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Shifting Paradigms From Promised-Based to Performance-Based

Shifting Paradigms From Promised-Based to Performance-Based. September - 2005. Agenda. The Big Picture – Overall Trends in Advertising The Multiple Hat Phenomenon – User Perspective Trends in SME Behavior Towards a Performance-Based Model for Yellow Pages. Advertising Industry Trends.

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Shifting Paradigms From Promised-Based to Performance-Based

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  1. Shifting ParadigmsFrom Promised-Based to Performance-Based September - 2005

  2. Agenda • The Big Picture – Overall Trends in Advertising • The Multiple Hat Phenomenon – User Perspective • Trends in SME Behavior • Towards a Performance-Based Model for Yellow Pages

  3. Advertising Industry Trends

  4. 1900 – 2000 Advertising = Mass Media TV Radio Newspaper Yellow Pages

  5. Television Ad Recall Declines Cable TV goes mainstream Remote control introduced World Wide Web arrives Tivo / DVR In homes Source: Newspaper Association of America, Cable TV Advertising Bureau, and Nielsen Media Research

  6. Costs Increase 2002 30 Second Spot = $2,100,000 Reach: 88,465,000 CPM: $23.74 1972 30 Second Spot = $86,000 Reach: 56,640,000 CPM: $1.52 Reach = 1.5X CPM = 15.6X Super Bowl Advertising Rates

  7. Tenuous Trust Source: 2004 Forrester/Intelliseek Research

  8. Consumers in Control “Penetration will reach 31 million households by the end of 2006…The shift to on-demand TV will cut traditional advertising by 19% shaving $7 billion from traditional ad revenues…” Forrester Research

  9. Blogosphere – Consumer Generated Media (CGM) * As percentage of 120 million U.S. adult Internet users Source: The Pew Internet & American Life Project, The State of Blogging, Washington, D.C.

  10. Mass Medium to CPD (Contextual/Participatory Directional) Mass Medium Radio TV Yellow Pages Newspaper

  11. US Ad Spending Totals by Media 2004 US Ad % Change Spending (2003-2004) Direct Mail $48.37 5.0 Newspaper 44.84 1.8 Broadcast TV* 41.93 -0.3 Radio 19.10 1.2 Cable TV 18.81 15.4 Yellow Pages 13.90 0.9 Consumer magazine 11.44 4.0 Internet 5.65 15.7 Out of home 5.44 5.2 Business publications 4.00 0.7 All other 31.99 4.1 Total 245.48 3.6 1 2 3 4 5 6 7 8 9 10 11 12 Source: Robert J. Coen’s Universal McCann

  12. Change in Share of Ad Spend by Medium 2000 - 2004 +52.7% -10.4% -8.2% -0.5% +3.6% +3.8% ($197 bn) ($185 bn) Source: eMarketer, based on IAB/PWC (for online ad spend, which includes search, display ads, rich media, classifieds and other) and Universal McCann (for total ad industry spend, which includes direct mail and yellow pages), 2005

  13. $20 18% 15% $15 12% $10 9% 6% $5 3% $0 0% Online to Grow as Share of Total Ad Industry $17.6 Online $15.6 $13.4 $11.5 $9.6 $7.3 Online Ad Spend ($ bn) $7.1 % of Total U.S. Ad Spend $6.0 Source: eMarketer, based on IAB/PWC (for online ad spend, which includes search, display ads, rich media, classifieds and other) and Universal McCann (for total ad industry spend, which includes direct mail and yellow pages), 2005

  14. Trends in Directional Advertising Small Business Advertisers who Use Media Source: ConStat/TKG Local Commerce Monitor Tracking study among small business advertisers.

  15. Next Shift:Towards Performance-Based Advertising CPD (Contextual / Participatory / Directional) Awareness Performance Based “Money where the clicks/calls are” TV Radio Yellow Pages Newspaper

  16. Percent Breakdown of Total Online Advertising Activity Source: Interactive Advertising Bureau/PricewaterhouseCoopers, “IAB Internet Advertising Revenue Report” Q2 2004.

  17. Paid Search Advertising Spending2000-2005 (as a % of total online advertising spending) Source: eMarketer, December 2003

  18. The Multiple Hat Phenomenon

  19. Consumer Information Use Trend NA NA NA Base: Total Consumers Indicates significant differences between waves at the 95% confidence level Source: ConStat/TKG Userview consumer study.

  20. Reason for Using Specific Advertising Source First Media Used/Would Use Media First Reasons Used/Would Use Media First^ (Regardless of Shopping Situation) % % % To get a phone number, address or hours of ops 34 bc 10 15 To research the product or type of service 17 29 34 a To find a retailer or business 14 23 15 Habit/used to it 8 b 2 4 Don’t like/know how/want to use PC 6 bc -- -- Easy/convenient 6 8 6 To research the retailer or business 5 11 7 To read reviews 3 18 a 10 In area/local 2 -- -- Base: Used/Would use media first (n=145) (n=49)* (n=64) Lowercase letters indicate significant differences at the 95% confidence level. * Small sample size; use caution when projecting data ^ Not all responses shown Source: ConStat/TKG 2005 Userview consumer study.

  21. PYP Use – Last 6 Months Source: The Kelsey Group

  22. Search Use – Last 6 Months Source: The Kelsey Group

  23. IYP Use – Last 6 Months Source: The Kelsey Group

  24. Strength of PYP v. Search and IYP Source: The Kelsey Group

  25. SMEs Use of YP/IYP Where they look now… Print Yellow Pages Usage June ’04 31% Source: ConStat/TKG 2005 Local Commerce Monitor Tracking study among small business advertisers.

  26. Trends in SME Behavior

  27. Advertising Media Use(Traditional) (% Change 2001-2005) (-9%) (-9%) (+6%) (-3%) (-1%) (+7%) Source: ConStat/TKG Local Commerce Monitor Tracking study among small business advertisers.

  28. Advertising Media Use (Online) (Percentage Points Difference 2001-2005) (+13%) (+7%) (0%) (0%) (-2%) (-4%) Source: ConStat/TKG Local Commerce Monitor Tracking study among small business advertisers. * Began tracking in 2003/2004.

  29. Budget Allocation June ‘04 June ‘05 Telco YPs Newspaper Company Web Site Pay-Per-Click/Search Engine Optimization Magazines or Trade Journals Other YPs Radio Source: ConStat/TKG Local Commerce Monitor Tracking study among small business advertisers.

  30. Future Advertising Budget Plan to Increase Plan to Decrease Direct Mail June ’04 2% Internet Yellow Pages Company Web Site or Home Page Newspaper Telco YPs Paid Search Other Yellow Pages Source: ConStat/TKG 2005 Local Commerce Monitor Tracking study among small business advertisers.

  31. Local Paid Search Advertising Awareness of Local Paid Search Usage of Local Paid Search Source: ConStat/TKG Local Commerce Monitor Tracking study among small business advertisers.

  32. Local Paid Search Advertising Billing Preferences Amount Willing to Pay (Base: Small Business Advertisers using or extremely/very/somewhat likely to use local paid search) (Base: Small Business Advertisers who prefer being Charged according to the number of phone calls) Source: ConStat/TKG 2005 Local Commerce Monitor Tracking study among small business advertisers.

  33. A Performance-Based Model for Yellow Pages?

  34. The Opportunity • Extract more value from current performance print YP already delivers to a segment of advertisers • Extract some value from non-advertisers unwilling to commit upfront • Incentive for the print YP industry to promote the category use • One model for all distribution platforms - print, online, wireless, IPTV

  35. The Risks • Advertisers reject the model as too complicated or “unjust” • Sales lock-up – too complicated for commission based sales • Too difficult to implement – phone number issues, tracking devices, etc. • Possession and use decline substantially and reduce call volumes • Individual advertisers find ways to corner the market for calls –(triple truck ads)

  36. Contact Information The Kelsey Group Neal Polachek 70 Tamalpais Avenue San Anselmo, CA 94960 P: 415.256.1268 npolachek@kelseygroup.com www.kelseygroup.com ConStat, Inc. William D. Deaton, Ph.D. 70 Washington Street, Suite #225 Oakland, CA 94607 P: 510.267.3100 bdeaton@constat.com www.constat.com

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