Friday 14 March 2014

How has Digital Technology Changed the way Modern Companies Do Business?

Introduction

A marketers job is to carefully manage all of the elements of the marketing mix: product, place, promotion and price. It is a delicate balancing act and the rapid evolution of internet technology has added a new variable to each element of the marketing mix. These changes are happening so rapidly that it is difficult to keep up with and to understand how each element is affected by change. This has undoubtedly made the marketers job more difficult. In order to cut through some of the fog, this post will look at how the internet has affected the marketing mix. It will then look at the newspaper industry as a case study in order to provide a real world example of how digital marketing has thrown a wrench in the industry's marketing mix.


How the Internet Changed Marketing

There are four elements of the marketing mix (product, place, promotion and price) and while it is evident that the internet has changed the promotion part of the marketing mix, it is worth considering how it has also affects product, place and price. 



 Broadly speaking, the internet has affected the prices of many marketplaces because it allows for greater efficiencies in production, a larger number of possible competitors and an increase in transparency of prices, all of which are factors that put downward pressure on prices.

Today, eCommerce allows consumers to choose from a much wider variety of products. For example, if you were to purchase a new shower curtain you can choose from the products offered online in addition to what is offered in your local retail outlets. So instead of having a couple dozen shower curtains to choose from, now you can choose from hundreds. This increase in product selection puts pressure on companies to differentiate and specialize their product to a greater degree, affecting the product element of the marketing mix. 

Lastly, the internet has affected the traditional distribution models of the past by allowing companies to reach consumers who would have been out of reach without the internet, and vice versa, altering the place element of the marketing mix.


Case Study: A Look at the Newspaper Industry


Arguably, the current difficulties faced by the newspaper industry are born out of a misunderstanding of what product they were selling. It is easy to think that newspapers are in the business of selling the news to its subscribers and this is undoubtedly the impression that many major publications were under. They are also, however, in the business of selling ad space to advertisers. This isn't a small part of their business either, as advertising revenue accounts for 80% of newspaper's income.  




When the internet began selling banner ads in 1993, a major competitor to the newspaper stepped onto the stage. Advertising on the internet offered some major advantages over the traditional newspaper ad. Banner ads are generally less expensive than the traditional ad and they have detailed return on investment (ROI) measurements and analytics, which allow advertisers to track the success of their ads in a way that was not feasible before. Additionally, newspaper advertisements offer a shorter shelf life than banner ads. Daily publications would only last for a day, while advertising on a website lasts significantly longer. Another advantage of the banner ad is that online content has a higher younger market readership than newspapers, which is important as many companies target the coveted 18-25 demographic.   



The internet also proved to be a serious competitor to newspapers in providing information to readers. Classified websites like Kijiji and Craigslist provided a more intuitive and free version of the paid classifieds offered by the newspapers while eHarmony rendered the personals obsolete. This is in part because the internet eliminated the barrier to entry that had previously prevented competing publications from emerging. The internet eliminated the need for expenses related to starting a newspaper such as printing equipment, input costs, fixed costs, labour, space, and distribution costs. Now, costs that would have been prohibitively high for a new publication to emerge no longer existed and rival online publications were nipping at the heels of the newspaper giants.



The newspaper industry suffered a major blow from these shifting market forces. From 2005 to 2009 newspaper advertising revenue dropped by 44%, and during this time period we begin to see the decline of the newspaper. From January of June 2009 alone, 105 newspapers were shuttered, 10,000 jobs were lost and print ad sales fell 30% in the first quarter of 2009 alone. The newspaper industry was in free fall. Meanwhile, the internet was seeing record breaking growth in advertising revenues. In 2004 the internet advertising revenue in the U.S. alone reached $2.69 billion in the fourth quarter, which was the highest revenue quarter ever reported. In 2005 internet advertising was up 34% and in 2006 had increased another 37%.



If newspapers had been more intuitive, they would have entered the digital marketplace more convincingly. An early adoption of and investment in websites that offered the same content as their printed medium would have allowed newspapers to translate their offline readership online, shifting their offline advertising space and allowing them to maintain their important advertising revenue. Many newspapers, comfortable in the monopoly they had enjoyed for so long, and under the wrong impression that they were just selling the news didn't view the internet as a serious threat to their business. Instead, newspapers went online late, if at all, and they did so grudgingly. Today, newspapers have shifted online to varying degrees of success and many are still struggling to monetize their websites.   

Buzzfeed

In light of these technological developments, many onlookers consider the industry a lost cause, thinking that newspapers will go the way of the dodo. However this new climate isn't entirely uninhabitable to news publications. To illustrate this point consider the publication Buzzfeed. 




Buzzfeed is emerging as a media giant of the modern age, however it is commonly dismissed as a superficial website that provides viewers with the latest LOLcats, listicles and memes and is often dismissed as lacking in journalistic integrity. For this reason news providers may be overlooking a successful business model that serves as an excellent example of the opportunities provided by digital marketing.  In December of 2013, Buzzfeed had 130 million unique visitors, 92 million views on their Youtube videos and 2.7 million Youtube subscribers.  Much of Buzzfeed's success is credited to a savvy digital marketing campaign.



Jonah Peretti, the founder and CEO of Buzzfeed, caught on to the idea that would lead to Buzzfeed success when he began creating content and tracking it to learn the way viral content spreads. Peretti applied what he learned in Buzzfeed's early days by using early analytics tools to track which headlines weren't working and would then rewrite the headlines. While Peretti was also interested in search engine optimization, his main focus was in how people shared content, and catered Buzzfeed's content to social sharing.

Instead of making content that the robots like, it was more satisfying to make content that humans want to share.”                     -Jonah Peretti

Buzzfeed's strategy is now based on this type of obsessive measurement. Buzzfeed uses machine learning to anticipate what content might spread. Each of Buzzfeed's stories has it's own dashboard, and every story is carefully monitored. It tracks how many seed views the content gets as well as social views. This helps Buzzfeed learn what is successful in addition to knowing how to adapt content for more social sharing by tweaking the headlines or boosting under-performing stories with higher visibility.

Not only has Buzzfeed learned how to create optimal content for social sharing, it has made a very profitable business model based on native advertising. Native advertising is paid-for content in the form of stories with a “featured partner” label. This has proved very successful for Buzzfeed. Buzzfeed's native advertising boasts impressive traffic numbers in addition to being content that viewers engage with and share. A Motorolla campaign called “10 places you need to visitonce in your life” had an impressive click-through rate of 6.1%.  A Virgin Mobile campaign “27 Cats That Just Can't Handle It” generated 9.7 million engagements.


Buzzfeed's form of native advertising faces some criticism from the journalism community.  Wall Street Journal managing editor Gerald Baker said,
“The clear delineation between news and advertising is becoming more blurred. We have to resist that.” 

Andrew Sullivan, writer for The Dish and an influential blogger and commentator said, 
“If journalism is not understood to be separate from advertising, then it has lost something incredibly important in a democratic society.”

These criticisms touch on a key difference between Buzzfeed and the typical news publication. While traditional news publications are composed of almost entirely of hard news and legitimate journalism, Buzzfeed has a more eclectic mix. Buzzfeed's content is made up of various forms of stories, from puppies and kittens, entertainment, memes, lists and GIFs, to the forms of hard hitting news provided by traditional news outlets. Buzzfeed even has a prominent LGBT section, which covers important issues in LGBT activism, an issue glossed over by many traditional publications. This mix of irreverent and serious content is integral to Buzzfeed's brand and success.
"It's a complete failure of mainstream media that has disenfranchised the whole generation, they say young people don't give a shit about news. That's a bunch of malarkey. Because it affects their lives so much. BuzzFeed can be the next CNN. And quite frankly I hope they are, because news needs it."  -Buzzfeed CEO Shane Smith

The types of stories used for native advertising are never the serious news stories, instead they are made up of lighthearted and fun content. This clear distinction allows Buzzfeed to maintain its credibility and trustworthiness as a news provider. In addition, by lending focus to the more lighthearted stories, Buzzfeed is appealing to younger generations and creating impressive traffic on their site.

Buzzfeed serves as an excellent example both to other news publications and other businesses in general.  It success proves how powerful digital marketing can be and shows what opportunities can be afforded if one embraces the challenges of digital technology.



Sources

Taylor, C. . Retrieved from http://smallbusiness.chron.com/internet-affects-newspaper-business-39364.html

Greene, F. (n.d.). Retrieved from http://smallbusiness.chron.com/disadvantages-advertising-newspaper-11746.html

Dumpala, P. (n.d.). Retrieved from http://www.businessinsider.com/the-death-of-the-american-newspaper-2009-7?op=1

Rowan, D. (2014, January 2). How buzzfeed mastered social sharing to become a media giant for a new era. Retrieved from http://www.wired.co.uk/magazine/archive/2014/02/features/buzzfeed

Stokes, R. (2008). emarketing: The essential guide to digital marketing. (4th ed., pp. 4-6). Quirk eMarketing (Pty) Ltd. Retrieved from https://dl.dropboxusercontent.com/u/52542864/eMarketing_the essential_guide_to_digital marketing_Single_Page_No_Vouchers.pdf

Gaylord, C. (2014, March 10). Buzzfeed introduces a writing style guide for the internet age. Retrieved from http://www.csmonitor.com/Innovation/Tech/2014/0310/BuzzFeed-introduces-a-writing-style-guide-for-the-Internet-age




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