The Hidden $50 Billion Available to Media & Advertising Companies from Below-the-Line Marketing Budgets

In 2009, total advertising revenues are projected to be $201.8 billion and total marketing revenues are projected to be $700 billion. In 2015, advertising revenues are projected by Jack Myers Media Business Report to grow to $253.2 billion while total marketing expenditures (including advertising) increase to $809.1 billion. An estimated $1.0 billion in 2010, growing to $17 billion in 2015 is available in incremental revenues to media companies if just 0.2% to 3.5% of spending shifts to traditional media from below-the-line non-advertising marketing categories annually. Thanks to the Internet, mobile and interactive TV, below-the-line revenues are now accessible to broadcast networks, cable networks, magazines, newspapers, out-of-home media, online and other traditional advertising-dependent media in conjunction with inventory-based media buys. While the music and sports industries are successfully tapping into these budgets, almost no effort is being made by traditional media to capture them. Unless the industry responds, an estimated $46 billion could be left on the table between 2010 and 2015, too obvious an opportunity to ignore as the industry struggles for survival. Jack Myers Media Business Report has been focusing on this issue for more than two decades and continues our series of commentaries outlining the potential business models for traditional media in this week's report for corporate subscribers.

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The media companies that competitively position their organizations and content to expand their revenues generated from database initiatives, social networking, couponing, sweepstakes and incentives, point-of-purchase tie-ins, sampling, conversational marketing, event marketing, user generated content initiatives, cause related efforts and other non-traditional applications will not only capture the lion's share of available growth, but will also be best positioned to maintain traditional value models and inventory sell-through. An advertising industry-wide failure to service this opportunity is likely to translate into significant sustained revenue declines across-the-board among traditional media – including emerging media. In other words, stable advertising revenues in 2012 and beyond will be dependent upon the industry's development of capabilities required to service the below-the-line communications needs of marketers.

Below-the-line categories of direct marketing/database management, trade promotion, consumer sales promotion, event marketing and public relations will be capturing more than $550 billion in 2015 spending by marketers, compared to the $250 billion in ad spending that will be divvied up by thousands of competitive media companies in 18 highly competitive media categories. Shifting the focus from commoditized transactional eyeball-centric media sales toward promotional initiatives is a strategic imperative. Media companies that develop the capabilities to offer below-the-line services as integrated businesses, using the brand equity of their content as a differentiating marketplace advantage over traditional providers of these services, will be positioned to attract significant incremental revenues.

Myers estimates conservatively that the following below-the-line revenues will be available to traditional brand-centric media companies in 2010 and beyond.

The above forecasts are dependent on media companies making the investments today to compete for these dollars in the future. They must develop the resources to compete with traditional providers such as Valassis, News America, and numerous below-the-line service companies. Most of the major ad agency holding companies have significant investments in sales promotion, direct marketing, event and other B-t-L agency services, but they do not integrate these services with their media and creative advertising agencies. The merger of Draft and FCB, within the Interpublic Group of Companies, was designed to integrate across capabilities. Because of enabling new media technologies, traditional media companies are now positioned to compete for these dollars. Enhanced technology-based capabilities will further advance the traditional media companies' ability to compete for below-the-line marketing expenditures.

Jack Myers advises media, agencies and marketers on business models for revenue growth and invests in early-stage companies that serve the media industry. He can be reached at Jack@mediadvisorygroup.com.