Media Selling E-Book

Charles Warner

• Herausgeber: John Wiley & Sons
• Kategorie: Geisteswissenschaft
• Sprache: Englisch

Seitenzahl: 1228

Veröffentlichungsjahr: 2020

Beschreibung

The must-have resource for media selling in today’s technology-driven environment

The revised and updated fifth edition of Media Selling is an essential guide to our technology-driven, programmatic, micro-targeted, mobile, multi-channel media ecosystem. Today, digital advertising has surpassed television as the number-one ad investment platform, and Google and Facebook dominate the digital advertising marketplace. The authors highlight the new sales processes and approaches that will give media salespeople a leg up on the competition in our post-Internet media era.

The book explores the automated programmatic buying and selling of digital ad inventory that is disrupting both media buyers and media salespeople. In addition to information on disruptive technologies in media sales, the book explores sales ethics, communication theory and listening, emotional intelligence, creating value, the principles of persuasion, sales stage management guides, and sample in-person, phone, and email sales scripts. Media Selling offers media sellers a customer-first and problem-solving sales approach. The updated fifth edition:

• Contains insight from digital experts into how 82.5% of digital ad inventory is bought and sold programmatically
• Reveals how to conduct research on Google Analytics
• Identifies how media salespeople can offer cross-platform and multi-channel solutions to prospects’ advertising and marketing challenge
• Includes insights into selling and distribution of podcasts
• Includes links to downloadable case studies, presentations, and planners on the Media Selling website
• Includes an extensive Glossary of Digital Advertising terms

Written for students in communications, radio-TV, and mass communication, Media Selling is the classic work in the field. The updated edition provides an indispensable tool for learning, training, and mastering sales techniques for digital media.

Leseprobe

FIFTH EDITION

Media Selling

Digital, Television, Audio, Print and Cross‐Platform

CHARLES WARNER

WILLIAM A. LEDERER

BRIAN MOROZ

This fifth edition first published 2020© 2020 John Wiley & Sons, Inc.

Blackwell Publishing Ltd, (3e,2004), John Wiley & Sons Ltd (4e,2009)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by law. Advice on how to obtain permission to reuse material from this title is available at http://www.wiley.com/go/permissions.

The right of Charles Warner, William A. Lederer, and Brian Moroz to be identified as the authors of this work has been asserted in accordance with law.

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Library of Congress Cataloging‐in‐Publication Data

Names: Warner, Charles, 1932– author. | Lederer, William, author. | Moroz, Brian, author.Title: Media selling : digital, television, audio, print and cross‐platform / Charles Warner, William Lederer, Brian Moroz.Description: 5th Edition. | Hoboken : Wiley, 2020. | Revised edition of Media selling, 2009. | Includes bibliographical references and index.Identifiers: LCCN 2020013130 (print) | LCCN 2020013131 (ebook) | ISBN 9781119477396 (paperback) | ISBN 9781119477464 (adobe pdf) | ISBN 9781119477419 (epub)Subjects: LCSH: Selling–Broadcast advertising. | Advertising, Newspaper. | Internet advertising. | Advertising, Magazine. | Advertising, Outdoor.Classification: LCC HF5439.B67 W37 2020 (print) | LCC HF5439.B67 (ebook) | DDC 659.13068/8–dc23LC record available at https://lccn.loc.gov/2020013130LC ebook record available at https://lccn.loc.gov/2020013131

Cover Design: WileyCover Image: Grey Bokeh Background © cyb3rking/iStock.com, Set of flat design concept icons © VLADGRIN/Getty Images

This book is dedicated to my wife, Julia, whose loving care and support sustained me and to the memory of my mother and father who would be proud of me for being productive in my dotage.

Charles Warner

About the Authors

Charles Warner teaches in the Media Management Program in the School of Media Studies at The New School in New York. He is also the Goldenson Chair Emeritus at the University of Missouri School of Journalism.

Until he retired in 2002, Charlie was Vice President of AOL’s Interactive Marketing division. Before joining AOL, he was the Goldenson Endowed Professor at the Missouri Journalism School for 10 years where he taught media management, media economics and finance, and media sales, and where he created and ran the annual Management Seminar for News Executives.

Charlie has also served as a management and sales consultant and trainer for CBS, ABC, ESPN, MTV, TCI, Fox, AH Belo, Hearst Magazines, Microsoft’s MSN, Cox Cable, The Hyperfactory, and many other major media and online companies. He has also been VP, General Manager, of WNBC‐AM (now WFAN) in New York, WMAQ‐AM (now WSCR) and WKQX‐FM in Chicago, WWSW‐AM and WPEZ‐FM in Pittsburgh, and CBS Radio Spot Sales.

William A. Lederer co‐founded and serves as Chairman and CEO of iSOCRATES, the Global leader in Programmatic Resource Planning and Execution™ that serves publishers, marketers, agencies, and their suppliers. iSOCRATES has two lines of business: Strategic and Operations Consulting and Managed Services (Managed Service Platforms and Business Process Outsourcing). The company is owned by its employees, is headquartered in Saint Petersburg, Florida, and has its global delivery center in Mysuru, Karnataka, India.

Previously, Bill founded and served as Chairman and CEO of MediaCrossing Inc., a pioneering programmatic media trading company. Prior to MediaCrossing, he was CEO, Kantar Video, a global online and mobile video data, measurement and analytics innovation unit of Kantar, a global media and market research holding company of WPP Group. He also served as a board member of WPP Digital and of Kantar Digital. Bill had been Global Chief Development Officer and COO of North America at Kantar Media Audiences (formerly, TNS Media Research), and earlier VP, Corporate Development at Kantar Media (formerly, TNS Media NA). He was the Founder of Art.com, the leading e‐commerce retailer, which he sold to Getty Images where he led as CEO of its Consumer Division.

Bill is an Adjunct Professor in the graduate Media Management Program in the School of Media Studies, The New School in New York. He is author or co‐author of four Wiley texts on media selling or finance, including this 5th edition of Media Selling.

Brian Moroz is a senior creative strategist at Google. He has held several positions there during his decade‐plus tenure both in the sales and agency groups and in the sales training group where he led North American new hire training in New York for all new employees.

Brian has particular expertise in strategic planning for complex online marketing campaigns and is expert in online video, search, and display as well as emerging technology in the digital media space. His current focus is on understanding how Google users interact with and take value from online marketing.

Previous to his work at Google, Brian worked in a postgraduate MBA startup and in finance. He has worked in the US and in Europe with consulting roles in Asia and was an Adjunct Professor in the graduate Media Management Program at The New School in New York.

Acknowledgments

Special thanks go to Haze Humbert, former Wiley Executive Editor, who urged me to write a fifth edition of Media Selling and to current Executive Editor, Todd Green, who has been so patient and supportive through several missed deadlines. Kudos to Wiley project manager Ajith Kumar and to the meticulous copy‐editor Katherine Carr for making me seem like a much better writer than I really am.

Buckets of kudos and thanks go to my two co‐authors, Bill Lederer and Brian Moroz; a fifth edition of Media Selling would not have been possible without their insights and expertise. And thanks to Scott Pompe of the Austin American‐Statesman for his multiple insights into best practices in local cross‐platform selling, to John Zimmer of Zimmer Marketing Group for his team’s insights in local cross‐platform selling, to Leo MacCourtney of Katz Television, to Tim Warner (no relation) of WRTH‐TV in Indianapolis, and to Zorik Gordon, co‐founder of Reach Local for being so candid in my interviews with them. Also, thanks to Will Warner for designing some of the coolest graphics in the book.

The book was also guided by the thoughtful reviews of several of my academic colleagues, and I would like to thank them for their efforts and encouragement.

Charles Warner

New York, August 2019

Preface

Updating the fourth edition of Media Selling, published in 2009, has been challenging because of the exponential changes in the media, especially in digital advertising, which in 2016 toppled television as the numberone advertising medium, and in the time since the fourth edition, Google and Facebook have dominated the digital advertising media environment. In 2017 and 2018 the two Internet giants amassed approximately 90 percent of the increase in digital advertising investment over the previous year, leaving hundreds of thousands of advertising‐supported websites and apps struggling to survive by dividing the crumbs of the remaining 10 percent of the digital advertising yearly increase. It is difficult to keep up with accelerating changes in the media and in advertising because these changes are driven mostly by advances in artificial intelligence (AI), but this edition includes many of the changes up until August of 2019. With that in mind, we (the authors) have tried to avoid predicting the future beyond 2019. We have included a list of the most relevant references at the end of each chapter. We have also provided a list of resources that includes the URLs of websites and industry newsletters, blogs, apps, and websites where readers can keep up to date on current information.

Focus of the Book

Media Selling focuses on several basic concepts:

Selling media has changed irreversibly since the advent of Google’s self‐serve Ad Words (called Google Ads from July 24, 2018) and the rise of programmatic buying and selling of media ad inventory. In 2019, over 80 percent of all digital inventory (desktop and mobile) was bought by computer‐to‐computer online programmatic trading. There are now two basic types of media selling: (1) in person, or via Skype or FaceTime, face‐to‐face educating, on which this book focuses and (2) programmatic trading, which is covered in a separate chapter. People selling legacy media (television, radio, newspapers, magazines, and out‐of‐home) today must understand both their own medium and the complexity of programmatic, including a basic knowledge of programmatic’s underlying ecosystem and technology because virtually all of the legacy media, both nationally and locally, are sold on a cross‐platform basis that includes a digital component.

Personal selling without tricks or manipulation – with authenticity – is essential in order to build and maintain relationships based on trust.

The imperative of honesty, integrity, and ethics in selling in this era of government, corporate, and media misdeeds and erosion of confidence in the media, and in this new era of social media in which it is virtually impossible to erase the digital footprint of misdeeds or impulsive comments.

Attitudes control successful sales performance, and attitudes are controllable by using sound goals and objectives to motivate salespeople and help them achieve their dreams.

Developing emotional and social intelligence – self‐awareness, self‐management, social awareness, and relationship management – is necessary for success in educating customers and helping them.

Solution and insight educating and selling means selling solutions to marketing and advertising problems.

Because some of the in‐person business in the media is still conducted by means of negotiating, today’s successful media salespeople must be competent negotiators.

Understanding the basic concepts of marketing and advertising is crucial to developing appropriate solutions and insights.

Unique Features

The fifth edition of Media Selling has several unique features:

A fully integrated and organized selling approach – AESKOPP – that enables salespeople and sales managers to organize and evaluate sales efforts.

A strategic personal selling approach that emphasizes giving customers insight and solving customers’ problems by developing trusting, long‐term relationships using the wisdom of emotional intelligence.

Definitions of the five or six steps of personal selling (depending on the type of selling) that focus on discovering and understanding customers’ and buyers’ personalities, needs, and wants; solving advertising and marketing problems; and, most important of all, getting results for customers.

A thorough chapter on negotiating and closing.

Tips on time management.

A chapter that covers the history and practices of programmatic trading.

A website (

www.mediaselling.us

) with a Downloads section that contains many useful documents such as ad‐sales ratios, RFPs, and blank planners.

Most books on personal selling emphasize discovery and qualifying customer needs and viability, crafting proposals that meet those needs, and techniques for closing a deal, often by creating a false sense of urgency. In the current era of Big Data, micro‐targeting, and buying individuals instead of broad audiences via programmatic, old‐fashioned sales techniques do not tend to work. Today’s media salespeople must concentrate on educating clients and helping them get results. Rather than being just sellers and closers, media salespeople must be educators and helpers.

Style of the Book

The three authors have attempted to write this book in a relatively informal and personal style. We have used the term salesperson throughout this book instead of account executive, seller, account manager, or business development person in order to be consistent, because they are all virtually equivalent in meaning.

1The Marketing/Media Ecology

Charles Warner

What Is Marketing?

The Internet and Ad Words: Disrupting Marketing and Advertising

Google

Customers Versus Consumers

What Is Advertising?

The Media

Hypocrites Not Allowed

Anyone taking a moment to ponder the $2 trillion marketing and advertising sector of the economy “can’t avoid the inescapable truth that capitalism could not exist without marketing,” Ken Auletta writes in Frenemies: The Epic Disruption of the Ad Business (and Everything Else).1 The marketing process is vital to the vigor of the American economy, and the media are integral elements in that marketing process and, thus, to the economy’s health and stability. Consumer demand is what drives the economy, and it is marketing that fuels demand. Advertising is a major component of marketing, and it is through the media that consumers and businesses receive advertising messages about products and services. Also, “in the United States each dollar spent in advertising alone spawned nineteen dollars in sales and supported sixty‐seven jobs across many industries…”2

Furthermore, advertising keeps a brand healthy and growing in a highly competitive marketplace. In a March 4, 2019 issue of Ad Age an article titled “The end of austerity” detailed how “The stunning tumble of Kraft Heinz has caused pain for investors … after Kraft Heinz took a $15.4 billion write‐down of its assets.”3 The article goes on to report how Kraft Heinz owner, Brazilian investment firm 3G, went into a cost‐cutting mode and used a zero‐based budgeting process to cut advertising investments drastically. After the Kraft Heinz huge write‐down on assets, a JP Morgan analyst said, “Investors for years have asked if 3G’s extreme belt‐tightening model ultimately would result in brand equity erosion.”4 So not only is advertising a major element in the fuel that drives consumer demand, lack of sufficient advertising investment can stunt a brand’s growth.

If any one of the three elements (marketing, advertising, and the media) is not healthy, the other two cannot thrive. This chapter will examine the ecosystem‐like interdependent relationships among marketing, advertising, and the media and how the Internet disrupted that ecosystem.

What Is Marketing?

In his influential book, The Practice of Management, Peter Drucker, “the Father of Modern Management,” presented and answered a series of simple, straightforward questions. He asked, “What is a business?” The most common answer, “An organization to make a profit,” is not only false, but it is also irrelevant to Drucker. “There is only one valid definition of business purpose: to create a customer,” Drucker wrote.

Drucker pointed out that businesses create markets for products and services: “There may have been no want at all until business action created it – by advertising, by salesmanship, or by inventing something new. In every case it is a business action that creates a customer.” Furthermore, he said, “What a business thinks it produces is not of first importance – especially not to the future of the business and to its success.” “What the customer thinks he is buying, what he considers ‘value,’ is decisive – it determines what a business is, what it produces and whether it will prosper.” Finally, Drucker said, “Because it is its purpose to create a customer, any business enterprise has two – and only these two – basic functions: marketing and innovation.”5

Notice that Drucker did not mention production, suppliers, or distribution, but only customers. That is what marketing is – a customer‐focused business approach.

A production‐focused business first produces goods and then tries to sell them. In the book Marketing 3.0: From Products to Customers to Human Spirit, Philip Kotler and his two co‐authors refer to a product‐focused approach as Marketing 1.0.6 A customer‐focused business approach produces goods or services that it knows will sell based on market research and data that reveal customers’ aspirations, wants, needs, tastes, and preferences. In Marketing 4.0: Moving from Traditional to Digital, Kotler, who is often referred to as “the father of modern marketing,” and his co‐authors refer to a customer‐focused approach as Marketing 2.0.7 In Chapter 15: Marketing and Chapter 16: Advertising, you will learn more about how marketing has further changed from Marketing 1.0 (product focused), to Marketing 2.0 (customer focused), to Marketing 3.0 (human centricity), and to Marketing 4.0 (customer collaboration), but for now, we will concentrate on customer‐focused Marketing 2.0.

Another leading theorist, former Harvard Business School Professor Theodore Levitt, wrote an article in 1960 titled “Marketing myopia” that is perhaps the most influential single article on marketing ever published. Levitt claims that the railroads went out of business “not because the need [for passenger and freight transportation] was filled by others … but because it was not filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business.”8 In other words, the railroads failed because they did not know how to create and keep customers; they were not marketing‐oriented. Where would makers of buggy whips be today if they had decided they were in the vehicle acceleration business or in the transportation accessory business instead of being in the buggy whip business?

As a result of the customer‐focused, marketing approach espoused by Drucker, Levitt and other leading management and marketing theorists, in the 1960s, 1970s, and 1980s many companies asked themselves the question, “What business are we in?” and subsequently changed their direction to focus more on marketing and customers rather than on products. After the Internet became widely adopted by consumers in the late 1990s, entrepreneurs such as Larry Page and Sergey Brin (Google), Mark Zuckerberg (Facebook), and Jeff Bezos (Amazon) asked “What business do our customers want us to be in?”. Existing businesses that survived after the Internet disruption had a heightened sensitivity to customers and changed the old‐fashioned outlook of, “Let’s produce this product because we’ve discovered how to make it.” The Internet opened the door to a new digital age in human history, and from a business perspective, successful businesses and entrepreneurs in the digital age put the preferences, wants, and needs of customers and consumers first as these customer‐first businesses shot past traditional companies in market value.

In today’s digital‐age economy consumers rule because the availability of information on the web has switched the information asymmetry that existed in favor of marketers prior to the Internet to be in favor of consumers in the post‐Internet, digital era. Before the Internet and search, someone who wanted to buy a car had to depend on car dealers and their salespeople to provide information about a car’s features, benefits, condition, and price. The information asymmetry favored the salesperson.

Today, consumers can search for the information about the make, model, features, benefits, condition, and price of a car on the Internet and can be armed with thorough information before walking into a dealership, often with more information than a dealer salesperson has. Therefore the information asymmetry has switched to the consumer in the digital era. Any company that does not recognize that customers now rule and put them on a pedestal, wow them, and delight them with an excellent experience will disappear from the business landscape.9

The Internet and Ad Words: Disrupting Marketing and Advertising

The Internet completely disrupted marketing. It switched the focus of marketing from mass marketing in the mass media to marketing to one individual at a time in customized, personalized, and fragmented media. In addition, the Internet allowed marketers to appeal to a narrow market of just one person out at the end of the long tail; to sell less of more, as Chris Anderson writes in The Long Tail.10

Not only did the Internet allow marketing to be more precise and more highly targeted, it also allowed consumers to discover a new product or service, to get more information about the product in the moment, without going to a retail store or dealership, and, probably most important, it allowed consumers to purchase a product online without going to a retail checkout counter. Thus, elements in the old value chain were upended; distribution costs and transaction costs were reduced to virtually zero – an enormous disruption.

Figure 1.1 The value chain

Let’s look at the steps in the value chain that companies had to go through in order to be successful:

The top step in each box (in gray, no parentheses) is the original one identified by Michael Porter in his 1998 book Competitive Advantage.11 Porter’s value chain obviously refers to a manufacturing or retail company, not a media or Internet company. The steps in the value chain that are in parentheses are more familiar and helpful in understanding the value chain process as it exists today, especially in companies such as Google, Facebook, and Amazon.

Before the advent of the Internet, large companies that were vertically integrated could control the three creation steps in the value chain (supply, production, and distribution) and could gain monopoly‐like market power, charge higher prices, and, therefore, achieve huge profit margins. For example, newspapers that controlled the scarce supply of news (skilled reporters who wrote news stories), owned expensive printing presses and delivery trucks and, thus, controlled production and distribution; therefore, they often gained monopoly‐pricing control over advertising. Newspapers, because they had an elastic supply of advertising inventory (they could add pages if demand for advertising went up), charged a fixed, non‐negotiable price and gave volume discounts to large advertisers. In other words, newspaper pricing strategy rewarded advertisers for buying more advertising lineage and buying it more frequently, and the newspapers could just add pages as demand went up. This pricing strategy was extremely profitable for newspapers, and also favored large advertisers, such as department stores that could buy advertising more cheaply than small retailers because of volume discounts. Thus, it was an advantage to be a large advertiser; the small corner dry cleaner couldn’t afford to advertise in a major newspaper and had to find other ways to market its business, such as advertising in Yellow Pages.

Another example of pre‐Internet advertising pricing strategies was how television networks determined pricing. Television programming had an inelastic supply of advertising inventory because programs were formatted for a fixed amount of advertising. Thus, a half‐hour news program was formatted for eight minutes of commercial time. Because of the inelastic supply of advertising slots and because there was high demand for a limited supply of television ad inventory, prices were not fixed and were determined by demand. The market determined prices, and thus each television commercial schedule was negotiated anew at the time an advertising campaign was placed. It was a pricing model based on scarcity and demand.

The prices for all media advertising were based on some version of a cost‐per‐thousand (CPM) model in which advertisers paid on the basis of having the opportunity to capture readers’, viewers’, or listeners’ attention. Advertisers purchased the opportunity for exposure, not based on whether anyone read, watched, or listened to an ad. Mass media advertising was, in a sense, a gamble that someone would see and respond to an ad immediately or sometime in the future.

John Wanamaker, a Philadelphia department store owner, famously said in the early 1900s, “I know that half my advertising is wasted. The problem is I don’t know which half.” So Wanamaker and other advertisers doubled down on advertising hoping that at least half of it would work.

Therefore, newspaper readers and television viewers were inundated with advertising whether or not the ads were relevant to their individual aspirations, needs, or desires. Television advertising was especially intrusive, but most viewers put up with it because of an implicit contract between television stations and networks and their viewers who got free entertainment and news in return for their attention.12

The introduction of the digital video recorder (DVR) in 1999 by TiVo allowed viewers to record programs and fast‐forward through commercials in the programs they recorded. This fast‐forwarding highlighted the fact that people were not happy about intrusive, irrelevant advertising and wanted to skip it.

Google

About the same time that TiVo introduced the DVR, Larry Page and Sergey Brin, who were PhD candidates at Stanford University in the Computer Science department, started a company in their dorm room. The two had come up with a way to organize keyword search results on the Internet based on how many other web pages had links to the website the keyword appeared on. They called their system PageRank after Larry Page.13

Both Page and Brin knew they had to find a way to monetize their search results, but they both disliked traditional, intrusive advertising. After Google got funding from two major Silicon Valley venture capital funds, the new company’s first business plan was not written by either Page or Brin, who were both focused on the product and the user experience. The business plan articulated three streams of revenue: (1) Google would license its search technology to other websites, (2) it would sell a hardware product that would let companies search their own content very rapidly, and (3) it would sell advertising.14 Google’s first effort to sell ads was in July 1999.15 Page and Brin felt that information in advertising should be as valuable to users as the search results Google provided.

From 1999 to 2002 Google sold advertising in the traditional way to major advertisers and their agencies through salespeople who sold on the basis of a CPM pricing model. However, in October 2000, Google “launched a product catering to smaller operations that had not previously contemplated an online buy.”16 Google named the self‐service system AdWords.i

Initially, the automated system allowed advertisers to buy on a CPM basis and pay more for ads positioned at the top of the search results area on the right side of the page.17Although the system was fairly popular, it was easy to game, and Page and Brin felt it was not scalable. Therefore, Google adopted an online auction system similar to one used by a competitor in the online search space, GoTo. The major difference between Google’s system and GoTo’s system was that the GoTo auction was a traditional auction model in which the highest bidder won. The GoTo auction model is referred to as a first‐price auction. However, Google developed a modified Vickrey second‐price auction system. In a second‐price auction, the highest bidder on a keyword won the bid, but paid only what the second‐place bidder bid plus a penny.ii This model, counterintuitively, causes people to make higher bids than in a first‐price auction, thus raising the final price because bidders know they will pay less than the price they actually bid.18

The second‐price auction was a stroke of genius because it eliminated buyer’s remorse, which often happened after a buyer won a traditional auction.19 Google made another decision that finalized the earth‐shattering effect AdWords had on marketing. Instead of charging on a CPM model, it adopted GoTo’s model of charging an advertiser only when someone clicked on an ad. It was a cost‐per‐click (CPC) model.20

The third innovation, and one that was purely Google’s was its quality score. A quality score is determined by a complex algorithm that determines how relevant a website is to users. If someone clicks on a keyword search result ad, and goes to a site that is not relevant, that site gets a lower quality score. For example, if someone searches for “jobs,” does Google put up a result about Apple founder Steve Jobs or does it put up results about employment opportunities? The beauty of the ad quality score is that “it makes the advertiser do the work to be relevant,” according to the 2002 Google head of advertising, Sheryl Sandberg, who in March, 2008, was named the COO of Facebook.21

On January 24, 2002, Google tested the new AdWords auction system and soon not only small businesses with a credit card were buying search results on a self‐help, second‐price online auction and CPC model, but also major advertisers such as P&G and Coca‐Cola were participating. The immediate, runaway success of AdWords not only led to Google’s first profitable year at the end of 2002, but it changed the entire marketing/media ecosystem and the way media would be bought and sold from that time on.

By mid‐2018 Google was the most valuable media company and the third most valuable company in the United States. It had more than twice the market capitalization of older production‐oriented companies such as General Motors and General Electric combined.iii In 2018 Google was by far the largest media company in the world, garnering an estimated $136.5 billion in revenue in 2018, 86 percent of which was from advertising. Google 2018 ad revenue was almost two‐and‐a‐half times more than the second largest media company in terms of advertising revenue, Facebook, which had an estimated $56 billion in advertising revenue. In 2018 the largest traditional media company in terms of advertising revenue was Comcast’s NBCUniversal division, which had roughly $33 billion in advertising revenue.

For the purposes of this book, we are defining media companies as those that are supported primarily by advertising and are ranking them according to the amount of advertising revenue they generate. Bloomberg BusinessWeek, other financially oriented publications, and many Wall Street analysts consider Google and Facebook to be technology companies, and both Google and Facebook’s top management also consider their companies primarily tech companies. However, for the purposes of this book, Google and Facebook, often referred to in the advertising and marketing business as “the duopoly,” are considered media companies because Google and Facebook’s incredible success as advertising platforms clearly demonstrates that the Internet became the major factor in virtually all businesses’ advertising and marketing efforts, and the duopoly dominates in digital advertising. Also, Google and Facebook might claim that they are technology companies or platforms and often deny they are media companies, but both are conduits for content that flows between advertisers and consumers – a medium as it were – and both are supported primarily by advertising, as most media companies are.

In 2007, the growth trajectory of the digital era veered in a new direction because of two innovations: (1) the iPhone and (2) programmatic buying and selling of digital ad inventory. The iPhone fueled Apple’s rise to becoming the most valuable company in the world in 2012 and almost every year since then. In mid‐2018 Apple exceeded a market valuation of $1 trillion, the first company in the world to reach that market‐cap valuation. Technology business analyst Ben Thompson, author of the Stratechery newsletter, calls the iPhone “the most successful product ever.”22 Also, the iPhone drove the phenomenal growth of smartphones and the Internet from being desktop, PC dominated to being mobile dominated, as approximately six billion global mobile phone users “have replaced the desktop and television as the dominant [advertising] platform.”23

Also, 2007 was the year that the first real‐time bidding (RTB) by Right Media occurred that “allowed advertisers to know in advance exactly whom they are presenting to and on exactly which site it will appear and at what time.”24 The ability to address specific individuals rather than broad audiences created the rapid growth of programmatic trading that has irrevocably changed media buying and selling practices (See Chapter 17: Programmatic Marketing and Advertising for more detailed information about RTB, programmatic, and automation). Furthermore, in 2007 Facebook shifted its focus from appealing just to college students to letting everyone join its popular social media platform, which gave its growth an atomic blast upwards to eventually become the second largest advertising platform.

Aggregation theory

In 2015 Ben Thompson in his “Stratechery” newsletter articulated aggregation theory, a concept that explained the phenomenal success of digital‐era companies such as Google, Facebook, Amazon, Netflix, Snapchat, Uber, and Airbnb. Thompson wrote:

First, the Internet has made distribution (of digital goods) free, neutralizing the advantage that pre‐Internet distributors leveraged to integrate with suppliers. Secondly, the Internet has made transaction costs zero, making it viable for a distributor to integrate forward with end users/consumers at scale.

This has fundamentally changed the plane of competition: no longer do distributors compete based upon exclusive supplier relationships, with consumers/users an afterthought. Instead, suppliers can be aggregated at scale leaving consumers/users as a first order priority. By extension, this means that the most important factor determining success is the user experience: the best distributors/aggregators/market‐makers win by providing the best experience, which earns them the most consumers/users, which attracts the most suppliers, which enhances the user experience in a virtuous cycle. The result is the shift in value predicted by the Conservation of Attractive Profits.25

Previous incumbents, such as newspapers, book publishers, networks, taxi companies, and hoteliers, all of whom integrated backwards, lose value in favor of aggregators who aggregate modularized suppliers – which they don’t pay for – to consumers/users with whom they have an exclusive relationship at scale.26

Customers Versus Consumers

You have been reading about “customers” and “consumers,” and the two terms seem to have been used almost interchangeably. It is time to clear up any confusion and accurately define the terms: a customer buys a product; a consumer uses a product. Consumers on the Internet are often referred to as users. Sometimes a customer and a consumer are the same person, for example, when a man buys an electric shaver for himself and uses it. Sometimes they are different people, for example, when a teenager says she wants an iPhone and her mother buys it for her. Proctor and Gamble (P&G) year after year is the world’s largest advertiser; P&G’s customers are retailers such as Walmart and their consumers are people who buy Crest. By advertising to consumers and creating demand for Crest, P&G pulls the product through the distribution system. Some manufacturers do not advertise their products but sell them to wholesalers who then sell the product to retailers and, thus, push products through the distribution system. In the media business, the customer is the advertiser and the consumer is the user, viewer, reader, or listener.

In today’s marketing ecosystem, many companies, such as Facebook, are referring to customers as partners, and this trend toward partnership selling will be discussed more thoroughly in Chapter 2.

You will also find a more detailed discussion of marketing in Chapter 15 and of advertising in Chapter 16 because media salespeople must have a deeper understanding of marketing and advertising than is provided here in this introductory section in order to be effective problem‐solvers and solutions sellers for the media.

What Is Advertising?

“In a non‐state‐run economy advertising is the bridge between seller and buyer.”27 This quote by media writer Ken Auletta in Frenemies defines advertising perfectly and concisely. Theodore Levitt also explains branding advertising well. Levitt changed the direction of marketing with his 1960 article “Marketing myopia,” and he changed the perception of branding advertising 10 years later with his article “The morality (?) of advertising.” Levitt wrote that, “In curbing the excesses of advertising, both business and government must distinguish between embellishment and mendacity.” He presents a philosophical treatment of the human values of advertising as compared with the values of other “imaginative” disciplines.28

Levitt defended advertising against critics who would constrain advertising’s creativity, who want less fluff and more fact in advertising. Many critics of advertising come from: (1) high‐income brackets in business and government whose affluence was generated in industries that either create advertising (advertising agencies) or distribute it (the media), (2) industries that have grown through the use of effective advertising, or (3) by using advertising to promote themselves (politicians). Thus, advertising’s critics must look carefully at their own glass houses when throwing stones at advertising.

Furthermore, advertising’s critics, Levitt claims, often view the consumer as a helpless, irrational, gullible couch potato, which is far from the truth, especially in a digital age when consumers often have more product information than sellers do. As David Ogilvy, the advertising genius and practitioner par excellence, wrote to his advertising agency copywriters in his book, Confessions of an Advertising Man, “the consumer is not an idiot, she’s your wife.”29 Obviously, when Ogilvy made the comment in 1963, most copywriters were men, which is no longer the case.

Levitt, too, believed that “most people spend their money carefully” and are not fooled by advertising’s distortions, exaggerations, and deceptions. He writes that rather than deny that distortion and exaggeration exist in traditional branding advertising, these properties are among advertising’s socially desirable purposes. Levitt goes on to say “illegitimacy in advertising consists only of falsification with larcenous intent.” Levitt’s thesis is that branding advertising is like poetry, the purpose of which is “to influence an audience; to affect its perception and sensibilities; perhaps even to change its mind.” Branding advertising, like art, makes things prettier. “Who wants reality?” Levitt asks. When most people get up in the morning and look at reality in the mirror, they do not like what they see and try to change it by shaving, using hair gel, or applying makeup. These things give people hope that they will be better accepted, more attractive and, thus, happier. They aspire to a better version of themselves. The goal of the poet, the artist, and the composer are similar to the goal of most ads – creating images and feelings. Much advertising, especially on television and in video, is about feelings and emotions. It is about trying to make people feel good about a product. Levitt writes that, “Advertisements are the symbols of man’s aspirations.”30 So, Madison Avenue (as the advertising industry is often referred to), like Hollywood, is selling dreams, and dreams and hope are essential to people’s well‐being.

In the digital era Google extended the definition of advertising to include search, or keyword, advertising, and Google’s search advertising is primarily direct‐response advertising, which is different from branding advertising, which sells the dreams mentioned in the paragraphs above. Direct‐response advertising tries to close a sale or a transaction in real time. Branding advertising, on the other hand, invests in building brand equity and attempts to establish a brand’s value proposition in consumers’ minds. The return on direct‐response advertising investment will often occur immediately with a click and a sale, the return on branding advertising investment will take longer, sometimes years, to pay off.

However, both types of advertising can develop demand for goods and services, and, as mentioned above, consumer demand drives the economy. Furthermore, the Internet reduces the cost of distributing digital goods and reduces the transaction costs to buy goods. Therefore, advertising can be a major contributor to reducing manufacturing costs, search costs, distribution costs, transaction costs, and, thus, ultimately, retail prices for goods. Many products such as personal computers and eyeglasses steadily come down in price as the market for them grows larger and as manufacturing, distribution, and transaction savings are passed on to consumers in the form of lower prices. Consumers get information about reduced prices and increases in features and value through both direct‐response and branding advertising.

Advertising is a vital part of the nation’s economy, and as the nation’s population increases and products proliferate, marketers and their ad agencies will invest more and more in media advertising, especially in the digital media, to influence consumers and to introduce new products and services to highly fragmented media audiences. Therefore, media salespeople must understand the complexities and technologies that create and distribute advertising in order to effectively sell it. You will find out more about how advertising works in Chapter 16, and in that chapter and other chapters that follow, we will try to help you navigate through the maze of those complexities and technologies.

The Media

Advertising is one of the integral elements of the marketing process. We might look at advertising as the mass selling of a product. Where is advertising seen or heard? In the media. For the purposes of this book, as mentioned earlier in this chapter, the authors will define the media as businesses that are wholly or in part supported by advertising, e.g. Google, Facebook, ABC, CBS, FOX, NBC, ESPN, CNN, iHeart Media (radio), The New York Times, Cosmopolitan, the New Yorker, and BuzzFeed.

When people talk about the media, they are typically referring to the distributors of news and entertainment content – digital media such as Google and Facebook, plus television, newspapers, radio, magazines, and podcasts. The vast majority of media businesses are dependent in full or in part on advertising, and advertising, as an integral part of a larger marketing system, is co‐dependent on the media. Without the media to reach large numbers of consumers with advertising, marketers would have to go door‐to‐door to try to sell their goods one‐on‐one through personal selling and, similarly, consumers would have to wander from store to store or website to website wondering which sold the product they needed – both very expensive and time‐consuming undertakings. Advertising agencies would not exist if there were no media to distribute the ads they create.

The reason marketers and advertisers are dependent on the media is because the media are pervasive and popular with consumers (users, viewers, readers, listeners), and the media are consumers’ link to the global village. People love their media and depend on their media – their favorite search engine, such as Google; their favorite social media platforms, such as Facebook or Instagram; their favorite television program, such as “Empire;” their favorite magazine, such as People; their favorite country music radio station; or their favorite newspaper, like the Wall Street Journal. Because of this affection and dependency, the media are actually the most powerful businesses in the country –more powerful than the celebrities, industries, or politicians they cover, expose, and glorify.

It is because of this enormous power coupled with a perception that the media emphasize negative news, poor‐quality user‐generated video, fake news, or sex and violence that many people probably have such a low opinion of the media. Americans seem to blame most of the ills of society on “the media,” by which they typically mean the news media. It is for this reason that we have devoted a separate chapter in this book to ethics. Chapter 3 emphasizes the importance for media salespeople to deal with customers ethically, because the reputation of the media is at stake, and that reputation needs to be improved.

One of the roles of the media is to expose consumers to advertising, not to guarantee sales or results to advertisers. The media are just that – a medium, a connection between advertisers and consumers.

In most of the world’s countries, the media are supported and/or controlled by government; however, most of the media in the United States are kept free from government control and interference because the majority of their revenue consists of advertising. The media from which the American public gets the vast majority of its information and entertainment are free or relatively inexpensive because they are supported by advertising. If Google were not supported by advertising, people would have to pay a few cents for each search. If Facebook were not free, people would have to pay for posting a selfie in a bar with friends.

Finally, in spite of a love‐hate relationship between the public and the media, or perhaps because of it, most large media companies are profitable. Many of the great fortunes in the in the world have been built in the media, especially the digital media, for example Google, Facebook, Amazon, and Snapchat. Even if new products do not survive in the marketplace, the media still receive the advertising dollars invested to introduce a product, just as the media get the advertising revenue from political candidates who eventually lose. The profit margins in successful media companies are, as rule, higher than in many other industries. For example, Facebook’s quarterly profit margins are often higher than 50 percent because it does not pay for content (its supply, which users create), does not pay for operations (producing the content), and does not pay for distribution (it’s on the Internet). Also, top‐rated radio and television stations in major markets often have profit margins of 40 percent or greater.

The reason for these profit margins is because in an advertising‐supported medium such as Google, Facebook, radio, television, digital newspapers, and digital magazines, the cost of adding an additional ad has no or extremely low incremental costs involved. For example, in television, the time for commercials is baked into most programming, so if a commercial is not scheduled in a commercial pod, a promotion or public service announcement will run. A television station does not expand the programming time if it does not have commercials to run. Thus, at a television station, it costs nothing to add a commercial – there are no incremental, or marginal costs involved. On the other hand, if an automotive manufacturer sells a car, it has to build one with all of the incremental, marginal costs involved such as labor, materials, transportation, and so forth. Once a radio or television station or a website has sold enough advertising to cover its cost of operations and debt payment, if any, all additional advertising sold is virtually 100 percent profit. In digital newspapers and digital magazines, which often have an additional subscription revenue stream, once the cost of operating is recovered, the incremental cost of adding an ad is very low in comparison to the cost of the ad to an advertiser.

What this profitable economic model means for salespeople is that advertising revenue can be quite profitable and, therefore, there is more money to distribute to salespeople in the form of compensation than in less profitable industries. Media salespeople are among the highest paid of any industry.

Although media buying and selling functions are being automated by artificial intelligence (AI) and programmatic trading (see Chapter 17), research about jobs in the future indicates that jobs with more emphasis on clerical and service work (selling is service work) and jobs with more emphasis on communications and critical thinking (sales, again) are jobs that are less likely to be eliminated by automation and (AI). Furthermore, strategic media planning and selling‐as‐educating jobs will take on new importance in the future and, thus, are much less likely to be automated or computerized.31Chapter 2 will cover the concept of media selling as educating, which replaces the traditional practice of selling the inexact “magic” of the media in the pre‐Internet era.

Hypocrites Not Allowed

If you agree that advertising is a vital part of the American economy and that advertising supports free Google searches, free Facebook posts, and free broadcast television and local radio programming, then you must believe in the value and efficacy of advertising. If so, then you cannot be hypocritical and use ad‐blocking software. If you are selling advertising in any medium, including a digital medium, you must not only support, embrace, watch, listen to, and read all advertising you are exposed to but also understand enough about advertising to be able to evaluate, appreciate, and intelligently critique all the advertising you see or hear. Ad blocking is not allowed if you are a media salesperson.

Test Yourself

What is purpose of a business?

In marketing, what is the primary focus?

What was AdWords?

Why is Facebook so profitable?

What is the difference between a customer and a consumer?

Why are many media companies potentially so profitable?

Project