The future is online

Media companies need to make transition to internet

Reading Time: 4 minutes

Reading newspapers, watching television and listening to the radio may no longer be preferred options for consuming media. Mobile handsets and computers are gaining importance as means to access mass media, especially with younger audiences. Media usage has fragmented and many more advertising platforms now exist. New media will gather a 19 percent share of global advertising by 2011. These platforms enable a greater precision in targeting and accountability, while allowing for interactivity and innovation. During the current economic climate, new media has a clear advantage.

This has profound implications for traditional media players. Their distribution channels are controlled by a new breed of competitors. The Internet gorillas dominate online traffic, whereas telecommunication companies control the touch-points with mobile media consumers. New formats, such as paid search, dominated by Internet players are eating into their bread and butter. The new media game involves a dynamic, complex and interconnected ecosystem in which ad agencies, telecommunications, media, Internet and technology players depend on one another to thrive. But it is also a brutal competitive arena, rapidly distinguishing winners from losers.

In the MENA region, the game is just beginning. New media accounts for less than two percent of ad spend. Unlike developed countries, delivering content over mobile forms the primary new media revenue source. Low Internet penetration, availability of digital Arabic content and advertising capabilities remain key challenges. Consumers are displaying similar preferences as those in developed countries. Young people make up a relatively high percentage of the population. Overall, the regional new media market is fertile with leaders yet to be established.

Are the rules still the same?

As always, consumers define the rules. The consumer today has more control and choice. Consumption is no longer passive. Consumption is becoming a norm. So yes, the rules are changing. This is transforming the recipe for building a successful digital media brand. The challenge is not limited to real-time consumption of content. Editors need to engage in two-way communication allowing user participation. Building a digital community within the context of a brand is essential. Ability to leverage technology and develop partnerships is more important than ever.

The youth segment rarely uses traditional platforms. Hearst, recognizing this trend, transformed Elle Girl into an online-only brand. Other segments — such as leisure male, female socialites and professionals — are expected to follow suit, more so when today’s youth transition into these segments. For now it is crucial to leverage the loyalty of traditional assets to create equity on digital platforms, before users choose a different digital brand for the same content needs. Marketers are demanding new models of interactions with agencies. The traditional models lack the required speed-to-market and ability to create a dialogue with consumers. A recent cross-industry study in the US confirmed that advertisers believe closer and more collaborative partnerships with media companies will be important to their marketing initiatives.

Media companies have the opportunity to take on responsibilities that were once the exclusive preserve of ad agencies. Ninety-one percent of media companies surveyed already provide some kind of advertising service such as campaign development and branded content creation.

In the US, newspapers took 127 years to reach $20 billion in ad revenues; online media have garnered that amount in just 13 years. Regionally, advertising investment per user is two dollars, compared with $59 in the US or the global average of $27. Regional offerings are suboptimal and do not cover the wide spectrum of needs. Popular local sites lack qualities essential for advertisers. The successful traditional brands are not well represented on digital platforms. International players are not focusing on the region, yet they dominate the traffic, although not by intent or design. Today’s opportunities may well be taken and guarded by the time the market becomes lucrative. Fortunately, paid search is not expected to be the primary format. A targeted local offering has the potential to not only capture a prominent share but also to play a critical role in creating the market.

What strategies are media players adopting?

Take existing assets online — it is key to enable users to consume and participate with their favorite content at the time of their convenience and in the form they prefer.

Build new media brands — new media provides an efficient way to target segments not covered by traditional formats. It also enables companies to aggregate content from existing titles to provide a differentiated experience. For instance, Conde Nast created by combining GQ and Details magazines.

Build a digital content business — new media provides a unique platform to monetize the long tail. The large libraries, which do not find a place on TV grids or magazine pages, can be monetized easily.

Build a media portal — media players could integrate traffic-generating applications, like e-mail and marketplace, into their content propositions. To illustrate, the strategic merger of Time Warner with AOL accelerated the digital transformation of Time Warner. Today, AOL is syndicating content not only from Time Warner, but also from other media sources.

Who will win the ‘New Media’ game?

Each player has established a sweet spot along the digital value chain and is devising strategies to lead the game. Business models are constantly evolving and their sustainability is yet to be established. Relative values of traffic generation and aggregation, content and customer intelligence will be key in defining the leader. But one thing is certain, no player can win alone. Collaboration is king. The ability to forge the right partnership at the right terms and at the right time will define the winner.


Gabriel Chahine is partner and Jayant Bhargava senior associate at Booz & Company