to her or to the followers with whom she shared the tweet.
Undergirding all of this one-on-one interaction is big data—large stores of information made available by digital technologies—a topic we will cover at length in Chapter 5. For the moment, bear in mind that media and marketing companies track our every digital move. Put a pair of shoes in an online cart, decide not to buy them, and just wait for the image of those flats to follow you from website to website and from computer to cell phone to iPad and soon to your smart TV, a technique known as retargeting.18 And by now, you likely know that the Google results you receive in response to searches are not the same as the ones your spouse or child or business associate sees. This is because as you roam the web, you leave trails of data for marketers to analyze—and to sell to others—in a never-ending attempt to persuade you to buy even more consumer goods. How you have moved around the web determines not only the ads that you see, but the types of sites that will make it to the top of the Google results. It isn’t merely Google that uses your information to serve their business needs: Netflix created “House of Cards” using viewership data from their site (more on that later), Pinterest is the social media equivalent of a consumer focus group, and I could go on and on. The list of sites that use our information to garner information is virtually endless.
In the perhaps the most notorious case of marketing research, Facebook manipulated users’ news feeds in the summer of 2014 to see if they could influence user emotions. The company increased the amount of negative content on the news feeds of 689,003 people to see if it would make them sadder, testing a theory known as emotional contagion. The question was: could Facebook use its algorithms to make an emotion spread like a virus from one person to another? In short, it worked: fewer positive posts in the news feed led to more negative posts being written, and vice versa.19 Think about that: Facebook used their site to discover that they had the ability to stage-manage people’s feelings. It sounds like something out of a sci-fi movie. Unfortunately, it isn’t. Facebook claimed that this was legitimate product research and that they were protected by the legal notice that users agree to when they sign up for the site.20
Bottom line: the Internet is one giant marketing research experiment. The vast stores of data generated from spending time online enable marketers to tailor content to individualized wants and needs, to develop relationships with consumers, and through those relationships to compel us to engage with increasingly cloaked commercial content and to share it with our social groups.
DECLINING REVENUES = BLURRED LINES
Media and marketing have merged because the revenue models that buoy the production of noncommercial content are imploding. The long-term consequences of this are likely to be far worse than we can imagine, both in terms of the denigration of content and the amount of money we as individuals will all have to pay out of pocket for content that used to be free because it was advertising supported. In the short term, the “solution” is to hide the advertising—a choice that has far-ranging fallout.
In brief: media companies generate revenue either by selling advertising or via a hybrid model of selling advertising and subscriptions.21 In its simplest form, for example, broadcast TV networks sell advertising, and magazines sell a combination of ads and subscriptions. Cable networks also work in this way: a network like MTV, say, gets money from advertising and a monthly fee from the local cable operator, such as Comcast or Time Warner.
The cost of an ad is determined by how many people see the ad (ratings) and by who those people are. The more people that watch a commercial, the more expensive it is. That is why commercials in the Super Bowl—the most watched program on television, with tens of millions of viewers—go for more than $3 million for a thirty-second spot. But cost is not just about tonnage. Advertisers want to reach some types of people more than others, and they will pay handsomely to reach those desirable consumer groups. Young men, for example, are a notoriously hard-to-reach but valuable target audience, and advertisers will pay up to twice as much money to reach them as they will to reach many female demographic groups, who tend to watch more television.
Obviously, companies with a combined revenue model have been better able to withstand the ups and downs of a volatile advertising market. MTV might lose advertising dollars in a down market, but the company retains a substantial monthly revenue stream from cable operators. In 2013, for example, MTV received a monthly average of 39 cents per subscriber and had 99 million subscribers, so their annual subscription fees totaled more than $463 million.22 But any security that combined revenue models might have provided no longer exists. Digital technologies are threatening not only advertising revenues, but also hybrid revenue models.
In terms of television advertising, a combination of delayed viewership, reduced viewership, and the practice of viewing online has led to declining ratings and a concomitant decline in revenues.23 Nielsen, the agency that determines the viewership of TV programs, counts C3: commercial ratings for live viewership, plus anyone who watches their DVR within three days of the broadcast. Thus people who record programs on DVRs but put off watching them for several days are lost in the ratings numbers. Ratings have declined further because people are simply shunning TV in favor of YouTube, Netflix, and other video outlets. More troubling still is the migration of TV viewing to tablets and mobile devices. That’s because when you watch Scandal or The Walking Dead online, that viewership cannot be tracked by Nielsen.24
As the audience is moving from TV to online, so too is advertising spending, and this is happening at a faster and faster rate. Up to now, television has been immune to declines in advertising spending because of its ability to reach a large audience, something no other medium can do. In 2014, though, spending shifted for the first time away from traditional media to digital. Expectations are that those spending patterns will continue, particularly in light of the fact that in 2015, Procter & Gamble (P&G) and Unilever, two of the world’s largest advertisers, planned to spend 30 to 35 percent of their budgets on digital, with some of those dollars being found at the expense of television.25 These advertisers and others are shifting their spending to follow consumers, but they are also doing it because advertising online is significantly cheaper. This low cost advertising is great for marketers, not so good for media properties, whether offline or on.
In terms of subscriptions, cable companies are seeing declines as never before. More people (and particularly Millennials) are “cord cutters” or even “cord nevers,” people who are either giving up their cable subscriptions or who’ve never bought one because they can receive all the programming they want online. Cable homes have dropped from 70 percent of American homes to 57 percent in the last fifteen years.26 These “cordless” folks are the reason we are seeing more direct-to-consumer program options (called OTT, or over-the-top content, like HBO Now and CBS All Access), in addition to the propagation of streaming options from companies like Amazon, Hulu, and Netflix, a site which alone accounts for more than twenty-eight hours per month of viewing per subscriber.27 According to Nielsen, more than 40 percent of U.S. households subscribe to at least one of these types of video streaming services.28 Fewer subscribers mean not only less money for the cable operators, but also for the TV networks that they carry.
While broadcast and cable television, as well as newspapers and magazines, are struggling, Google—an organization that produces no content—generated $50 billion in ad income. That’s more than twice that of all newspapers.29 Think about that: the one company that spends absolutely nothing to create entertainment or news is blowing everyone else out of the water. And not surprisingly, the only media segment expected to experience increased advertising revenue is digital, which was predicted to grow by 19 percent in 2015 and to outpace TV spending by 2018.30 Do you see how badly this could go?
From an economic viewpoint it is obvious why this is happening. In the 1980s, before cable took off, 90 percent of Americans watched one of the three major broadcast channels. Reaching prospective customers was easy: make a commercial and put it on network TV. After cable became ubiquitous, broadcasters could still reach a significant audience with its most popular shows. For example, during its run in the 1990s Seinfeld regularly reached more than 30 million viewers. Today, a major hit like The Big Bang Theory only reaches half that number, yet