kirkpatrick, Senior Editor, Internet and Technology
I'm not so sure whether social networking is going to require all publishers to completely change their game, but I will say that once people start communicating with each other more efficiently on social networks, anybody who really wants to take advantage of the digital opportunity is going to have to factor that into their thinking. It really means everything becomes more viral, everything goes through the customer in a more profound way, so that one reader, one listener, one viewer, can share that with their friends in a way much more efficiently than they every could before. I think that s the big difference.
Nothing ever goes away, that's the great thing about media. Hey, I still work for a seventy five year old magazine, we still have radio, and TV -- none of these things get supplanted by the next thing. I think you are seeing the emergence of a new form of advertising that is still really being invented, which takes advantage of the information users have created about themselves which on the internet, in social networks and elsewhere. Banners will still be valuable, but I do think that mining data and customizing marketing to the Nth degree, down to the level of the individual, is ultimately where the most results will be found.
The panel this morning was really about the structure of the advertising industry, and whether, given the predominance of digital certainly in the mind of the advertisers, the traditional model of the advertising industry where there is a buying component and a creative component makes any sense at all anymore. In general everyone agreed that it didn t, that integration is necessary, that you really have to do it all together and view buying and creating as part of one big process.
The problem is that the customers are still being charged in general based on placements in the old model and many of the new placements don t even have any revenue, so you have to come up with a new financial model between the client and the marketing agency, and that is still challenging.
Google's market cap suggests that is is a lot easier for technology companies to learn media than vice versa. Google is more valuable than any conventional media company. Google dominates online media in the sense that it is the most lucrative advertising vehicle on the internet. So, that to me proves it, and I have certainly seen it from the other side time and time again that conventional media companies have an infinitely difficult time changing their business model for the digital realities, and doing the software work required to really exploit what s now happening on the web. I do believe software is key to successful connection to today s customer and I don t think that media companies understand software, I don t think they know how to create software, I don t think they are willing to spend money on R&D. Those things are key. In the technology world, by contrast, those companies their DNA is R&D, spending, trying things, failing, trying again, software, it s all technology. And in the end they are finding it more rapidly possible to get into media by far than the old media companies are to get online, and I m afraid that is going to continue. So I have far more confidence in Yahoo s ability to figure out it s own stumbles than I do in, say, Viacom. Although Viacom is doing some things smart, they have great content, but in the long run I think you are safer to be on the web as your DNA and the companies valuations would suggest that the investors agree.
It s a matter of what scale you maintain as you evolve. I wouldn t be at all surprised if the absolute size of many of the media companies declines in terms of their overall revenues as time goes on unless they are extremely aggressive and take huge risks like Newscorp did with buying Myspace, for example. That was a huge risk, it was much criticized, it proved to be brilliant, but it was not a safe move. Even buying the Wall Street Journal was not a safe move for Newscorp. Others weren't willing to pay that kind of price. One of the reasons why Murdoch is willing do it is because he believes the Journal has such an unexploited internet brand. The Journal couldn t seem to do it on its own. Murdoch has properly asked why isn t the Wall Street Journal the absolutely dominant brand for business news on the internet? It would seem that it should have been but it is not.
I think that the economy is less likely to cool off because of the effectiveness of internet advertising, and I believe that the ability to stimulate demand that is being discovered with customized, individuated, one-to-one marketing even in it s crude form as we have today (Google being a classic example), is likely to make it less likely, certainly, that many sections of the economy will slow as much as they would in a conventional recession. The thing that really makes me optimistic is that global growth is much stronger than in the US long-term, and in the rest of the world the internet has not taken off as an advertising media for the most part (except in the UK and a few other English speaking countries and a couple of other countries in Europe). It will. That will create huge growth opportunities for those economies in places like India, China, Thailand, Brazil, Nigeria, especially as the mobile market becomes the internet. So the cellphone becomes a key means by which people get online.
Once online advertising does come into existence, then a lot of buying gets stimulated, which we ve seen proven. New businesses get created, new investing opportunities get created, giant market caps get created, and investing. The entire economy gets stimulated as a the internet takes off in a country, I think that s a given. That is going to happen in country after country around the world in the next few years. And the aspiration that the people of those countries have towards a better life is so powerful, and they have such bad lives today in so many places, that the chances that the growth is really going to slow, to me, are really small.