Saturday, November 10, 2007

"A brand is ultimately a is something that is not ownable by a corporation any more." Nick Brien

"The marketing plan of tomorrow has to manage an enormous number of touch points...has to have search, it has to have site design and build, it has to have on- and offline, analytics and multicultural, electronic and out of home." David Verklin

"We are not seats or eyeballs or end users or consumers. We are human beings and our reach exceeds your grasp. Deal with it." Chris Locke

Today's image: Yellow Tree Reflection by dawn perry. Beautiful. Thank you!

Vision > Execution > Accountability
Hope > Optimism > Opportunity

Involved in creating the second draft of our 2008 ad spend forecast. In this process we look back at the last ten years of data. We look for patterns. What is happening? What is not happening? It brings to mind a writing by Kurtz and Snowden and the issue of "pattern entrainment" to wit:

"The issue in decision-making is to know when to run and when to stand still. A choice must be made between allowing the entrained patterns of past experience to facilitate fast and effective pattern application and gaining a new perspective because the old patterns may no longer apply." (The new dynamics of strategy: Sense-making in a complex and complicated world via IBM Systems Journal here)

Looking ahead for radio, my sense is the first tribe of wireless is in for yet another difficult year. 2008 is shaping up to be the year macroeconomic pressures impact consumer-discretionary spending (at least in the first six months). Gas prices, housing-market weakness and financial-market problems play roles that are not insignificant. It is possible that the present economic slowdown assisted by a credit crisis could lead to another 1991 style ad recession. To frame this, in 1991 default rates on real-estate loans ran at 7.5%, today the run rate is about 2.0% and if you caught the most recent comments of our Fed chairman the housing-market has yet to bottom. Things will get ugly before they get better. Stay tuned.

Random observations: Value stocks are now more expensive than growth stocks (on a cash-flow basis). Small-cap is out. Large-cap is in. Large-cap growth coming back into vogue. (These factors and the lack of growth will continue to work against public-held radio equity) This year GDP will likely post 2.15%, next year we project 2.10% (2008 CPI at 2.5%, S&P 500 profit growth north of 4.5%). We do forecast a return to more normal perceptions of risk. Consumer cyclicals and financials will continue to struggle with little or no improvement. Large-cap tech will be a winner and we continue to like Microsoft (16x earnings, free-cash-flow margin around 30%). In the ad space Google continues to lead, Microsoft a strong second. Yahoo! the sleeper. We see energy doing well, especially natural gas. Gold stands at $800 an ounce, a 28 year high (best to consult best man Ron Fell on what this really means). E-commerce will continue to show solid growth and please keep in mind it is still very early, e-commerce sales as a percentage of total US retail is only 4% (Amazon represents about 17% of all US e-commerce). Google is on track to generate $15 Bil in 2007 rev. By 12/31 internet advertising will surpass total radio advertising for the first full calendar year, this will serve to confirm an ongoing trend. Radio becomes the first of traditional media to be eclipsed by online. TV gets a good year with Olympics and political, (easy comps).

A lesson from a buyer: Sir Martin Sorrell is in the process of reinventing WPP. His strategy: reduce traditional advertising from about 50% of his annual billings to one third. Trevor Kaufman may, in fact, be the single most important WPP player responsible for landing the $2 Bil AT&T account. Every radio outfit needs to hire a Trevor Kaufman. The internet channel has been ignored too long by radio. 2008 must be the year radio begins to play serious catch up. 2008 must be the year radio begins to think a bit more like Sir Martin and way more like Trevor.

It's the denominator, stupid: (Apologies to James Carville) Radio must take game-changing, innovative action in order to survive and grow. First up, develop a meaningful approach, a go forward without the present life or death reliance on, the potentially dangerous addiction to, getting better at the traditional, optimizing the transactional. It's time for radio to muster the courage and change the denominator, stop wasting precious bandwidth on the now end stage game of playing around with the numerator. What's needed is an urgent and genuine obsession with driving the top lines of ratings and revenue. It's not at all about getting better, it's all about getting different. Vision > Execution > Accountability. Today, what radio needs is that vision thing.

To know and not to do, is not to know