How to know when it’s time to change

*Note: This is a re-post from our class blog for Changing Media Business Models

It seemed a lot of what we discussed in class on Monday was how the main forms of media (Radio, Television and Print) are in the midst of changing how they rely on advertising funds. Plenty of other methods in advertising today include mobile/tablet platforms and Facebook or Google ads to name a few. It was clear these are rising forms of advertising and probably bring in quite a bit of money to the companies like Google themselves. But why is there still so much investment in traditional 30-second spots on local television stations, for example?

The print model has crashed and now we’re seeing newspapers struggle to find those new forms of revenue. It is just too easy today to reach the consumer through new media (or unmeasured media, now 40% of all ad spending) which is what companies, television stations, newspapers and radio need to understand. Just as the print model is slowly becoming obsolete for papers, traditional forms of advertising are falling out of style. This whole situation screams economic inefficiency. Millions of dollars are invested in traditional advertising (we’ll stick with thinking about the television model here), yet more people every day watch their television online — there’s no consistent commercial breaks there. So now if we keep thinking of how economically inefficient this might be, it’s tempting to think about dropping the traditional forms all together. However, that’s not so easy. Most importantly, it’s not entirely up to the advertisers — there’s the market itself to keep in mind.

It’s strikingly similar to what Clayton Christensen talks about in the first chapter of his book, The Innovator’s Dilemma. While some of the details regarding the technology behind the technological development of disk drives was a little over my head, what he discovers are patterns companies like IBM experienced from the 70s to the 90s. Smaller disk drives were being developed, yet the existing companies wouldn’t invest in them. Instead, they would continue to make the bigger, slower disk drive. They claimed the consumers wouldn’t like the smaller models because they had less storage capacity. But start up companies would then enter the market themselves and use those smaller models. This in turn forced the larger companies to also invest in the smaller drives. Now think of this pattern in terms of advertising. I think it’s strikingly similar, no?

This is what new companies are doing in the advertising market. They see a hole left by pre-existing companies and try to fill that void. Stephanie Padgett told us on Monday she predicts the television advertising market to be the next one to crash. It’s certainly hard not to believe her. After all, how many of us watch television shows when they actually air nowadays? The best case scenario is that the advertising economy decreases its inefficiency by investing in old ad technologies and instead figures out how to be innovative. The worst thing they can do is become complacent. But until then, we’ll continue to see the same pattern emerge as what occurred in the disk drive market. The key is to know when to take the chance with new technologies.

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