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InPub Weekly # 083 17/02/2012

InPub Weekly # 083 17/02/2012

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The death of the life-cycle

Have you noticed, asks Jim Chisholm, how, as you get older, time passes faster?

If I was smarter, I would draw on some relativistic analogy, but since I had to look up relativistic in my university physics book, I’ll just put it down to old-age.

At least I’m not as old as the newspaper, though sometimes it feels like I am.

The world’s first newspaper was produced in 1605. Newspapers continued to grow in volume and value for nearly 400 years in the West, before they reached the peak of their product life cycle around 1990; long before the Internet started to take the blame.

In the East, South America and Africa, they’re still growing. That’s 76% of the world’s population still seeing circulation growth. There are many newspaper brands that were launched in the 18th century, that still exist today.

Alexander Graham Bell – a Scotsman - introduced the telephone in 1875. In its original concept, usage started to decline for the first time in 2010 after 235 years, but of course, mobile services have created a second evolution.

Radio was invented by Nikola Tesla in 1892. It is impossible to measure global audience levels, but statistics show that radio listening time has been the biggest victim of the digital revolution – though it could be argued that internet radio, and music downloading are radio’s evolution.

Then there’s television. John Logie Baird - another Scotsman - is widely credited with inventing what is now the technology of television in 1926. Television’s traditional terrestrial audience is also in decline, but is being more than made up for by the rise of digital viewing, in entertainment and sport. Significantly, despite the massive soar in the number of local, national and international news stations, overall consumption of TV news has been declining faster than print for nearly 20 years.

BBC radio was founded in 1922 by John Reith, another Scotsman. Reith exploited Logie-Baird’s technology to launch the BBC’s first television service in 1932.

Now we jump a mere 79 years into the digital revolution. Tim Berners Lee conceived the concept of the World Wide Web in 1989. In 1993 the Internet carried 1% of telecommunication information. Fourteen years later, in 2007, the figure was 97%. Today it is generally accepted that, in the West at least, the level of fixed Internet services has reached its peak both in terms of users and time spent, though commercial revenues will continue to grow. European digital advertising growth rates have fallen from 50% plus in the early nougthties to around 12% currently. Mobile is leaving a now mature technology behind.

Even as traditional media brands have evolved in response to their technological advancement, from letter-press, through web-offset and colour, to online, mobile, and now interestingly digital printing, what is most instructive is the performance of the digital brands within their own technological life-cycle. Look at how Microsoft has worked in a conspiratorial partnership with Intel and other chip-suppliers to ensure we humble customers never have the most up-to-date software or hardware. Do you know anyone who isn’t utterly fed-up with their exploitation of this?

* Microsoft, launched in 1975, saw its share price peak thirteen years ago, after 24 years – 65% of its life.

* Google was launched in 1998. Its value again peaked at 65% into its life.

* Its predecessor Yahoo’s value peaked four years after its launch in 1994, after only 27% of its life. Today it is a fifth of its peak.

* When I first visited AOL – I think in 1994 - it comprised 24 people. When it “merged” with Time Warner, one New York analyst joked at the time: “Why is AOL merging with Time Warner when Time still hasn’t merged with Warner?” Today, it’s worth less than $2 billion. The combined value of AOL/TimeWarner is now a tenth of their combined peak.

* Then there are MySpace and Netscape.

I did a comparison of the alleged digital heroes compared with well established FMCG companies such as Nestle, P&G, or Unilever, since the 2009 trough, and the reality is that these digital high flyers have performed no better or worse than those hundred year old companies. In other words, these digital companies are mature businesses past their peak in a fraction of the time.

Now we see Facebook heading for its IPO. But I believe all these potential investors are either cynical, short-term opportunists or patsies.

Facebook’s visitor level must be reaching saturation. And their time spent is well past their boredom level. And this young dynamic, fickle audience are absolutely going to loath targeted advertising. I applied my life cycle v history model, and my reckoning is that Facebook is already on borrowed time. Much like myself, its product life cycle is probably past its peak. It’s going to be downhill from here. By the time the patsies’ believe they will see their money back, the world will have moved on.

So much for the history lesson. What are the lessons for the future?

The first is that history shows that long term, brands and services have greater sustainability than those in the short-term. A new digital brand may be a patsy attractor, but it’s a game of chicken.

Just because you are the “fad du jour”, doesn’t mean you’re sustainable. Mr Zuckerberg may have been famous for more than his allocated 15 minutes, but my suspicion is that it’s as much of a passing fad as Yahoo and MySpace.

In all this disruption, the one thing that is crying out is BRAND!!!!! And Facebook’s revenue strategy is a brand-killer.

It’s interesting that Google are advertising in newspapers and all the new wave digital comparison and retail sites are advertising on television. Why? BRAND. Ask yourself: “Why can’t they build their brand online, without having to spend a fortune on boring old analogue media?”

The newspapers brand is our biggest asset. Just like Heinz or Coke or Colgate. We’ve got to start believing in ourselves, and telling the world we do.

All these digital services are fickle; in terms of technology, and even more so in terms of brand survival. Our attachment to them is a life-raft with a hole in it.

By increasingly relying on social networking and search brands for oxygen, we are further choking our own identity.

Newspapers are great at attracting audiences who don’t hang around. Google’s don’t either, but their ad model is highly targeted. Facebook are attempting to do the same, but their model is significantly riskier, and unproven. If we can combine their high levels of audience attraction, and, critically, audience knowledge with stickiness, we can massively increase reader intensity while also matching advertisers to the most readers who are most likely to buy. The algorithms exist and a few publishers are now realising the opportunity.

If you think that your salvation is going to come from attaching yourself to Facebook, Twitter or Google, forget it. General Custer longed for the cavalry to come to his salvation. The fact is pioneers get shot. Newspapers have over 400 years of reputation to rely on. True, we need to work harder on getting our technology to deliver our brands digitally in terms of visitors and intensity, but let’s not rely on here today, gone tomorrow flibbertigibbets to get us out of the pooh.

About Jim Chisholm
(Details last updated: 19 March 2010)

Jim Chisholm advises many of the world’s leading news media organisations on strategy and business development in both product and practice.

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