By Shadi Kandil, CEO, IPG Mediabrands, Middle East, North Africa and Turkey
Like many industries around the globe, the media industry has been battling strong headwinds for many years now. Disruption has cut deep into its structure and has changed the landscape forever. Looking back on the past five years, the media industry was among the very first to be affected by the explosive growth of the tech platforms and to witness network effects taking their toll on the ecosystem.
The new conditions for success have driven major shifts in wealth from established incumbents to new and emerging players. In this era, value creation has become dependent on the imperative to digitally transform and to develop sophisticated processes to capture and analyse data to shape business and product strategy in response to consumer preferences, all while solving the challenges of ad fraud and brand safety.
As a consequence of these changes, business models have come under pressure. We witnessed heightened competitiveness and new barriers to entry mounted, resulting from agile players who are powered by technology and are cash-rich due to their unprecedented valuations.
While all that was happening, Covid-19 descended on us like a storm, dealing a devastating human and economic blow all over the world. As it continued to rage unabated, the lockdown mandates and restrictions on mobility brought about certain changes to consumer habits that will become mainstays even after the world recovers.
Value mapping deconstructed
In media, value is created by the conception of a creative element that is built to inspire human feelings and psychological need states. Historically, the process of value creation was an “inside-out” practice.
Media executives embraced a sense of confidence in shaping their offerings by adopting the mantra, “build it and they will come”. This intuition-guided approach can no longer hold in the age of data-driven business planning.
In September 2020, the World Economic Forum’s (WEF’s) Industry Action Group on Media, Entertainment and Culture, together with Accenture, published a compelling paper about the future of media and introduced a new framework for valuing content along three dimensions: creation, distribution and consumption.
The paper concluded by analysing the various types of monetisation models, segmenting them as those that are at risk, those that are well-placed for the future and those that haven’t been affected by the recent disruption.
While the paper offered rich insights into the future of content monetisation, it tackled the subject from the perspective of media owners, publishers, content creators and tech companies, using functional labels (TV, print, digital…) and standard content genres (news, sports, entertainment…).
To come full circle in assessing the future monetisation potential, the exercise has to present the consumers’ motivators and inhibitors to consuming content and engaging with media.
Identifying the utility of content to consumers
Findings from proprietary consumer research that IPG Mediabrands has been running for the past 10 years points to four utilities that consumers seek from consuming content:
- The utility of communicating with others (Communication);
- The utility of being entertained (Entertainment);
- The utility of uncovering credible information (Information);
- The utility of facilitating commerce (Commerce).
The study ran across multiple countries, reasserting the fact that while the form of fulfilling a utility may have evolved over time, the utility and the satisfaction sought remained largely the same.
As consumers set out to satisfy a certain utility, the next logical question would be to identify what drives their media and content choices. Although the power of the brand, and the force of habit constitute a strong pull factor, conclusions from various academic studies indicate the presence of other determinants shaping these choices and preferences.
One such determinant establishes a relationship between cognitive involvement processing and the depth of engagement with a piece of content. Academic research posits that the higher the involvement processing, the higher the level of engagement. This is best illustrated when comparing a 30-second funny video about dogs to a five-minute video segment about elections, on election night.
The second determinant establishes a strong correlation between content engagement and the level of immersiveness that a content production offers. This relationship indicates that a higher level of immersiveness in production delivers higher levels of engagement. Again, an example to illustrate this: In attempting to satisfy the entertainment utility, a piece of video content has proven to deliver a higher level of engagement than a static or text-based piece.
Based on this analysis, plotting the two determinants on a two-by-two matrix, with scales ranging from low to high, produces four different quadrants that presents four different scenarios of immersiveness and involvement processing. Consequently, each of these quadrants will then have a distinct immersiveness processing score (I*P) that yields a certain monetisation outcome. This exercise, when completed for each of the four utilities, can provide content producers and media outlets, the ability to maximise revenue yield by aligning value with consumer motivations.
Thoughts for the future
This proposed approach is complementary to the WEF framework, and together they can offer a holistic recipe for future success. Reflecting on the current state, and building on all the above, I want to close with the following thoughts:
Content for communication will continue to edge towards commoditisation. This trajectory began with Facebook’s acquisition of WhatsApp and the evolution of Apple’s iMessage. From there on the economics never worked again for a stand-alone proposition. In the next phase, this space will witness a weeding-out of sorts.
Acceptance of paid subscription reached record levels in the Entertainment utility. This has finally validated the model and accelerated the cord-cutting trend. Two observations here: (1) Any new entrant has to compete on content and brand saliency (a tall order); (2) Recurring subscription revenue seems to have higher demonstrated success and sustainability with long-form content.
Paid subscription in the Information utility will soon become mainstream. The level of misinformation reached a nauseating high in 2020. The need for credible, trustworthy information, coupled with decreased barriers to pay, will finally give news outlets a genuine opportunity to move steadily into sensible subscription models. At the initial stages, it might not provide the same scale in user acquisition, but it will eventually provide enough to achieve sustainable growth. Kudos to the success of the early movers such as the Financial Times and the New York Times.
Advertiser-funded activities will continue to be a strong source for monetisation. Learning from 2020, expect this area to be increasingly unforgiving about matters that relate to brand safety, fraud, responsible data handling and transparency of measurement/attribution.
Focus builds stronger competitive growth. While an organisation might have assets to let it play in more than one utility, focusing on one utility zone will help in building a moat to achieve differentiated growth.
Organisations that have not embarked on their digital transformation journey yet have to do so immediately or risk checking out. Incumbents in each category are now officially in a race against time. Three actions to be considered:
a. Invest in the right technology infrastructure to capture and manage first-party data, automate the workflow and digitalise the business model.
b. Restructure value creation around the chosen utility, then identify the optimal point for immersiveness and cognitive processing that will prove to maximise engagement.
c. Explore pivots and bold experiments. How can the organisation’s assets be repurposed to extend the value creation potential? What other monetisation opportunities exist? (Two recent and brilliant examples I came across: an established newspaper in Canada that is using its distribution network to fulfil e-commerce orders; and some studios in Hollywood deciding to bypass theatres to launch new movies).
