Note: This post is a rehash of a post made on my Personal Blog, about how Yahoo should alter its strategy to focus on other streams of media for contextual advertising. Realized that there are lots of hidden opportunities for Startups as well within this space and here it goes…
A friend of mine and I, over some conversations were discussing about some of the bigger brands that we see around us and something along the topics of Return on Equity. Not sure if you are aware of, but Microsoft has a 52% return on equity. Yahoo has roughly about 7% and falling drastically and Google has one which stands at around 26% – and growing steadily. Whatever you may say, Microsoft has played this game with a whole new set of balls and one most people simply won’t understand. And if you ask me, they are a much better company in terms of strategy and products compared to most other giants, anyday.
But that’s not the focus of this post.
The conversation was that, if a company has Advertisement as its core strength and has built a competence in it, then its going to be very hard for the company to drop that and adapt the advertising network of its partner/rival. Well, for the case of survival they might, but since they do have the core competence, the resources and the minds that can think in that direction, what could they possibly do, was the question.
I’d say, flip the coin, and lets look out to the horizon. Go after other streams, television and Radio… to be precise.
So go down memory lane and you will remember how there was a time when all the internet properties used to have a sales team to go chase after advertisers and get them onboard and once the term was over the havoc began all over again. Most of them knew that they could make more money if they managed the deal directly with the advertisers, but the cost that went into chasing orders, and managing the clients was too much an ordeal that when the concept of advertisement networks came about, people were more than glad to give up a marginal cost to have these services “managed”.
It happened for the web medium, and it can happen for the television and Radio network as well. Because they face the very same problems.
If you don’t believe me, check out this company. There is a company named Spotrunner. What they do is that they build an inventory of ads that the local television operators, while doing the programming, can draw advertisements out of. I think thats a very neat bloody idea. I know of people who are running campaigns and they get the sweetest deals out of this television networks during “off seasons”. And when its off seasons, oh boy, the inventories are really bad that they’ll run just about anything to keep those media streams flowing. During rainy seasons, nobody wants to sell or buy cars, consumer goods etc, and that usually is what constitutes a large chunk of the advertisement revenue. So, they usually fill it up with fillers and Awareness Advertisements.
But imagine if… a centralized network would manage all the advertisements with vendors, create an inventory, and as broadcast partners sign up, all they would have to do is enter in the keywords for the show, and they’d see options of which ads they can play. They can pick, and queue it and go about their work. When the ad gets played, whatever amount was agreed upon with the vendor gets deducted from the advertising account – this could technically even be a prepaid account. Now this totally leverages the broadcaster, since he has options of playing an ad of a sponsor that they have, and use the flexibility of the ad inventory to fill whatever is required, and hence maximizing his revenue potential. If laziness is one to bet on, eventually they’ll scrap their sales force, and resort to doing programming with most of these advertisements running in.
This is also brilliant, cause imagine if there is a talk show happening and knowing how most programmers can flip through the show quickly, they can even generate keywords – manually, or there could be a simple app that extracts out the audio and picks up keywords, and can “suggest” advertisements that would make the most sense. THAT would be relevant advertising indeed.
I think television stations get away with it, by a little bit. But Radio stations really struggle. If you do the same for them, with just audio, they’d keeel (spelling intentional) over themselves for it. I have closely observed how some of these radio stations work, including the popular and well known ones and having friends in that circle, one only hears one thing over and over again – finding sponsors and advertisers is a tough job.
So you’d start with something like this, and move on to the second phase, and then there is even a third. That, we’ll talk about that in a later post.
The Original Post can be found on my blog, www.vijayanand.name
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