Message from Michael -- June 16,2008

THE RACE FOR THE MONEY

THE PROOF IS IN THE PUDDING

MORE TV IS LESS TV

MORE TV IS MORE TV ONLINE

AMERICAN I-O-U’S

COCKTAIL CHATTER

DISCLAIMER


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THE RACE FOR THE MONEY: If projections and data provided by market research firm IDC are correct, the Internet is the hare about to beat the tortoise of Broadcast TV. In five years time, the Internet will go from the #5 medium in terms of advertising dollars to the #2 medium – second only to direct marketing but ahead of newspapers, cable TV and broadcast TV. The folks at IDC say overall Internet advertising revenue will double from $25.5 Billion last year to $51.1 Billion by 2012. Leading that growth will be video advertising which the firm projects to have a compound annual growth rate of 49.4% -- much of it at the expense of broadcast and cable TV. Of course that translates into video advertising going from a relatively meager half a Billion dollars last year to $3.8 Billion by 2012. The biggest driver of online advertising will continue to be search advertising though, which the company says in its news release “means that for any media company, search must be a key part of its strategy.” I should note a couple of number disclaimers. The Internet Advertising Bureau pegged the amount of online advertising last year at $21 Billion – considerably less than the $25.5 Billion cited by IDC. Also, the last figures I saw would put the revenue for broadcast advertising higher than the $51.1 Billion projected for the Internet by IDC.

As consolation, a report by Borrell Associates says that while Internet pure-plays “continue to gobble up” most of the local online ad revenue pie, local media websites are starting to share in the local online ad revenue which Borrell puts at $13.1 Billion. Newspapers sites, in particular, “have gone on the attack” but other media are moving more dramatically into the online market.

THE PROOF IS IN THE PUDDING: Sorry to use one of the old English sayings from my Australian days, but it may be appropriate since my next article deals with the growth of the Internet in Europe. According to the Internet Advertising Bureau/ Europe, online ad revenues there were up 40%, compared to 25% in the U.S. That came to $17.4 Billion last year. The IAB says if those rates of growth continue the European online ad revenues will surpass the U.S. by 2010. Most of those online ad dollars are being spent in the U.K., Germany and France, as more companies move their advertising budgets online for the first time. Several of the smaller countries are seeing strong online growth as well, including Greece (90%), Spain (55%) and Slovenia (49%).

MORE TV IS LESS TV: It seems like a recurring theme, but yet another report shows Americans are getting more TV but watching less. Nielsen Media says the ‘average’ household receives 118.6 channels, but only watches 16 of them for any length of time (the standard being at least 10 minutes per week). I should note here that other research I’ve been involved in, shows that number to be pretty consistent over the years -- meaning, it seems to me, no matter how many channels the American public has available, there are only so many they deem worth watching or can track. To put a little more perspective on the number of channels available, more than half of American homes (58%) receive 100-plus channels while another quarter (26%) receive between 60 and 99 channels. And that ‘average’ U.S. TV home has 2.5 people and 2.8 television sets.

And to continue on that ‘adding perspective’ theme, that average TV household watches an average of 8 hours and 43 minutes of TV DAILY, according to Nielsen’s TV at a glance summary. Hispanic households watch slightly more (9 hours daily) while African American households, on average, watch nearly two hours more (11 hours and 24 minutes to be exact). The average per person is just under five hours (4 hours and 55 minutes, again, to be exact) and again African Americans watch considerably more, averaging another two hours more of TV daily. Just under two-thirds of American homes (61%) have ‘wired cable hook-ups (a figure that is done from the high of 68% in 2000) while satellite or ‘specialized antenna systems’ use is up (27% versus 19% in 2005).

And I don’t know why I find this interesting, but I do. There were no ‘suspense mystery’ programs in prime time this past season and only three programs that Nielsen classified as Adventure, SciFi or Western. Most of it was ‘general drama’ (92), followed by the generic label Variety (56) and situation comedies (33). And continuing the theme of things I found interesting in the Nielsen data, Sunday is the most watched night of prime time (126.8 Million viewers) followed by Tuesday (120 Million viewers), Monday (117.7 Million), Wednesday (116.8M), Thursday (115.5M), Friday (106.7M) and last, Saturday (102.7M).

MORE TV IS MORE TV ONLINE: As long as I’m on a kind of broadcast kick, Nielsen Online figures for “online TV viewership” shows NBC-News Corp co-venture Hulu topped the chart for network-owned portals in April with 63.2 Million video streams and 2.4 Million unique viewers. In second place was ABC.com with 60.8 Million streams but 5.9 Million unique viewers, followed by NBC.com (51.6M streams and 2.3M unique viewers), Fox Broadcasting (21.9M streams and 4M viewers) and finally CBS Television (18.5M streams and 3.3M viewers.) However, before anybody at the network goes ecstatic, a little perspective: YouTube averaged 4 BILLION video streams in the same month with 73.5 Million unique viewers.

In terms of top 10 brands, Fox Interactive came in second with 329 Million streams and 21 Million unique viewers, followed by Yahoo (221M streams and 22M viewers), Nick Kids & Family (151M streams and 6M viewers), MSN/ Windows Live (149M streams and 10M viewers), ESPN (125M streams, 5M viewers), Disney Online (93M streams and 7M viewers), CNN Digital Network (85M streams and 6M viewers), Turner Entertainment (81M streams and 6M viewers) with Hulu rounding out the top ten list.

AMERICAN I-O-U’S: In a previous MfM, we focused on Billionaire financier Warren Buffett’s annual letter to shareholders. In it Buffett also expounds on the U.S. trade deficit, noting that America ships about $2 Billion of I-O-U’s and assets EVERY DAY to the world. What he points out that is particularly disturbing is that ‘normally’ when a currency falls (as the U.S. dollar has), it cures the trade deficit because our products become cheaper for foreigners to buy and their products become more expensive for U.S. citizens to buy. Unfortunately, he says, citing figures from Germany and Canada, that hasn’t happened – their currency is worth more and the trade deficit is still in their favor. He says the increase in foreign countries buying American businesses and the weakening currency is not the ‘fault’ of any other country but simply the result of other countries being “force-fed” dollars that they have to spend in the U.S. Despite the problems and despite his concerns about the failure of Congress to act, Buffett believes America will continue to prosper because of its “rule of law, market-responsive economic system and belief in meritocracy.”

COCKTAIL CHATTER: According to the book Bite Politics, the length of the soundbites aired from the presidential candidates has dropped steadily from an average of 40 seconds in 1968 to less than eight seconds in the 2004 race. A poll by the Pew Research Center finds that more than a third (37%) of the American public believe news organizations had been biased in favor of Barrack Obama compared to less than one in ten (8%) who believed the news media had favored Hillary Clinton. Another 40% though said the media had shown no bias. Even that though is not such a good number because, Pew researchers say, the percentage of people who believed the coverage was good or excellent dropped from February (55%) to June (43%).

DISCLAIMER: The Message from Michael was on a brief hiatus while I was in India (yes, India, not Indiana) on a consulting trip. I don’t believe there was any wailing and gnashing of teeth over its absence. And I should note that over the slow summer news months, the MfM will be a little less regular.

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