Digital ‘stars’ will flame out

European digital advertising growth rates have fallen from 50 percent plus in the early noughties to around 12 percent currently. Mobile is leaving a now mature technology behind.

Just as traditional media brands have reflected their technology’s lifecycle, what is most instructive is the lifecycle of the digital brands within this.

Microsoft launched in 1975 and saw its share price peak 24 years later in 1999 – equivalent to 65 percent of its life so far.

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

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

When I first visited AOL (in 1994), it comprised of 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?” The combined value of AOL/Time Warner 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. These digital high flyers have performed no better or worse than those hundred-year-old companies. In other words, they are mature businesses past their peak in a fraction of the time.

Now we see Facebook heading for its IPO. Potential investors are either cynical, short-term opportunists or patsies. Facebook’s visitor level must be reaching saturation. Their time spent is well past their boredom level. And this young, dynamic, fickle audience are absolutely going to loathe targeted advertising.

I applied my lifecycle vs. history model, and my reckoning is that Facebook is already on borrowed time. Its product lifecycle is probably past its peak. By the time the patsies believe they will see their money back, the world will have moved on.

What are the lessons for the future? Long term, brands and services have greater sustainability than those in the short-term. Just because you are the fad du jour, doesn’t mean you’re sustainable.

Facebook’s Mark 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 advertises in newspapers and is a very sophisticated advertiser in IT magazines.

Why? Brand.

Ask yourself: “Why can’t they build their brand online, without having to spend a fortune on boring old analogue media?”

The newspaper’s brand is its 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. By increasingly relying on social networking and search brands for our own oxygen, we are 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 is attempting to do the same but its model is riskier and unproven.

If we can combine their high levels of audience attraction, and critically, audience knowledge with stickiness, we can increase reader intensity while matching advertisers to readers who are most likely to buy. The algorithms exist and a few publishers are now realising the opportunity. Waiting for Facebook, Twitter or Google to appear over the hill sure ain’t going to save us.

Pioneers get shot.

Jim Chisholm is an independent media consultant based in France. He can be contacted at jim@jimchisholm.net

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