Advertising's Future Is 3 Simple Words: Paid. Owned. Earned.

Advertising's Future Is 3 Simple Words: Paid. Owned. Earned.
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There is angst in ad land over the complexity of media. (There's also endless angst in legacy media companies, but that story's been told and re-told .) Ad planners wring their hands, bemoaning the proliferation of media channels and the unpredictable ways in which "consumers" (as they refer to people) jump from TV to Facebook to text messages to Google to foursquare to iPods...and so on.

What's a brand to do?

Out of the chaos in the media world and the complexity of infinite digital channels, a new way of looking at media is emerging that is simple, useful and strategic. The latest buzz in advertising puts all media in just three categories: paid, owned and earned. But advertisers and everyone else struggle to make sense of that. So this is a combination how-to and how-come piece about those three categories of media and how they can vastly improve the way advertisers small and large approach advertising.

For everyone who's addicted to short, numbered lists, here's the 3-step answer:
  1. Paid jumpstarts owned.
  2. Owned sustains earned.
  3. Earned drives cost down and effectiveness up.

(If, by any chance, you are a real person, not a media person, definitions of paid, owned and earned media are lower down in this post. For shorthand purposes, paid is stuff you pay for like TV spots; owned is stuff you create and own; earned is nice free stuff people say you about on Twitter--and anywhere else.)

There are a plethora of benefits to approaching media this way; the most important are these two:
  1. No matter what new media channels the geniuses invent tomorrow, this logical set of strategic categories doesn't change; and
  2. To repeat, no matter what the short-term goal of any advertising effort (product introductions, trials and test drives, store visits, etc.), the long-term goal is always the same: to drive media spending sharply downward by recruiting fans and advocates who will spread a brand's messages for free, forever.

The end result of using media this way is the creation of a permanent marketplace advantage for a business: Total cost of marketing ultimately goes way down because expensive media buys are less necessary. Credibility goes way up because ordinary people are talking up the brand to their friends and online connections, which has far greater impact on purchase behavior than anything a brand could ever do or say on its own.

Any brand that doesn't put this set of media strategies to work will end up with a higher cost basis and lower credibility than its competitors. Not a good thing.

What you've read so far may be all you need to create a new mental framework that goes beyond old thinking about media channels and ad planning. But read on if you want some background and a few prescriptive words about a new, more useful approach to advertising and the nature of media in a digital, social era.

First, some necessary background.

Roughly eight years ago, it became clear that traditional media (newspapers, magazines, TV, music and so on) and traditional marketing (TV spots, print ads, radio spots and so on) were on a collision course. New technology was passing control over media from the media companies to the audience. The day was approaching when no one could force people to watch ads. So the ads had to go away or become something else.

It became accepted dogma that advertising needed to add value to people's lives or it would be ignored. It had to be useful and valuable, entertaining or informative or both. It had to be (drum roll)...great media. Everyone supposedly began to understand, in other words, that brands have to be media companies, but almost no one knew how to do that or what it really might mean.

Also only dimly understood until just a few years ago was how much legacy media companies would suffer as advertisers began to become media companies. But as old-fashioned advertising began to be less effective and as people gained the power to by-pass and avoid most ads, everybody in the media/advertising ecosystem began see they were in the same leaky boat: Not just advertisers, but publishers, broadcasters and agencies, too. Everybody.

The collision between marketing and media finally occurred in the mid-2000s. The exact date doesn't matter. Ever since, everybody has been wandering through the wreckage, dazed, trying to figure out what happened and, more terrifying, what will happen next.

A recent dinner party at New York's 21 gathered two-and-a-half dozen smart media people to talk about what might happen next. The Jordan Edmiston Group, media investment bankers, invited the leaders of established and emerging companies in publishing and marketing to sit down together. Mediating and setting the agenda was Rishad Tobaccolwala, a man with a large reputation and title, Chief Strategy and Innovation Officer at VivaKi, the media arm of Publicis, the French advertising holding company.

"The future does not fit in the containers of the past," Tobaccowala began. It was, of course, an incantation echoing the parable from the Gospel of Luke: "And no one pours new wine into old wineskins. If he does, the new wine will burst the skins, the wine will run out and the wineskins will be ruined."

One way to apply that biblical metaphor, of course, is to conclude that the new forms of advertising--the post-advertising forms--will not fit into the old categories of media. That might have been on Tobaccowala's mind when he identified the central question for the dinner discussion--a question he believes will be at the center of media's future for quite a while: What roles are to be played by the three kinds of media that now exist: paid, owned and earned?

Again, this was not new for Tobaccowala or, he acknowledged, the rest of us at dinner that night. But it was, I think, a very smart way to focus the evening because it is precisely the question that advertisers are asking (or ought to be asking). Everyone is talking about media in a new way, but few know what's to be done about it.

What's needed, of course, is a new mental framework about media.

In the old days, just a few short years ago, all media was conveniently and simplistically divided by channel or device--broadcast was radio or TV, print was magazines and newspapers, out of home was billboards and events. And we confidently measured things like "impressions" and "reach" and "frequency"--measurements that have no meaning today.

As a matter of habit, the advertising business is still trying to think this way; ad folks just keep adding new media categories--"digital" and "social" and "mobile" and so on--and new metrics that sound disturbingly like the old ones (clicks, hits, etc.).

Ad agencies are still organized to a great extent around this ancient view of media, dividing their people by channel as if that made any sense: Over here are our TV people and there's our print unit and, oh yes, here's our digital agency and way over there in the corner are the social media experts...and so on. Advertising clients, too, tend to organize in this outmoded fashion, sporting titles like "Head of Social Media" and "Head of Digital."

Problematically, this kind of division doesn't work anymore when all kinds of content routinely runs on multiple channels and most content with any value becomes social. Print (text) exists on mobile and stationary screens as well as on paper of all sorts and walls and bus exteriors and so on; film is on theater screens, DVDs, TVs, PCs, tablets, smartphones; conversations are on telephones, email, mobile text, Facebook, Twitter and a thousand apps. And so on.

As a result, on a practical level, it just doesn't help today to draw up advertising plans that begin by dividing a brand's budget mainly by media channel. "How much cash should we plow into TV?" is no longer a meaningful initial question.

What makes sense now is to understand how to achieve the right mix of paid, owned and earned media. But to do that, of course, advertisers first need to know which jobs should be done by paid media, owned media and earned media. They need to know if these are different or identical jobs. They need to know how to allocate money and effort among the three to get the best results.

Brands also are asking how to migrate from traditional advertising to non-traditional. But that goes back to understanding the roles of paid, owned and earned, all of which come in traditional and non-traditional boxes. (Consider: A 30-second spot on "The Closer" is paid, but "Iconoclasts" is owned media--a TV show owned by brand. And when a fan who knows video creates a new, unauthorized episode of a branded series and puts it on YouTube, that's earned TV.)

It was in vogue for a while to declare that traditional advertising was dead. (I used to say it myself to get attention.) But it's a silly thing to say. What's not silly is to understand that TV spots are just one tactic (and a pretty expensive one with decreasing results) among a wide range of paid media--a range that now runs from network prime time spots to paid search to promoted tweets, for example.

So the time now has arrived to define paid, owned and earned and consider how best to use each. I'm going to offer my definitions and a few examples as my final act in this story. (For some statistics on the buzz around these terms and a look at the history, read my colleague Ryan Saghir's recent post.)

FIRST, PAID MEDIA: It's any form of media where brands pay the media owner to insert the brand's message. Central to this exchange is the idea that the media owner has gathered an audience that the brand wants to address. That's why the brand is willing to pay.

Examples of paid, as I've said, include TV spots, print ads, billboards, paid search, online banners, promoted tweets and so on.

The truth about paid media: Paid media works, but only so long as the money spigot is turned on and gushing. Stop spending and paid media stops working with little or no residual benefit. Put another way, the meter is always running and no matter how far you ride, you never own the taxi.

NEXT, OWNED MEDIA: Owned media is real, engaging media that is created and owned by a brand. That sounds simple enough, but it requires great skill to execute. Brands now create and own all kinds of media. Films, TV shows, webisodes, magazines, books, blogs, Facebook pages, tweets and so on. Owned media is what everyone is talking about when they say, "Brands must be media companies."

Examples of owned are everywhere now. Brands like Levi's jeans and Palladium boots are creating new forms of journalism on film. The Converse shoes folks are producing new bands in the brand's Brooklyn recording studio like some new-age record label. Lexus (disclosure: Story Worldwide client) publishes one of the world's leading luxury lifestyle and travel magazines, in print and electronic versions, featuring world-class writers like Jane Smiley (A Thousand Acres). And so on. Owned media traces its history back to 1900, when tire maker Michelin launched a travel guide for drivers.

The truth about owned media: It is relatively expensive to create great content, but when the spending is over the media can keep working indefinitely. In the case of owned media, the brand's spending is really investing; the brand is creating a valuable asset with a more or less unlimited useful life. There are two main challenges. One is finding the right people to create great content that actually embodies a brand, achieves the brand's business goals and truly engages its intended audience. Traditional ad agencies have proven to be unskilled at this. The second is gathering the audience to consume the brand's media. Audience generation usually requires paid media to get it started, especially if anyone's in a hurry to get noticed, which everyone usually is.

FINALLY, EARNED MEDIA: Earned media is positive brand messaging that's produced and spread by unpaid (at least not paid by the advertiser) influencers. This group includes bloggers and tweeters, journalists and media reporters, Facebook updaters. Anyone large or small, amateur or professional, who finds your brand content worth sharing with others is creating earned media. Earned media is routinely focused on spreading content that an advertiser created (see "Owned Media" above). (This, of course, makes owned media the center of all attention because it is or should be the object of paid media and the subject of earned media.) The purest variety of earned media, of course, involves content that is both created and spread by brand advocates on their own.

Pure examples of earned media are not rare, but they are rarely measured or documented except in the most vague way by "social media listening tools" which claim, with huge margins of error, to measure sentiment and volume of online chatter.

There are myriad, well documented examples of brands creating media that is then seen, commented on, shared and spread by fans. This is owned media sustaining earned media. The brand blog post that gets attention and draws comments. The YouTube video that gets a million or 100 million views largely because people are telling their friends to watch it. (The "telling" can take place in-person, through emailing the link, through Twitter, Facebook or almost anywhere outside of YouTube.) And so on and so on.
Ford has been pretty good about generating positive buzz for new cars by loaning them to influential bloggers and other social media mavens, as in the Ford Fiesta Movement. Johnson & Johnson's pharma division, Janssen (disclosure: Story Worldwide client), won a prestigious European digital award for making a film about ADHD that appeared only on YouTube and was watched 120,000+ times in some three months. And so on.
The truth about earned media: Earned media, when it happens, is the best form of advertising on Earth. Not only does it spread brand messages at no additional cost, it also carries more credibility and has greater impact on purchase decisions (according to global survey evidence from Nielsen) than anything the brand can ever say about itself. But it is impossible to control (a popular corporate word) and very hard to generate completely free marketing from a brand's fans. Generally, you need a paid campaign to get it going and owned media to keep it going.

All of which brings us back to the beginning of this story and the roles of paid, owned and earned in the new age of advertising, which my friends and I call the post-advertising age.

Paid media, more and more, is all about generating an audience for owned media. Paid's greatest virtue is that it gets attention and it's fast. But it works best if it's getting attention for something specific--if it's pointing people to a piece of content that can deepen their knowledge, understanding and emotional connection to the advertiser's brand. So the first new rule of paid--whether it's a network TV spot or banner ad or search--is that it should point to a really good, genuinely engaging, audience-pleasing piece of content.

Owned media is about telling the brand's story in great depth and infinite variety. This is the kind of media that connects the advertiser's brand to the audience's lives. Like all great media, it's got to be deeply engaging, informative, entertaining. But that's just table stakes in the owned media game, because the content also must embody the brand and accomplish the brand's business goals. Fueled by a smart paid campaign to generate audience, owned media needs to be search optimized so it's easily findable and it must be spread across digital and traditional channels where its audience spends time. When all this is done properly, there is nothing more powerful than owned media, which has the unique ability to gather and grow communities of brand fans.

It used to be that owned media was pretty much restricted to a brand's web site. In today's world of distributed digital content, owned media needs to be strategically spread all over hell and gone on the digital and traditional channels where its intended audience is most like to encounter it.

Advertisers looking for earned media have only one choice: a really well executed owned media strategy. Owned media, deployed so it is easily shared and commented on, is the sole reliable sustainer of earned media. Every marketer, of course, has the option of praying or waiting for lightning to strike. But only by sending off a piece of attractive owned media can advertisers set off a predictable round of conversation and pass-along that has the potential to spread brand stories and messages almost endlessly through the ranks of their audience.

Paid, owned and earned--the present and future structure of media--only work together in integrated, content-focused programs. They are not generated by siloed marketing organizations. They are not the province of the old general agency or the new digital agency or, sad to contemplate, some even more isolated and truncated little silo like the social media agency. Thinking about such programs and executing them requires, in many cases, re-organizing the advertiser's marketing function and the agency's structure.

The bad news is that the punishment for not pursuing true integration is to be left behind. The good news is that the rewards are worth the pain.

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