By: Eric De Grasse, Chief Technology Officer
2 August 2013 – The amount of time people in the US spend consuming digital media is set to overtake hours spent watching television for the first time this year, marking a significant tipping point in the shift away from traditional forms of media.
The average adult will spend five hours and nine minutes a day online or consuming other types of digital media this year, an increase of 38 minutes or 16 per cent compared with 2012, according to new estimates from eMarketer.
The amount of time spent watching TV is projected to fall by seven minutes to four hours and 31 minutes. In another pivotal change, mobile devices such as smartphones and tablets will overtake the computer as the primary means of consuming digital media. The amount of time people spend using mobile devices to surf the web will increase by nearly an hour to two hours and 21 minutes, compared to one hour and 33 minutes in 2012.
Meanwhile, hours spent using a desktop PC or laptops for internet-related activities will fall by eight minutes, from two hours and 27 minutes in 2012 to two hours and 19 minutes.
The change in consumer behavior is already shaking the foundations of the advertising business. Google reported a larger-than-expected drop in advertising rates during the most recent quarter because of the shift to mobile, where ad rates are typically cheaper (but see more below). In contrast, Facebook shares have soared after the company last week reported better than expected mobile ad revenues.
This week, Publicis and Omnicom announced a $35bn tie-up, which will create the world’s largest advertising and marketing services group. Executives are pitching the deal, the largest in the history of the ad industry, as a way to create a technology and digital media-driven advertising company for the future. “The objective was not to do a deal to be bigger; the objective is to drive the key issues of the future of this industry” said Maurice Lévy, the chief executive of Publicis, in one of about … oh … 36 interviews I watched after the deal was announced (see more below).
Yet advertising dollars still lag behind. While marketers are steadily shifting their budgets to follow how people are spending their time, ad spending on television far dominates ad spending on digital media. Marketers are set to spend $205bn on television commercials worldwide this year compared with the $116.8bn they are expected to spend on digital ads, according to eMarketer. Marketers are set to spend $15.8bn on mobile this year, up 80 per cent from 2012 but amounting to just 3 per cent of total global ad spending.
Internet companies, including Facebook and Twitter, are rolling out new advertising products to lure marketers to transfer more dollars from television to digital. Facebook is set to roll out a new video ads in the coming months, for instance.
Television companies are not standing still. CBS, which owns the top broadcast network in the US, reported an 11 per cent increase in revenues in the most recent quarter to $3.7bn from the same period last year. The company is attempting to make money on its video programmes, regardless of what devices people are accessing them from, through licensing agreements for digital streaming and selling digital ads. CBS.com ranks as the top website among all TV networks in unique viewers and reported a 35 per cent increase in revenue during the most recent quarter. “We’re very nimble. We realise the models are changing,” Les Moonves, chief executive of CBS, said during a conference call this week. “We welcome what’s happening with technology, and we’re on top of it.”
The forecast decline in TV watching in the US is in stark contrast to the UK, where a report this week from Ofcom, the industry regulator, showed the medium remains central to the British household, with viewers on average watching four hours a day in 2012, up from three hours and 42 minutes in 2004.
Google’s plan
What do you do when you have tried to reinvent TV and TV wasn’t interested? Answer: sit back and wait for TV to come to you. That is the conclusion Google has come to with its new Chromecast gadget. The result is a surprisingly simple – and inexpensive – way of getting web video and music on to a television set. But until the TV establishment decides to play along, the pleasures will remain limited.
Spend some time at any of the consumer electronic shows and you learn one thing: grappling with new software interfaces and handheld remotes that merge traditional television viewing with web video is no fun. Unless you live in an all-Apple household and have splashed out $99 for an Apple TV box, there are not many simple and easy ways to do it. So that is why relatively few people even try to channel web video on to the big screens in their living rooms.
So when Google comes up with something that is quick, simple and cheap, it sounds like it should be a big deal. And that’s just what the new Chromecast is – up to a point. The search company has mounted much more ambitious pitches for the world’s couch potatoes before this. The now three-year-old Google TV was an attempt to blend television and web into a single service that has not worked – at least, not yet. For its latest attempt, Google has started with two basic assumptions. One is that most people would like to watch web video on their TVs at least occasionally, if it were cheap and easy enough to do. The other is that TV remotes belong in the trash bin: for finding and controlling internet content, the many smart gadgets that have taken up residence on the sofa will work much better. Oh, and there’s a third assumption: at only $35, why wouldn’t you buy one?
So Chromecast, a small dongle that looks like a chubby USB stick and plugs into the back of the TV, is the missing link that wirelessly transfers the video running on your smartphone or laptop to the TV. Touch a special icon that appears at the top of the page on the screen of your device, and whatever is playing on the personal device switches over to playing on the TV (there is a lag of a few seconds, but not enough to be annoying). Apple has something similar, called AirPlay, but it only works on Apple devices linked to an Apple TV box. With Chromecast, it’s a case of any device to any TV screen. And unlike AirPlay you are able to use the tablet that is “casting” video to the TV to do other things while it was playing, such as searching for the next video or browsing Twitter.
Ok, all fine. But … what, exactly, are you going to watch? Internet companies have to adopt a new Google technology standard if their services are going to work with Chromecast. Few have done that yet. We’ll have more in a few months because there is a flood of tech coming for the holiday season.
Of sad men and Madmen: the Publicis/Omnicom tie-up
Gary Silverman of the FT said it best: advertisers are being driven to distraction by an audience that is otherwise engaged. Omnicom of the U.S. and Publicis of France: the sheer heft of the combination made it sound formidable. And it will bring a nice chunk of change to the 5 law firms and 4 legal technology vendors retained to handle the regulatory review on both sides of the Atlantic.
But oh what a business challenge.
Years ago, it was simple. The couch was on the other side of the room. There was no remote control. Changing the channel required actual physical effort – a spring from the sofa, a walk across the room and a return. This meant we tended to take what advertisers dished out in those days. We were a captive audience.
Now? The internet has liberated couch potatoes all across the world. They are free to text and to tweet, to comment and to connect. This leaves the Mad Men of today chasing after people on the web – and one of the stated reasons for the Omnicom-Publicis merger is to marshal the resources needed to do so. The risk for advertisers is that consumers have become so distracted by their online lives that they no longer notice Madison Avenue’s marketing messages. People can log on these days and simply get lost. Just from that you sense the obstacles facing advertisers as they seek to build brands today.
At a recent IBM social media conference I attended Richard Branson was the keynote speaker and what he said … well before the Omnicom/Publicis announcement … is simply spot on. He said advertisers seek to make people perceive some premium value in the product or service that they ascribe to the brand. They seek to control the perception. Wrong. What has changed is that brands are now built online by consumers. Brands are what people say about you when you’re not in the room, and that room has gotten extremely big and extremely digital. You cannot engage in the same strategy and tactics in a post-digital world to build your brand in a competitive way. “Advertising” has changed.
