Thursday, May 05, 2005

The New York Times > Business > Media & Advertising > Advertising: New Technology Is the Big Challenge for Madison Avenue's Executives

Advertising agencies are like lawyers, consultants, architects and other service professionals. The value of the work they do is difficult to measure. Google and Tivo are two of the technologies that are changing the ability to measure response. Advertising is about to rapidly become more efficient.

Harry Dent presents a good chart or two in his book; The Roaring 2000's. One of the charts shows the way technology is a blessing and a curse. For example, the invention of the automobile was a curse for the railroads. Rail passenger miles peaked around 1921. Henry Ford's assembly line boosted the output of cars dramatically in 1914 but car passenger miles did not take market share until 1921. The railroads have never been the same, but the inflation adjusted costs to go from here to there are dramatically less than in 1920.

Companies are saving substantial sums by advertising more efficiently over the internet. Google now offers text scanning of 12 video channels and Tivo is just gearing up to offer numerous advertising advantages. My family came close to being scared out of Tivo a few months back. We held on and even purchased more shares. The rule is simple; build a better mousetrap and the world will beat a path to your door. Google and Tivo have the products to save companies billions annually. See my earlier post for the projected growth in online advertising expenditures. Madison Avenue firms need to figure the new situation out or see their business go the way of the railroads (Ironically, my family owns both CSX and NSC railroads. The firms have been rationalized as freight haulers, but it took a lot of years.)