Microsoft Explains the Reset of the Advertising Economy
June 25, 2009
I like poetic flourishes. Call me old fashioned. The notion of pushing a reset button and causing the economy to reboot in a bit of rhetoric that jarred my sensibilities. The story “Microsoft’s Steve Ballmer: Traditional Media Will Not Bounce Back” in the Guardian backs into the ad argument. Mark Sweney wrote:
Ballmer, speaking at the Cannes Lions International Advertising Festival, argued that traditional broadcast and print media would have to plan business models around a smaller share of the advertising market, as revenues continue to move to digital outlets. “I don’t think we are in a recession, I think we have reset,” he said. “A recession implies recovery [to pre-recession levels] and for planning purposes I don’t think we will. We have reset and won’t rebound and re-grow.”
My question was, “What is Mr. Ballmer edging toward?” My thought is that the subject of this remark might be the Google. If advertising goes farther south, ad dependent Google would be hurt. I am not so sure. If ad revenues decline, Google has a baseline of ad revenue. Declines might suppress Google’s growth but a slowdown might force Microsoft to slash ad rates in an effort to get share. Buying market share means that Microsoft would have to grow traffic to make cheap ads pay. What if ad revenues don’t reset but just remain flat. Microsoft will still have to market the heck out of its services in the hopes of getting strong ad revenue. But what if those marketing costs spike? Google is not lousy at Microsoft style marketing. Google doesn’t approach marketing as Microsoft does, so it has a different cost mix.
My hunch is that the remarks were not directed at the media attendees. Those executives know exactly what is happening with their ad revenues. Month on month declines are bedeviling some publishers and media companies. Microsoft’s bold statement triggered my idea that Microsoft itself may be a victim of an ad reset. Cost control may be more of an issue at Microsoft than Google. Reset is not exactly the right metaphor for a revenue and cost challenge.
Just my opinion.
Stephen Arnold, June 25, 2009
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