Online advertising and the decline of the broadcasting sector

On 19. September Ofcom, the UK independent regulator and competition authority for communications industries, hosted a briefing to address current and future regulatory issues in the UK broadcasting sector.

What impresses is not not the regulatory agenda, that aims to promote the development of next generation communication services, such as HD TV, but the status of a part of the traditional broadcasting sector.

In particular, the broadcasting sectors is facing new forms of competition from telcos, cable operators and 'search engines'. Competition comes mainly from production of programs and in advertising budget; "launching additional channels has been successful but not enough to offset losses on core channel".

Advertising

Since 12 months ago online advertising agencies, such as Adsense and Doubleclick, did not compete directly with traditional advertising agencies for a share of the advertising market.

What happened?

Traditional advertising agencies did recognize the opportunity of online advertising, but were not able to adapt and transform their value-chains, in particular production and distribution, and corporate strategy to the online world. Combining online and offline advertising would be too destructive to their businesses. As in the 60s TV changed the market, now Internet shifts part of the advertising market to new communication tools that have (for the moment) the exclusive advantage over TVs to be interactive and the response measurable.

The online advertising is already dominated by digital-born firms, Google owns Adsense while Microsoft owns Doubleclick, that have two advantages over traditional advertising agencies to know the technology and the market well. On the other end, advertising agencies can produce unique advertising propositions for Internet as they have the right human assets and capabilities.

Broadcasting companies can reduce competitive pressure by doing what they do best and concentrate on their core capabilities, produce shows and entertainment. Good quality shows will attract advertisers and new interactive technologies will fill the gap between the online and offline broadcasting sector.

This a evolution and not a revolution, don't panic!