Founded in 2001, Borrell Associates works with hundreds of media companies, as well as Internet "pure-play" companies, investment analysts, and industry vendors. Their work focuses on helping companies understand and capitalize on the evolving media landscape, and to grow revenues exponentially rather than incrementally. The company conducts the largest survey of local advertisers' (SMBs') marketing habits, with more than 10,000 responses annually, and maintains the largest database of local media companies' digital revenues, with more than 11,000 participants. Borrell's primary product is a deep set of local advertising data for any U.S., Canadian, or U.K. market.
CEO Gordon Borrell talks to us today about the influence of digital media in the advertising industry, its lack of influence in the political world and the biggest challenges the industry faces in 2016.
Q1. What are the key trends in the marketing sectors in 2016? Are you seeing an increased demand for digital marketing services?
Advertisers are clearly moving towards social media in massive numbers in 2016. A year ago, only 32% of local businesses were utilizing Facebook as a marketing and advertising tool; as of July 2016, 64% are, according to our ongoing surveys of thousands of SMBs. Overall, they've begun spending less on what we know as "advertising" and more on general "marketing" activities, especially anything to do with digital media. This is why so many traditional media companies are rushing to sell digital services like SEO, social media management, and reputation management. Heavy demand is clearly there, while the same can't be said for print or broadcast advertising products.
Q2. What impact has this year’s presidential campaign had on political ad spend? And how does this compare with the last comparable election year of 2012? How are “earned media” and “purchased media” affecting these figures?
On the surface, digital media hasn't affected the amount of spending on political advertising in the U.S. In fact, of the record $12 billion that we expect to be spent in 2016, about 9% will go toward digital media. Meanwhile, other advertising segments such as automotive or restaurants are spending roughly half their budgets on digital media. Digital's share in the political realm is increasing - it was barely 1% in the last presidential cycle - but it's remarkable that the candidates and PACs are still relying so heavily on TV spots to influence the public. About 60% of that $12 billion is going to television advertising.
Q3. What have been the most important developments in the outdoor advertising market over the past five years? How has the rapid adoption of smartphones and connected devices impacted outdoor advertising? (E.g. location-specific campaigns, street furniture and sports stadium).
There are two remarkable trends: the digitization of billboards, and the proliferation of outdoor signage. Digital billboards now represent 17% of all billboard revenue, which is double what it was five years ago. It's the most exciting part of the industry, especially when you see how some companies are making some signs display current information like time, temperature, traffic conditions, or what song is playing on a certain radio station. Regarding the explosion of outdoor signage, spending on street furniture (benches, transit booths, etc.) is up 50% in the past five years alone, and spending on "alternative" outdoor - signage you see in stadiums, gas pumps, and bathrooms, for example - is up 70%.
Q4. In your opinion, what are the three biggest challenges facing the advertising industry in 2016? How will these changes influence the industry and how will market players respond?
The slow, painful shift from high-margin advertising to lower-margin marketing services is definitely the biggest shift of all. Coupled with that is advertisers' infatuation with marketing data, particularly if it can show the efficacy of any type of advertising or marketing expenditures. Finally, the risk associated with keeping up with new marketing channels is another challenge. All three of these have created the perfect storm, both for media companies and for businesses trying to market themselves. The risks of making missteps have become extraordinarily high. If you misfire and fail to realize it or fail to fix it in a reasonable amount of time, your business could be toast.
Q5. What other industry do you find the most interesting outside of the ones you cover? Have you ever considered covering this industry?
The whole societal aspect of digital media fascinates me. We're witnessing a slow-motion world revolution where control has shifted from "the media" to individual people - or groups of people who've become masters of the new medium. This disruption is having a profound effect on family fortunes, on political power, and on our own fragile psyches. Facebook has created a world that torments those whose lives aren't perfect, and un-friending people you don't agree with allows us to retreat into a one-sided world. No wonder suicide bombings are on the rise. If I weren't covering the revolution in advertising, I'd be immersed in trying to fathom this one.
As we can see from Gordon’s answers, the advertising industry as a whole is benefiting from the various marketing methods digital media offers. From social media management to digital billboards, new technologies are providing advertisers with innovative means for reaching target audiences. However, new advertising avenues result in new associated risks, and the consequences of a bad marketing choice have never been more serious than today.
We’d like to take this opportunity to thank Gordon for today’s insightful answers and for sharing his deep knowledge of the advertising world with us.
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About the Analyst:
Gordon Borrell is chairman of the Local Media Association and CEO of Borrell Associates Inc. He is a sought-after speaker for conferences and company meetings and is the local media industry’s leading analyst. He is ranked in the top 2% among Gerson Lehrman Group’s 150,000 consultants worldwide and is quoted frequently in The Wall Street Journal, The New York Times, Ad Age, Forbes and other publications. He has appeared on CNN and other TV and radio programs discussing trends and forecasts for local media. Prior to starting Borrell Associates, Gordon was vice president for new media for Landmark Communications Inc. in Norfolk, Va., where he worked for 22 years.