Welcome to the Digital Marketing Inner Circle

My name is Yuan Zou, and I am the President of Media Consulting within the SinoTech Group in China.

In the Chinese market, newspaper publishers are wakening to a duel reality. On one hand, government policy changes push the publishers onto a road towards market economy. On the other hand, publisher is confronting global industry wide challenges of an aging and declining future trend.

In mature markets like Europe and the States, classified advertising comprise a large percentage of newspaper publisher’s revenue. The relentless migration of ads from print to digital media is posing the biggest threat to their bottom line profitability. For example, in advanced Scandinavian countries, up to 50% of classifieds has been lost in print to reappear in digital format.

The following chart from the World Association of Newspaper statistic report shows that in developed countries, the total revenue of classified ads on newspapers have decreased over 10 percentage points, while that of online version have increased significantly:

Table 1: Changes in advertising revenue of all developed economies 2004

This becomes the inevitable reality that is confronting the Chinese publishers today. To a lesser or greater extend, the digitalization of classified ads pose similar obstacles to the future development of Chinese newspapers. Is this the end of paper version classified ads? Are there chances for publishers to regain control? What are the factors for success?

We think that the battle has not been lost. There are still time and room for Chinese publishers to regain grounds on the online front, and win the classified advertising war. However, the following three areas must be taken into consideration in devising a strategy for maintaining control.

• Ø Dynamics of the digital online world
• Ø Control of end consumer
• Ø Consumption experience in each media.

Grasp Online Dynamics

The internet fundamentally changed the way people consume classified advertising. To search for desired information, the reader no longer need to read the entirety of contents, they can now focus in on the content that best suits his needs by proactively selects and limits with search words. This common internet mechanism offers a higher paradigm of consumption that the traditional “eyes on paper” could never reach.

Internet also alters the relationship structure of the market. It puts the advertiser directly in touch with the consumer, and eliminated the intermediate role, and extends the reach of the advertiser from simply providing information to possible involving in transactions.

For the publishers, how does the dynamism changed? In the printed world, the name of the game is number of ads and size: the more and bigger the ads, the higher the revenue. On the online world, size is no longer relevant. Unlike the ink and paper cost consideration of the printed world, the size of the word, the amount of text carry no implication whatsoever on costs, and subsequently little effects on the pricing of ads. Publishers could hold exponentially greater amount of ads on the same platform at the same time with almost no incremental cost. In this way, the actual ads, and the inventory in the hands of publishers becomes a commodity. Instead of simply providing the information, the new game of the online world becomes contributing to the transaction.

Retain Customer Relationship

In both offline and online world of classified ads, the principal actors on the two ends have not changed: on one end the people with things to offer, on the other end people who search for things. Admittingly, there are very different groups of people: older generations who still only appreciate traditional media, younger generation who are accustomed to transacting online, and are quickly tuned to additional new media such as mobile. But regardless of their media preferences or behaviour, as advertisers and readers of classified as, their main objective are the same: results: one wants get rid of what he has, the other wants to obtain what he is searching for.

Retaining these actors becomes therefore the ultimate control. This is where newspaper publishers have a significant advantage over other offline or online player. Newspaper have long ago established a reputation and a brand on the local basis, and along with them the trust and the recognition of people on both ends, the advertisers and the readers, as the authoritative source of placing and searching for information. This trust relationship is difficult to replace.

Other than relying on the existing brand, publishers must seek to suit the different consumption behaviours and preferences of different groups in order to captivate the advertisers and readers, and retain the prized trust relationship.

Enhance Consumer Utility

Whether it’s the internet, mobile or paper platform, the nature of technology itself is not the main issue for classified ads, but just a supporting mechanism. What is important is the benefit each platform brings to the consumer during his consumption experience. Classified ad customers all seek some or all of the following utilities in their experience: convenience, simplicity, efficiency, speed relevance, timeliness and ultimately successful transaction. These are the factors that increase utility, bring satisfaction to consumers, and make them stick to one media.

While the portable paper version brings consumer convenience and simplicity, the online key word search provides efficiency and increase the relevance of the ads for readers. Mobile phones complement the other two media with speed and timeliness.

On each of the above platforms, simple applications such as intelligent search that can automatically search the database via criteria, sends user e-mail or mobile SMS alerts.

Only by tactically utilising some of the above applications, combining and alternating all of the online and offline technology platforms can publishers able to fulfil all of the utility needs of consumers of classified advertising.

Advice for publishers

Given the speed of internet development in China, the classified migration will be a crisis facing newspaper publisher in the imminent future. Luckily, before the online classified market takes any mature shape, there is still time for publishers to react. Like in all other competitive situation, “first mover” still carries significant strategic advantage.

Being a first mover means think fast and act now. Leveraging their existing advantage of a strong local brand, good reputation and long term relationship with advertisers, publishers could start right away to prepare the ground to enter online platform.

First step is to utilise technology solutions. In the long run, a fully integrated IT solution that effectively manages data entry and date management will be necessary. However, such solution takes time, and deep financial and technical investment to build. In the short run, in order to realize “first mover” advantage, publishers need to move their inventory of ads onto the internet platform in a fast and efficient manner. When ads arrive from different sources in traditional format, they could be automatically formatted to suit both the offline and online platform. Europe, advanced systems exist to perform such tasks.*

Secondly, internal sales organization needs to be integrated. Only by managing the promotion, offer and pricing mechanism for classified ads will publishers be able to fully control the transition process, and successfully transform themselves into a multi-media player.

Grasping the above three important dynamics of today’s classified advertising market, publishers can have the opportunity ride the wave of migration from print to online.