The trend toward social, content-driven advertising and the collapse of direct-sold banner advertising is becoming increasingly evident in management discussions on earnings calls.
In their February 7th note, Goldman Sachs described a concave ad curve that will characterize the display market and would entail high demand for cheap direct response banners bought programmatically, high demand for custom units and premium campaigns with content elements and nothing in the middle.
Two earnings calls this quarter, one from The New York Times and one from LinkedIn, have some nice discussion of these issues.
On The New York Times’ fourth quarter call, James Follo, CFO explains:
Digital display advertising continued to experience challenges, including a glut of available ad inventory in the market and the resulting downward price pressure, as well as a shift towards ad exchanges, real-time bidding and other programmatic buying channels.
While such audience-targeted approaches have begun to impact premium pricing for advertising environments, such as NYTimes.com, we believe The Times Media Group can return to digital growth by focusing more heavily on unique custom ad units, an area where we already stand out, monetizing tablet inventory as our audience on that platform grows and making significant inroads in video advertising, as our content offerings there multiply.
This was a reiteration of the same message from the Q3 call - which can be simply described by saying that the market for banners is increasingly moving electronic, not unlike stock trading, and the opportunity for publishers and media companies rests in doing advertising that is more engaging, content-driven, and social from the ground up. The banner, which has been unchanged for 18 years, has never been a good product for brand advertising and this is finally starting to show up in corporate performance. Look no further than the Washington Post Company, which moved into content-driven advertising as well just this week.
In contrast, take LinkedIn CEO Jeff Weiner’s comments from his last earnings call:
I think one of the things that we are increasingly focused on in 2013 is the opportunity to support content marketing. I was just talking a little bit about that in terms of the examples where companies are able to leverage content repositories they have already built up for the sake of generating leads and targeting prospects.
One area that we are determined to make strong traction in is establishing LinkedIn as a professional publishing platform. You see with the momentum we are generating now with LinkedIn influencers, LinkedIn groups and SlideShare that people are increasingly turning to LinkedIn to publish professionally relevant content. We think that’s going to create a very strong platform and very valuable context for large enterprises and for small to medium-sized businesses that want to target and engage with professionals.
The days of publishers and media companies using direct sales forces to sell banners are numbered. Online media companies will perform the brand advertising function in the future through rich, brands-as-publisher, content-centered campaigns.
This isn’t the future anymore, it’s the present, and we are seeing it arrive on Wall Street.