On August 8th, Roulston Research held a conference call on the paper and containerboard industry.  The call was held with John Knudsen, former Senior VP at Rock-Tenn Company and former Senior VP at Smurfit-Stone Container Corporation; and John Begley, Principal, Mats View Consulting, former President and CEO at Port Townsend Paper Corporation, and former Director-Strategic Planning at Weyerhaeuser Company.  They sat down to discuss the past trends in the industry, as well as where the industry may be heading.

The call began by the presenters talking about the recent history of the industry.  Much of the industry became consolidated in the hands of a few players, and these companies became too large.  They then had to close some of their plants, primarily the smallest and most inefficient of the plants.  These closings were at least partially due to an increased presence from competitors in Asia.  These foreign competitors, while not very strong in the domestic market, were able to take part of the market share in Asia away, leading to a decrease in exports.  The general restructuring resulted in more decisions being made at a corporate level, where orders would be processed there rather than at plant level.  This allowed plants to become more specialized; only handling one type of order.  This new business model allows for smaller companies to provide better service to their customers, as they can still handle different types of orders at the same plant.  In the future, some of these smaller companies may try to make some acquisitions to grow.  On the industrial packaging side, companies have yet to go through this Renaissance.  They have not gone through the same type of cost cutting measures, and instead have mostly relied on expanding into the consumer products.  Other topics addressed include pricing and South American pulp supply.  If you would like to listen to the full podcast, or engage in a 1 on 1 discussion with either of the presenters, please contact info@roulstonresearch.com.

I recommend a highly interesting review by Brian Wieser (brian@pvtl.com) of Pivotal Research Group on the announced merger of Publicis and Omnicom, as well as Facebook’s claim to be an effective ad medium because of its broad reach in daytime. In his analysis, Brian makes the point that reach by time of day is not the key factor in media planning—the intrinsic effectiveness and cost of the media come first. That is one reason for the Publicis OMD merger—to develop ways to buy online video at a cheaper rate.

But beyond that, Brian also makes this point:

“For a good illustration of how issues like the above play out elsewhere, consider: if marketers could identify the 20 percent of local markets that drive 80 percent of variations in outcomes, wouldn’t they spend more money on local media? It’s a potentially massively more efficient way to spend money, and one which marketers have had the capacity to execute against for many many years…and yet if anything marketers with nationally-skewed corporate structures have been shifting most of their spending towards national media over the same time. Consider that over the past ten years, national mass media owners’ advertising revenues grew by 33 percent while local mass media owners’ advertising revenues fell by 28 percent during the same time. Reasons unrelated to marketing efficiency usually have substantial sway in dictating changes in advertising spending choices across the economy.”

I believe effective media leverage is finding those media and those geographies where there are greater concentrations of product users that can be bought more efficiently—these are the key places to grow share. A simple example of this is the national election, where the Obama for America campaign advertised in only 44 TV markets (using Rentrak data).

The reality is that our country is becoming increasingly Balkanized, with different concentrations of cultures and economies in different parts of the country. The map below from Pew Research shows the importance of religion in people’s lives—the darker the color, the more important. The Northeast and West Coast are clearly different than the Deep South.

This disparity extends to lifestyle and product usage as well. The map below from The Atlantic shows where the 1 percent is concentrated. Those products that cater to the more affluent (e.g. cars) need to consider the disparities in income that allow for people to purchase or lease cars. The real price of automobiles adjusted for inflation as the chart from the Motoramic blog indicates.

The increase in real car prices in the auto industry alone makes understanding the differences in sales across markets and within a medium even more important. Since Rentrak has the same measurement methodology across markets, we can provide comparable TV delivery indices across markets, unlike the sample-based folks who have different methods in different markets. Rentrak can also do this with actual auto sales information, as we have integrated Polk data across our footprint. In addition, within a market (and for the nation as a whole) we can indicate where to find the best TV leverage points for auto buyers. I leave you, dear reader, with a fun example of where to find the Cadillac buyer in Dallas in March in Early Fringe.

I wasn’t a good media planner and I didn’t look at the all the networks and stations we report on. I used the major broadcast affiliates and a couple of cable networks. It isn’t just the news networks like CNBC and FNBC that index high against Cadillac buyers. Affiliates like CBS and MeTV also have high concentrations. Unfortunately, the few liberals in Dallas on MSNBC don’t seem to be lovers of Cadillacs.

Bottom line, Brian is right. Leverage in media can be found across markets, within markets, and across media. And Rentrak, with its Advanced Demographics can help with that leverage.

Bruce Goerlic is the Chief Research Officer at Rentrak,which is  the global standard in movie measurement and your TV Everywhere measurement and research company. He has been in the research end of the marketing business for more than 30 years primarily on the ad agency side, with my last stint prior to Rentrak in the role of President, Strategic Resources Zenith Optimedia North America. Somewhere along the way he morphed from young Turk to old fogey. Now that he has grey hair and is horizontally-challenged, he can speak with some authority on advertising and research issues – which I will do from time-to-time on his blog located at http://brucegoerlich.com/2013/08/06/the-value-of-media-leverage/. You can also learn more about Rentrak at http://www.rentrak.com/.

As the way we use media in our everyday lives changes, so too have methods of gathering and analyzing data on this media.  Roulston Research recently held a media measurement roundtable on June 20th to discuss this very issue.  Presenters were Jay Guyther, who along with being the current EVP of Mobile Research Labs was also the former SVP of Ratings Services, PPM Marketing, and Global Marketing at Arbitron, and former Media Measurement Research Consultant at Google; and Alec Gerster, who is the former Senior Marketing Director at Microsoft, former CEO at Initiative, and former CEO at Mediacom.  The presenters discussed the recent changes to the media measurement industry, and offered some thoughts on what the industry might look like going forward. 

The industry moving forward appears to be dominated by questions revolving around data integration.  In the past, there have been different ways of measuring viewership and ratings for all different kinds of media, with Nielsen dominating television, Arbitron dominating radio, etc.  With the recent acquisition of Arbitron by Nielsen, there appears to be potential for data integration across these platforms.  While the presenters believe that the name and legitimacy of these ratings as currency give Nielsen an advantage in this field moving forward, it is far from the only player.  Comparing data between the two sources has proved to be difficult, and promises to be even more difficult as they try to integrate other sources.  As new technologies are being increasingly utilized, it is important to determine how to measure data from other sources.  Until recently, smartphones and tablets were considered the same type of media, despite their differences in uses.  Smaller companies are more situated to adapt to these changes than large companies such as Nielsen.  Additionally, Nielsen gets much of its revenue from TV stations, so has little incentive to move into other areas of the field.  Google, with its large amounts of data, is also a potential player in this field.  However, the presenters contend that when Google tries to move outside of its core line of business, it is often clumsy in its approach, and may be unsuccessful.  Additionally, Google may have an interest in making its own media sources look good, so it may not be able to provide unbiased information as Nielsen does, which harms its legitimacy among advertisers as well as competitors.  Other topics discussed include methods of collecting data, set-top boxes, and the future of terrestrial radio.  If you are interested in listening to the podcast from the event, or talking with either Jay or Alec, please contact info@roulstonresearch.com.

Yahoo! Recently made a major splash by acquiring Tumblr and its 108 million active blogs for $1.1 billion. The deal has been scrutinized because of Yahoo’s poor past performance with acquisitions and because Tumblr has never made a profit bringing in only $13 million in revenue last year. Yahoo! CEO Marissa Mayer believes the company can incorporate Tumblr into its media network and Ross agrees since this a content aggregation play in an advertising driven business. It is similar to what Amazon and Netflix are doing with their original content programs where they are bringing in stars, building them up, and hoping to turn them into properties that attract new viewers. Ross also believes that the company can learn from Facebook’s acquisition of Instagram, which allowed them to include photos into their status sharing service. Yahoo! Already has photosharing abilities with Flickr that can be incorporated in Tumblr feeds and there is a mobile opportunity since Tumlr is an easy posting mechanism like twitter. To see the full interview on Reuters please visit http://insider.thomsonreuters.com/link.html?cn=uid390980&cid=1078576&shareToken=Mzo2ZGY1MmI5Ny0wZWJjLTQ4OGEtYmFmNC1hNTVkYWY0YWU0NjA%3D.

Ross has more than 16 years of experience analyzing consumer technologies. Prior to founding Reticle Research, he was executive director and principal analyst for the telecom industry at The NPD Group, where he provided analysis on a wide range of topics to clients and helped t launch several research products. Prior to NPD, Ross founded and developed the consumer access and technology service at Jupiter Research, where he served as vice president and chief research fellow. If you would like to speak with Ross further about this topic please contact info@roulstonresearch.com.

Speculation is already starting about the yet-to-be-announced iRadio from Apple.  This service, expected to be a competitor to Pandora and Spotify, appears to be inevitable at this point, even though it has not formally been announced.  The question is, how will this new service perform in this space?  According to Mark Ramsey, the advantage the Apple inherently has from its iTunes will not necessarily translate into success in this new space.  There are a few reasons for this.  First, the fact that Apple already has iTunes may not be that much of an advantage, since iTunes serves a market of people looking to purchase songs, whereas iRadio will service people looking to listen to a stream of songs.  Second, Pandora and Spotify have an incumbency advantage, where people feel comfortable with their service, and won’t switch unless they have a sudden negative experience with those companies, or the service provided by iRadio blows them out of the water.  Finally, the simplicity of Pandora and Spotify may be more attractive than the complexity of dealing with the entire Apple network.  As a bottom line, an introduction of iRadio will not necessarily harm Pandora and Spotify, but may actually help them as it will give legitimacy to that industry.  For the complete article visit http://www.markramseymedia.com/2013/06/thank-you-apple/

Mark Ramsey Media is one of the best-known research and strategy providers to media companies in America. MRM President Mark Ramsey has worked with several television and innumerable radio broadcasters over his career, including all the biggest names, from Clear Channel, CBS, Bonneville, Sirius XM, and Greater Media in the US to Corus and Astral Media in Canada.  Clients from outside broadcasting have included EA Sports and Apple.

Recently Yahoo announced it had purchased Tumblr for $1.1 billion, which is the most expensive acquisition since it bought online search engine Overture a decade ago for $1.3 billion. Founded in 2007, Tumblr provides a blogging service that makes it easy to share posts, photos, video and other content in an enthralling mosaic of interlocking information and has more than 50 billion posts from 108 million blogs, with some 75 million new posts every day. More than half of Tumblr’s users connect through its mobile app and engage in an average of seven visits per day. Rob Enderle doesn’t believe this is going to end well stating the reason why good turnaround CEO’s are so rare is that it takes a very unique skill set. You have to be willing to take huge risks and high stress over a long period of time. You have to be able to campaign the changes you are making to employees, customers and investors, and you have to be very patient because change is slow and if you try to do too much at once, the complexity will overwhelm you and failure will be the result. Particularly for a young and somewhat inexperienced CEO, it is this last that can catch him or her up and you can see this behavior in both Facebook and Yahoo: a desperation to make things happen fast, which is why things aren’t going very well. Rob goes into detail about the internal and external pressures CEO Marissa Mayer is facing, comparison of the Tumblr and Youtube acquisitions, and gives examples of how two major tech giants (Apple and IBM) were able to perform their turnarounds. To read Rob’s full article please visit http://www.itbusinessedge.com/blogs/unfiltered-opinion/yahoos-tumblr-mistake-how-speed-can-trump-good-judgment.html.

Enderle Group is a forward looking emerging technology advisory firm. Recognized as one of the best general inquiry analysts in the world, Rob specializes in providing rapid perspectives and suggested tactics and strategies to a large number of clients dealing with rapidly changing global events. Before founding the Enderle Group in 2003, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group. While there he ran the eCommerce, Security, and Mobile research practices. Before Giga, Rob was with Dataquest covering client/server software where he became one of the most widely publicized technology analysts in the world. If you are interested in speaking with Rob on a 1 on 1 basis please email info@roulstonresearch.com.

LIN TV (NYSE: TVL, $12.01) was recommended at our San Francisco idea forum on May 14. TVL owns 43 TV stations and 7 digital channels in 23 markets. 87% of the stations are either #1 or #2 in their local markets. The presenter argues that this is a very interesting time to be involved in the broadcasters, and LIN in particular. The factors he cites benefitting the industry include sharp growth in high-margin retransmission fees cable operators are paying for rebroadcast of network signals with strong demand for local content key to growth; growth in TV ad revenues correlated with the rebound in the economy and higher share of TV ad spending at the expense of newspapers, radio and yellow pages; growth in digital ad revenues from websites and mobile apps supported by local TV stations; and friendlier M&A environment. TVL’s peer group, despite the recent runup, as investors recognized that these companies are not going away, still trades at lower than historical multiples. TVL’s valuation in turn is significantly cheaper than most companies in the group.

The company announced in February it was exiting its NBC JV with GE Capital. To preserve NOL’s of $3/share from the taxable gain event, TVL filed with the SEC to convert ton LLC. The approval is expected to be granted in Q3, likely in September. Once the conversion is approved, the presenter expects TVL to initiate a dividend and get back into the M&A mode, or even sell the company. Sell-side coverage is limited, partly due to TVL and others in group all leveraged small caps with limited floats, but volumes have picked up lately.