Archive | August 2015

TV advertising is MORE effective than it used to be!

Second_screen

I’ve seen (and published a few myself) many negative stories on the future of traditional TV recently. But after last week’s update on further double digit ad declines for 2015 in both the US and UK TV markets, I am willing to make some airtime for some good news. It’s a subtle point, but an AdWeek article quoting CBS executives did contain one nugget:

“And those viewers who do stick with their DVRs are fast-forwarding through fewer ads than they used to. While 50 percent of DVR users would routinely skip ads, “the number is declining now,” said Poltrack, “because they’re too busy on their phones to fast-forward through the ads,” given that two-thirds of users watch TV while also engaged with a second screen.”

That makes a lot of sense to me. In the 1980s, when people were watching TV, whenever an ad break came on some people would do something else during the commercials…maybe pick up the newspaper (remember those?) and read for 2-3 minutes. The ads were on in the background, but people ignored them, or at least thought they did. Studies showed that ads in the background were still heard, and still had an effect. People hear the jingle or catch the essential audio message, and retain brand identification.

In the late 1990s, PVRs came on the scene, and instead of watching the ads, more than half of viewers began to regularly skip all the commercials. That didn’t totally eliminate ad effectiveness: even at 16x speed, the basic message and logos still come through, but ads were now less effective than they had been. But skipping ads with a PVR takes some effort: you have to push the button and hold it down, and pay attention to the screen so that when the ads are over so you can start your program at the right spot. Sometimes you even go too far and have to rewind.

Today, why bother skipping the ad at all? Your smartphone or tablet is already in your hand, so why not just check out a few Facebook posts, a tweet or two, and tune out the ads running in the background? It’s less effort than ad skipping, and if there is anything that is near and dear to a couch potato’s heart, it’s minimizing effort.

This won’t be true of all viewers, but according to the CBS folks, it does seem to be happening more and more.

And I think this is a really important shift. Movies are a visual medium, but TV is a primarily about the audio. Try it sometime: watch a TV show with the sound off and it seldom makes sense. Now listen only, and don’t look at the screen: it’s basically just radio that happens to have pictures.

If Americans are using their PVRs less to skip commercials, and are instead multi-tasking while the audio plays in the background, we may be about to see an UPTICK in the effectiveness of TV ads. Which is fantastic news…the decline in ad revenues may not be 10-12% annually, but only 8-9%. 🙂

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As a further thought, I am increasingly interested in the concept of attention. As one recent article put it “The currency of the media business is attention.” I plan on writing a whole article about the different kinds of attention, and what they mean.

But the CBS data point on ad skipping reveals yet another angle: in a world of multi-tasking, the media business may also be influenced by the different kinds of inattention! Whether it is TV commercials being fast forwarded, TV ads being heard in the background, radios in the background, pre-roll ads that are skipped, or banner ads that consumers claim not to see…how effective are any or all of these as ad formats? My hunch is that although consumers may think these ads have no influence, the reality is very different.

Pay attention? Don’t pay attention? It may not matter.

Demographic analysis matters more than ever!

Applew ownership PC

An article from Ad Age, published yesterday, said that we should “forget generational differences” and “…the notions that support the traditional concept of a generational cohort are becoming less meaningful.” Really? REALLY?

Don’t get me wrong, some generational analysis is silly: I doubt millennials are that much more or less idealistic than previous cohorts, regardless of what you read online. But I happen to be working through the data from a recent survey done in Canada. It’s not published yet, but I pulled one question more or less at random to see if there is any validity to the idea that generations aren’t that different from each other. Over 1,500 respondents, with over 230 in each age break.

As you can see in the chart above, 18-24 year old Canadians (aka trailing millennials) who own a laptop are much more likely to own a Mac than other age groups. There is a large gap (27% compared to 16%) compared to leading millennials 25-34; and they are more than THREE TIMES more likely to own a Mac than all Canadians 45+. (There is no statistically significant difference between 45-54 year olds, 55-64 year olds, or 65+!)

Demographic analysis and cohort analysis still matters. In fact, it may matter more than ever.


Just a couple of extra comments:

1) I know some people might get turned off by all the numbers in this post. But I think it is really important for readers in 2015 to be not just literate, and not just numerate, but also able to read survey and polling data accurately. That I give you the survey size, the number of people in the age groups, and all of the data points is important for YOU to be able to judge what I am saying.
2) A big problem with demographic analysis is sorting out age effects from cohort effects. A lot of today’s 18-24 year olds like to spend all their money on beer and dancing with friends. That probably will be less true 40 years from now when the 58-64. That’s an age effect. But preference for Mac over Windows is a behavior that is likely to be conserved over time. Operating systems tend to be “sticky”, so this is likely to be a cohort effect that will be true for some time.

The REAL price of oil: it’s lower than you think!

Inflation_Adj_Oil_Prices_Chart2

The price of oil matters, and it matters a lot. So it is critical to look at oil prices over the longest period possible, but also to factor in the effect of inflation. I remember the price of oil spiking in 1979, but it was to “only” US$40. Doesn’t seem so bad, but that would be over $115 in today’s money!

The chart above is updated as of March, and the oil benchmark they use is Illinois Crude (Sweet.) It was $52.50/barrel back in March, and as of August 8th had fallen even further to $37/barrel. What does this mean in proper historical perspective?

  1. Oil is about $100 per barrel cheaper than it was in 2008.
  2. Oil is about 43% cheaper than the average since 2000.
  3. Oil is about 31% cheaper than the average since 1980.
  4. Oil is about 11% cheaper than the average since the end of WWII in 1946.

This has enormous implications for the C$, money flows in the Mid-East, Putin’s behavior, sales of electric vehicles, viability of solar, population of suburbs vs. urban living for millennials, and so on.

I have no idea what the price of oil will do in the future, but current levels are suggesting a VERY different energy economy that what most people have become used to.


I wrote the above on the weekend on Facebook, and have decided to make it a blog post, based on a few stories published today, and my own further analysis.

  1. Russian GDP for Q2 came out this morning: down a shocking -4.6%. Will this cause Putin to act more conservatively, and try to get sanctions lifted? Or will it make him more aggressive, to distract attention from the weak economy? Students of Soviet and Russian history would bet on the latter. Nothing like fighting with the west to distract and rally the population.
  2. Tesla is a lowering its production forecasts, and a Reuters article says that Tesla loses more than $4,000 for every car it sells. Low oil prices don’t seem like they would make electric cars more attractive.
  3. People tend to make decisions based on extrapolations of recent trends. “What have you done for me lately” aka the recency bias. Why does this matter? As an example, the price of installed solar panels has fallen by about 50% since 2009. That’s amazing – surely that will cause massive adoption of solar? The problem is that in the same time span, the price of oil has fallen by even more (73%!) That’s going to have an effect on the perceived attractiveness of solar versus diesel generators, for instance.

Duncan’s Reading List & Book Reviews: July 2015

2015-08-01 15.56.40 (2)

Just over 2,000 pages read this month, down 20% from June, which was down 20% from May. Summer makes me dumber! I would also add, as you can tell from the photo, that balancing hardbacks on your head is really hard when you have no hair.

The Three Musketeers – Alexandre Dumas, 1844 (788 pages)

I loved the Count of Monte Cristo, so reading his second most-acclaimed book was the obvious decision. As with the Count, these are NOT children’s books. D’Artagnan is the “hero”, but hardly the chivalrous type, the title Musketeers are less charming than you might expect, and there are court intrigues galore. I didn’t enjoy this as much as Monte Cristo, and I suspect it was the translation. This was the 1952 translation, and I think a more recent version would have been more natural and flowed better. Still a ripping good yarn, and a page turner: I have already ordered the other four volumes in the series. 8/10.

Nemesis Games – James S.A. Corey, 2015 (530 pages)

This is the fifth volume in the Expanse series. James S.A. Corey is a nom-de-plume for the writing team of Ty Franck and Daniel Abraham, both of whom have worked with George R.R. Martin, author of the Game of Thrones/A Song of Ice and Fire series. If you have slogged through Volume Five of that series, you would approach his protégés later books with considerable trepidation. But unlike George, this fifth book is BETTER than the previous books, which I had given 8/10. One reviewer said that “This is Corey’s Empire Strikes Back and I would agree: it takes the franchise in some new and better directions, showing greater depth for the ancillary characters. 9/10

The Martian – Andy Weir, 2011, 2014 (385 pages)

Love love love. I already wrote about this on Facebook: it is the perfect hard science book for geeks, nerds, and (especially) those who are both. The writing is good but not brilliant, but the sheer detail of the story elevates the book into a hard science classic. The concept isn’t all that new: Jules Verne did some similar things in The Mysterious Island, and that was in 1874. The brilliant Cyrus Smith doesn’t need to produce water from hydrazine (spoilers!), but does make bricks, nitroglycerin and a telegraph from a standing start. 10/10

Armada – Ernest Cline, 2015 (355 pages)

I adored Cline’s previous novel, Ready Player One. I was so excited to read his sophomore attempt that I bought the hardcover! As I was reading Armada, I kept asking myself why I didn’t love it as much? It was just like RPO: the video game setting, the shameless homage to the science fiction movies of 1970-1990, endless pop culture references, similar lead character, similar supporting characters, and the list of similarities just went on and on. And on. Uh oh.  Maybe this is just a hurried book, badly edited, and rushed out to capitalise on the Ready Player One enthusiasm, and Cline will have something DIFFERENT to say in his next book. Or the alternative is that he only had one book in him, and he’s stuck on repeat from now on. I hope not.  5/10