Diversify your business to aid survival

26 March 2009 | By Simon Waldman

At a recent IAB event on the difficulties of forecasting in the current climate, the one thing that no-one had any difficulty with was stressing the challenges of the short term prospects for online display.

Typical of those presenting, Group M’s Adam Smith admitted that even his forecast of -3% might be a bit optimistic. It was dependent on a dramatic increase in volumes while yields would be dropping by 10-15%. Too little volume, or too much of a drop in yield and the picture could easily get worse. It’s now clear that the premium bit of the display market is very exposed to cyclical downturn. That said, at a time when ITV’s ad revenues are down 20% in the first quarter of this year, and when Enders Analysis predicts national press revenues will fall by a similar amount this year, we shouldn’t be surprised that online display is down. If anything, we should be relieved it’s proving more resilient than more established media.

But, there are those who see this as something much more than a cyclical downturn. ‘Does online display actually work?’ they ask. Is there going to be any premium market left? Is it all going to the networks?

Over the past five years as everyone has embraced online, too many media owners have effectively gambled their future by placing their chips on one square: the premium online display market.

If this doesn’t work out, then it’s not just their online business that looks a bit shaky, it’s the future of their business, full stop.

As the display market has started to creak, it has been utterly predictable that the number of voices calling for payment models has started to increase. Some will no doubt try it - and some incremental revenue might come from it; but going down this route seems unlikely to transform the online fortunes of many UK media owners.

So, is the great ad-funded online experiment for traditional media owners grinding to a halt, just as it did after the dotcom crash? I suspect that some big names really will fall by the wayside - but those who come out of this downturn stronger will do so for three reasons.

First, they will continue to prove the value of premium display. Media owners like ourselves have a role to play in providing a trusted environment where advertisers know they will reach an attractive audience and their messages will appear alongside quality content.

Second, they will diversify their online revenues. It has always been dangerous just to assume that online display will solve everything. You need at least one more meaningful revenue stream.

Third, they will deliver brilliant cross-media solutions. This is no longer a novelty - it’s the thing that will make us distinctive.

Transforming a traditional media business into a meaningful player online was never going to be easy. The recession has made it a few dozen times harder; but it certainly hasn’t made it impossible.

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