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November 24, 2009
Mammals and Dinosaurs
I was on a panel at the Paley Center for Media on Friday on the State of Advertising in a Global Digital Economy. Other panelists were Maria Francoli of MPG, Dennis Woodside of Google, Bob Greenberg of RGA and Chris Vollmer of Booz & Co.
The world is changing quickly for PR pros. The answer is not simply digital, which is to say delegating responsibility to your digitally minded colleagues. Here are some key findings from the panel:
1) Total advertising spending will not return to 2007 levels until 2013: The precipitous declines of the past two years (global ad spend down 12% in 2009 alone) will gradually be restored. Magazine and newspaper ads will continue to decline through 2010 with magazine down 20% and newspaper down 24%. Only China and India escape the global malaise (up 7% in 2009). But the mix of advertising will change forever, away from newspaper and magazine toward digital (Korea already has 57% of its ad spend in digital). PWC predicts that the total digital spend in 2013 will be 31% of total ad spend versus 21% in 2008.
2) Where will the ad spend go? According to the Booz study, Marketing & Media Ecosystem 2010, the “channels that will garner the most new ad dollars from marketers by 2010 will be digital media, with 88% planning to increase their spend; mobile media (52% will increase spend); public relations (41% will increase spend); and events (35% will increase spend). Meanwhile, half of marketers will cut print and 40% will cut TV spending.
3) Current digital advertising is not drawing mass: According to Starcom, eight percent of those on-line generate 85% of the click through volume.
4) Paying for content online: There are several experiments underway on charging for content but according to BCG, only half of people in the US are willing to pay for on-line content (a bit higher in Europe).
5) The future of mobile: Present mobile devices offer a trade-off between rich experience and mobility. There will be a new category of devices called slates, launching in mid 2010, which will be somewhere between seven to nine inches and weigh under two pounds. They will be more than e-readers, in carrying a browser that will allow text, video, podcasts, e-mail. There will be the opportunity to offer advertising that takes the viewer/reader on the whole spectrum from awareness to preference to purchase.
6) Story-telling in a digital world is quite different. There is less interest in long articles. People are more interested in headlines, an abstract of the story, linked to the full story, and deep dives into the data and sources for the piece. Journalists are learning to offer a dynamic—constantly updating-- presentation of story including stories from other media companies as an aggregator on specific topics. This approach enables media to cover a story from a 360 degree view—the core editorial values remain the same, even if readers are coming to media from different directions (Google, peer recommendation, facebook, blog)
This means that we need to tell stories differently, incorporating video clips with employees or consumers relating their own experiences. We need to create content that credible, compelling and (when relevant) entertaining to the end audience. Ensure clients’ web sites are repositories of credible—journalist quality-- information, with links to independent third party white papers. Surround a story with Twitter comments to provide readers with opportunity to contribute. We also need to make certain that our clients’ content also is available where the users are – on their social media communities—and we don’t rely on them to come to mainstream media or to the company itself.
Happy Thanksgiving to all…and remember to call the Butterball Turkey Talk line (a long-standing client) to assure that your dinner is perfect.
Posted by Edelman at 2:15 PM |
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| TrackBackNovember 19, 2009
Strange Bedfellows Who Kick in the Night
Did you know…
- the United Auto Workers had 425,000 members employed by General Motors in 1979 and today has 40,000?
- UAW members earn $33 per hour while non-union car workers in the American South earn $15 per hour and auto workers in Mexico get $6 per hour, but have the same productivity level?
- in the US and Western Europe there are 800 cars per 1,000 adults, while in China and India it is only 50 or 60 per 1,000 people, rising to 400 per 1,000 in the next decade?
- up to three million jobs were at risk in the US a year ago in the possible bankruptcy of Chrysler and GM, then the chain reaction onto auto suppliers?
China and India Do Frugal Product Engineering: This is the real long term source of competitive advantage, not low wages. Ghosn said, “Our engineers in the West have lost the instinct. The engineers in China and India do “just necessary” engineering, enabling them to design a $3,000 car that makes a good profit.
Structural Cost Advantage Eliminated; Revenue Advantage Remains for Foreign Cars: The restructuring of Chrysler and GM has leveled the playing field on the cost side, by eliminating debt obligations including cutting health care expenditure. However, the revenue challenge is that a comparable Chrysler product sells at a discount to a Nissan or Toyota product.
Twelve Percent of Car Fleet Can Be Electric in 2020: Ghosn said that his electric entry, the Nissan Leaf, to be introduced in the US at the end of 2010, has 25,000 inquiries by interested buyers. He noted that eight percent of Americans say they want an electric car as their next vehicle. With 100 miles between re-charges, the car will appeal to an urban or suburban owner as a second vehicle. He believes that hybrids and cars fueled by natural gas will also have their place.
Total Jobs in Auto Production to Rise, But All in Developing World—Rattner and Ghosn agreed that the present level of production capacity in the US, around 15 million vehicles, will be justified once the country recovers from recession. In the restructuring of Chrysler and GM, about 40% of their total production was closed down. Ghosn said that “Europe has not yet reduced capacity. It is more about job preservation in Europe,” he said. “Car makers instinctively try not to send jobs outside of their home country. They see themselves as integral parts of local society.”
Separation of Church and State—Rattner provided an excellent rationale for the US Government’s passive posture on the GM board of directors. “We don’t want the US Government to be deciding which plants to close or investments to make. This call was made by President Obama.”
Given the continuing government involvement in the auto industry-- and not just in the US, the French Government owns 15% of Renault and provided three billion euro in financing a year ago--it is incumbent on the car companies to behave and communicate differently than in the past. The command and control culture, so evident in the Congressional Hearings last December on the auto bailout, needs to be replacing with an engagement model, encompassing:
- Auto leaders should practice ‘private sector diplomacy by advocating for environmentally advanced technologies and innovation.
- Treat employees as critical allies to be informed consistently so that they can, in turn, spread the latest information about their progress and new products, key differentiators, value, quality etc.
- Partner with civil society as well as Government in product development, establishing and acceptance of standards with, for instance, modes of electric outlets for re-charging cars.
- Act as good stewards of the public’s money, by demonstrating they recognize the needs of stakeholders, not just shareholders.
Posted by Edelman at 4:39 PM |
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Interesting finding on the UAW, I was wondering if one of the reasons for the drop in membership was because the growing innovations in the auto industry?
Posted by: Charlie Campbell at November 22, 2009 12:44 AM
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| TrackBackNovember 9, 2009
Dangerous and Delusional
On Friday I spoke at the Foreign Correspondents Club of Japan. After my presentation, I was asked the following question by a senior journalist, who uncovered the Sumitomo copper trading scandal.
“I have been told by my friend who runs PR for a large Japanese company that it is much easier to manipulate the media because the reporters are younger, inexperienced and pressured to produce content quickly. What do you think about this?”
I responded very directly. I said that reporters today, whether young or old, more or less experienced, have access to a far richer array of sources. They can speak to established experts such as financial analysts or government regulators. They can also track conversations of passionate people on Twitter, blogs and discussions on social networks such as Cyworld.
Today reporters also have the ability to advance and co-create their story. They can post short form content onto Twitter or Facebook, securing more facts, feedback and fielding questions, prior to release of their more considered stories. They can aggregate discussion from other sources around their topic.
I concluded with a blunt warning--any PR people who thinks they are serving their client or employer by intentionally misleading a reporter is simply delusional and dangerous. We all have a stake in accurate information. The distortion or falsehood will be uncovered in time, leading to an unnecessary scandal that may ultimately engulf top executives and undermine the board of directors.
The public relations profession wholly depends on an independent and vibrant media. We must do nothing to undermine journalists’ ability to report the facts and their conclusion. To believe and counsel a company that it can exclusively tell its own story on its web site and bypass the mainstream and social media is wrong. We risk killing the positive trend toward PR by offering such bad advice.
Posted by Edelman at 10:31 AM |
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Amen. As Adam Curry says: "There are no secrets, only information you don't yet have."
Posted by: Nathan Schock at November 21, 2009 4:04 PM
Hello - I'm curious as to whether you think the art of public relations writing is becoming a lost art? In this high tech world of tweets and status updates, are PR professionals forgetting how to write a strong release, feature, etc.
Posted by: Trish at November 22, 2009 12:21 PM
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| TrackBackNovember 4, 2009
Postcard from China
I have been in Shanghai and Beijing for the past four days. Here are some observations.
The Economy—It is clearly stronger than the US and Europe but there are dark clouds on the horizon. The 8.5% GNP growth was the result of large government infrastructure spending (accounting for 7% of the GNP rise) and consumer spending (4% GNP rise) but offset by a drop in exports (3.5% GNP decline). The economy is strong in the tier one urban areas like Bejing and Shanghai. The high end wage earners are doing well, but the rich poor gap is growing. The southern and western regions are really challenged. Some of the manufacturing has gone and will not return as they have relocated to lower wage sites such as Vietnam. There is real doubt about vitality of consumer spending because of higher unemployment. 22 million migrant workers from rural areas lost manufacturing jobs by the end of last year, as did 15 million factory workers. Eight and a half million students are unemployed after graduating college or high school. Several big companies have sliced compensation by 10% or more, including US multinationals such as Caterpillar. Chinese consumers are nervous about the future, especially people outside the big cities.
The Media—To give you a sense of scale: there are 380 million Chinese online. Hence, mainstream media is in decline, especially newspapers. Very few of the younger set read newspapers, whether in digital or in print form. Magazines are faring better but do not (yet) have a good approach to digital. The Government ban on global social media such as Twitter, Facebook and YouTube has allowed Chinese alternatives to thrive. Key brands include Weibo, the Chinese Twitter; Kaixin and Renren, the Chinese Facebook, Youku; and Tudou, the Chinese YouTube. Most of our staff rely on news aggregators from Sohu, Sina and NetEase who put everything they can on front page which makes it hugely crowded. Advertisers tend to buy banner ads by the day not on CPM or click through for approximately $15,000 per day akin to a billboard. Bulletin board services remain a vital avenue for conversations. Company PR executives remain very nervous about participating in social media conversations, believing the risk exceeds the reward. There is some bad behavior by employees of communications firms who go into social media forums and tout their clients’ products without providing transparency on source.
On-Line Promotion—One of the most successful campaigns in recent months has been the Battle of the Bands by PepsiCo (global Edelman client)-- a mega reality show and its inviting all Chinese “underground” rock bands to debut their own art, cut a record, get on a soda can, much like American Idol. It is crowd-sourcing with people selecting the winners through voting at its very best.
Cause Related Marketing—PepsiCo is funding the drilling of wells in water-starved Western China. PepsiCo told me that 68% of Chinese consumers prefer brands that are associated with a social purpose.
Shanghai as Service Capital—The city seeks to attract investment in trading, tourism, creative industries and sports. Trade enables development of finance, insurance and shipping, plus professional services (accounting, law). Mayor Han said the city is phasing out large polluting industry. Language skills, legal and regulatory clarity and strong capital markets are key to success, said Stephen Green, chairman of HSBC, so that Shanghai can become a networked financial center comparable to London or New York.
Financial Market Still In Development—Venture capital investment was cut by two thirds in 2009, down to $684 million. American and British private equity firms are here in force, seeking to fill this gap. Jim Turley of Ernst & Young released a study of Chinese executives, in which 67% of entrepreneurs said they were seeking opportunities at present while only 19% of established corporation executives said they were seeking opportunities to expand.
I will post from Tokyo and Seoul later this week. I attach photos from our Beijing office, first of the CCTV tower then of the burned out Mandarin Oriental Hotel that was torched in February from an unfortunate fireworks accident.
Posted by Edelman at 8:56 AM |
Comments
China with its own set of problems and issues is unique in the manner in which development and backwardness coexist. This is made even more obvious due to the global crises having its ripples in China. The progress has been slowed but cannot be stopped.Let China get back to its feet and we would see where they are headed to.
Posted by: Bustor Williams at November 13, 2009 7:46 AM
Thanks for the rich commentary.
Interesting data re the desire for related social purpose for companies.
Posted by: Carol Cone at November 18, 2009 6:23 PM