Understanding The Economics Of Digital
By Ted Boyd & Travis St. Denis, 58Ninety Inc.
Posted July 3rd, 2009
During the 14 years since the advent of the consumer-facing Internet, the word ‘digital’ has become almost as ubiquitous in the marketing lexicon as ‘consumer’ or ‘media.’ Despite digital’s meteoric rise and growing role in the client MarCom mix, many myths and uncertainties remain about what it takes to produce outstanding digital work, how to gain optimal placement in media environments, and the process by which clients and their agencies get there.
We Live In a Digital Age
A variety of factors have combined to produce this situation. A shifting media landscape and an explosion of disparate digital media types provide more choice for marketers than ever before.
Technological innovations and refinements including increased processor speed, better & cheaper storage, sophisticated software, self-publishing and constantly improving broadband & wireless coverage have increasingly led consumers to embrace a digital lifestyle. As evidence of this, the digital share of spend for Canada has grown to approximately 15 percent in 2008, up from under 3 percent in less than a decade. But although digital has clearly arrived as a mainstream option in a marketer’s toolkit, the process through which digital solutions are created remains largely misunderstood.
The Key Issue
While digital marketing has evolved into a legitimate tool for marketers, it is also substantially changing how advertisers and agencies operate. There are significantly different economic drivers involved in digital programs compared to traditional marketing programs, so apples-to-apples comparisons are not valid. Making such comparisons and viewing digital media through the same lens as other media creates the possibility of friction, inefficiency and waste in client/agency relationships.
Creating digital media is fundamentally different from creating traditional works, and while often viewed as being cheaper and easier to do than traditional work, there are three key areas in which costs differ from those of traditional media:
1. High Labour Intensity
Producing and placing digital work can be characterized simply by its high volume, low dollar and highly complex nature, necessitating large labour inputs. Creating digital programs requires longer project timelines, complex technological inputs, a larger volume of creative elements, and a wider variety of expertise throughout the process.
The media placement side is no different, with more options to evaluate, a higher number of transactions to track, knowledge of the production process (not previously required) as it is intrinsically linked to the planning and execution, optimization of the buy throughout the campaign period and coverage of many individual disciplines (for example search, social Influence and mobile marketing). Across all functions, there are also considerable requirements for testing, frequent and deep analytics, innovation, and training requirements.
2. The Production and Planning Process
Whereas much of the production of traditional creative and media is contracted out to external partners, the majority of digital development occurs in-house. This shift in the production process adds to the complexity, time requirements, workforce and account management across all agency digital clients. Media planners face similar challenges with more upfront work required in evaluating options, building the plan, increased negotiation with a larger supplier network, constant optimization needs and more data to process and analyze in the back end.
3. Wider Variety Of Communication Options
Digital agencies and media planners are confronted with an unprecedented array of options to pursue in the digital realm. Agencies must not only be aware, but have the updated skillsets to develop more than just websites and banner ads. New platforms such as augmented reality constantly change the landscape and scope of projects. The media world is increasingly fragmented and non-standardized, quite the opposite of the static, consolidated world of traditional creative development and media.
Conclusions and Recommendations
Digital creative and media need to be assessed separately from traditional creative and media. Given that digital is more complex, expensive and time consuming compared to traditional creative and media, it is only fair that it be viewed in isolation, before being integrated into a broader communications plan. Given its clear benefits, including real-time measurement, engagement, brand building, and direct consumer relationships, its true value can only be realized when evaluated through a different lens.
Moving forward, some recommendations to optimize the digital marketing ecosystem are:
- Educate marketing and procurement partners about the differing economics between digital and traditional media
- Manage media, production and fees together as opposed to separately
or in silos
- Implement a continuous, flexible strategic planning and research process
- Resist stakeholder creep; just because one wants to participate does not mean one should
- Tier campaigns and set realistic goals
- Keep agency resources focused on the work, not on meetings, no matter how well intended
- Visit your agency to get a first-hand understanding
- Avoid “shiny new toy” syndrome
- Ted Boyd and Travis St. Denis
- 58Ninety Inc.
For a full presentation, including further analysis, additional charts, graphics, data points and common myths associated with the development of great digital work, please contact Bob Reaume at the ACA.
Ted Boyd is CEO and Partner at Digital Marketing Agency 58Ninety Inc., where he has created interactive marketing strategies and solutions for clients such as Canadian Tire, Molson Canada, CTVglobemedia, OLG, Unilever, Workopolis, and WWE. He has 25 years marketing and sales experience, including 15 years in interactive marketing.
- Contact Ted -
Travis St. Denis is the Media Planning Supervisor and Digital Lead at Mediaedge:cia. In three years with the company, he’s been integral in making his clients and Mediaedge leaders in the digital marketing field. Travis’s eye has always been toward innovative approaches for his clients based on a deep understanding of their consumers. Turning his sights toward social media, he’s helping lead the charge to make it a reality for clients.
- Contact Travis -
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