Gordon Borrell, CEO of Borrell Associates, joins Cross Screen Media CEO Michael Beach to share his thoughts on disruptors, planning with granularity, challenges facing local marketers today, and the new prime time. Watch our latest Screen Wars Thought Leader Interview here and read the full transcript below!
Michael Beach: All right, Gordon, thanks for joining us today.
Gordon Borrell: Thanks for having me.
MB: Excellent. How did you end up where you are today?
GB: I’ve been in the media business for 40-45 years. I started as a reporter and editor. I got into the management side of media, radio, TV, newspapers, and magazines in the ‘90s, and then jumped over to the internet side in the early ‘90s, when it was more about bulletin boards, AOL, Prodigy, CompuServe, and then, the internet. I started Borrell Associates in 2001 and we track local advertising, the lifeblood of media.
MB: What’s the core problem that you’re solving at Borrell?
GB: It’s a problem that a lot of people don’t know that they have, because of disruption. Anytime a disruption occurs, it creates a new marketplace. And the incumbent businesses, in this case, media companies and ad agencies, tend to deny that the new marketplace is occurring. So, the problem that we’re solving is that we’re identifying, researching, and sizing the advertising numbers, the total revenue money that is spent on internet advertising in local markets.
”It's easy to plan at the national level, but it's very difficult down at the local level.
It’s easy to plan at the national level, but it’s very difficult down at the local level. The problem that we’re solving, is that businesses or media companies whose lifeblood is advertising, don’t really know, or even see the level of money that’s being spent on advertising, particularly digital. We gauge that, and we help them see where it is.
MB: Who’s the core customer, and what’s the overall business model?
GB: The core customer is any business that derives its revenues from advertising and marketing. They would be outdoor companies, ad agencies, television stations, a lot of TV companies, newspapers, even yellow pages, sometimes vendors in the industry, people who have ad serving products, and others like that. We have a lot of insights on trends and advertising.
We run the largest survey of local advertisers in the nation. That’s our core business and the core customer for what we sell. People know us for our insights, but our insights are actually a byproduct of all the research that we have to do to gather data. Most of our money comes from licensing that data and watching the trends.
MB: I’ve always been really impressed with the granularity of your data. I’d say that it holds up to anything I see, even at the national level. Having to break that up into, at least, 210 pieces has always been really impressive, but you go even deeper than that.
GB: There are over 3000 counties, independent cities, and parishes in the US. We look at it down at the individual level. We describe it best as a forest. If I showed you an aerial picture of a forest, populated by big trees, and said, “How many trees are there?” You’d probably say, “about 50,” and you’d be about right. But a forester would say, “No, there are probably about 500.” So if you looked at the picture at the ground level, you’d go, “Oh. We counted the big trees, but look at all these other trees.” They are a decent size, but they are covered by the bigger trees.
So, if you’re in the television business or maybe outdoor business, all you see are those big advertisers and all that spending. In a mid-size market, like the one that I’m in, there are 15,000 businesses. And most traditional media companies will only see, maybe, 200-300 of them.
MB: What are the biggest challenges that local marketers face today, especially on the video side?
GB: Well, the biggest challenge, I think, especially on the video side, is targeting. They’re going down a rabbit hole, and they don’t know it, Michael, because the vast majority of businesses at the local level have never bought video advertising before. So all we really see in the media industry is OTT. Stuff that appears on Hulu, and Sling, and STIRR, and things like that.
And that’s not it. OTT, or video delivered by the internet, as opposed to broadcast channel or cable wire, is a disruptor. And disruptors always create a new marketplace. So what you’ve got is loads of advertisers that would just die to be on TV, typically radio advertisers. But they don’t have the budget for it. It’s just way too much money.
A typical TV buy might be $10,000-$30,000. And they’re over here buying TV because they can afford $3,000-$5,000. Now suddenly this is available to them.
So it has opened up this tremendous new marketplace. You have a lot of people who are new to video, who don’t understand video. They think what they’re buying will put them on TV, but it’s not mass media, it’s very, very targeted. It might be targeted to a demographic, or a psychographic, or it might be a household. They don’t understand that they are being pushed to a very small, niche audience. Which could be fine, and meets their budget, but they’re not going to get the response they would if they advertised on the local CBS, Fox, or NBC affiliate station.
MB: But they are getting more reach per dollar, especially more of their target, right? The people outside your target audience have no opportunity to see it.
GB: They’re seeing high response rates. So there are benefits to both. Mass media, television in particular, has a very strong benefit over online media: Very strong branding benefit, compared to the very targeted types of advertising on YouTube, or other OTT platforms. Typically, these are far more targeted, but they have equally strong branding capability.
It’s about understanding the nuances of all these types of media that are now available to them, but particularly video, because everybody seems to be rushing toward video. It is an 18 billion dollar marketplace in local. 18 billion dollars were spent on OTT advertising across all local markets in the US last year. That’s about 14% of all local advertising expenditures. That’s phenomenal.
”By 2025 stuff delivered by OTT will be about 70% of all digital advertising. Three times larger than broadcast TV advertising.
MB: High growth rate for an already big market.
GB: Indeed. And it’s going to get bigger. We’re forecasting it by 2025. I think it’ll be about 18% of all advertising dollars. And if you added up all video, adding cable and broadcast TV, by 2025 stuff delivered by OTT will be about 70% of all digital advertising. Three times larger than broadcast TV advertising.
MB: That’s a new customer as well. There will be people that buy linear that will also buy digital, but for a lot of people, that’s going to be their first video.
GB: Here’s an interesting statistic. Those who are buying OTT advertising are more likely to buy it from someone other than a TV station. They’re as likely to buy it from a newspaper and/or radio station as they are to buy it from a TV station. And overall, if you look at who is buying OTT advertising, two-thirds of them are not TV customers. So there’s your completely new to TV audience and the conundrum. The big problem for TV, is that it is a typical disruptive innovation situation. They have broadcast TV advertising, with a far higher price and a far higher reach. And then they have this disruptive OTT, which they have to sell because their big customers are buying it.
So, do they lose their big customers? No, they’d rather shift those smaller dollars into this pocket over here. So they still keep it. Meanwhile, they have their hands full doing that, but as I just said, two-thirds of the market is over here, not their customers at all. So, typically, they don’t reach the new customer base. They’re only trying to sell a smaller, more targeted product to their existing television customers. And that can be a problem.
MB: A couple of weeks ago, In your conference in Miami, you talked about what you thought the world would look like in 10 years. You looked back to the early part of the last decade, you looked at where Facebook was as a company, as a proxy for small things that can get really large. What function of advertising or marketing today do you see that could be a really big deal 10 years from now?
GB: It’s definitely video, but in a form that we don’t understand yet. You and I may understand it, but others may say, “Oh, video advertising delivered over the internet. Okay, it’s a YouTube commercial.” But that’s not it. As you look at the future, and you try to understand where video and digital advertising are headed, it is to very quick bites of things. I don’t know if TikTok is going to be it, but you better study TikTok well, because that represents the future.
People are saying, “Oh, you’re ridiculous.” Well, people said I was ridiculous back in 2010, when I said, “You better keep an eye on Myspace.” But it wasn’t Myspace, it was social media. So here I am saying, “It’s not TikTok. Maybe it’s Instagram Reels, or maybe it’s something like that.”
If you read the book “Distracted” by Maggie Jackson, you begin to get this understanding that we are multitasking more and more. We’re teaching our brains to do multiple things. And we want information just like that.
You’ve got all this incoming information. This tells us that video, particularly from marketers, needs to be sharp, to the point, surprising, and informational. All in a short period of time. This means you can’t say, “Hey, we have this sale, hurry up, it ends on Monday and you get 10% off this, and 25% on this, but here’s what else you have to do. And here’s our address.”
No. Get something that intrigues them and catches their attention and gets them to make a decision, either to go away because you don’t have what they’re interested in, and you don’t want to waste people’s time, or to go over and learn more about your product.
We’re having to become more and more bizarre, more and more flamboyant, more and more in-your-face. Surprising, delightful, all of these things just to break through all the clutter. And so much of it is in video. Video is definitely the third wave. First being search, second being social, now we’re in the video wave.
”What's prime time? Prime time is between 8 and 10 pm on weekdays, right? No. To Gen Z, prime time is when you post on Instagram, and it gets the most likes and shares.
MB: A big part of the conference was influencers. As an example, you were showing traditional media online versus a teacher in Arkansas. How do you think that plays into it?
GB: Any company that wants to understand today’s and the future world of advertising and marketing needs to hire the people who are in the gen Z; the oldest of them being probably 22, 23 years old. But these people have been trained more than any of us on media in a way that we haven’t been trained. It’s all about their smartphones. If they watch TV, they do it through their phones.
What’s prime time? Prime time is between 8 and 10 pm on weekdays, right? No. To Gen Z, prime time is when you post on Instagram, and it gets the most likes and shares.
Recruiting those younger people becomes really, really important because, more than any other generation, they are masters in marketing. They know how to get attention. They know how to get likes. They know how to get shares. They know how to deal with comments, and feedback, and interaction. They know how to produce their own media, particularly video. That’s the generation to watch. I think we have a lot to learn from these young people.
MB: Another area of your talk was this “three waves framework,” with the third wave being video. Could you walk us through that, and how it applies to video?
GB: If you look at the internet in terms of revenue or advertising expenditures, you can see very clearly there are three waves. The first wave from 2000, when the internet really got its legs as an advertising medium. The first billion dollars in advertising were spent on the internet that year. From 2000 to 2010, it was search advertising, which was the biggest form. Not banners, but search, and search advertising. Everybody was saying, “It’s the internet. Let’s get signed up, and let’s find out what’s here.” So they searched. First on AltaVista, and then they went to Google. And Google made an advertising medium out of it, because that’s where all the audience was.
The second wave was, “We know where everything is, and what’s out there. Now we want to know where everybody is.” So they migrated to MySpace, and Facebook, and things like that. Those companies, particularly Facebook, made an audience out of it and generated revenue. You could see social advertising going up like that from 2010 to 2020.
Right around 2018 or 2019, this other line began to cross it, and it was video. And we went, “So that’s the third wave. It’s going to be video.” While it’s interesting to see the internet in decades, and in types of dominant revenue generated in each decade. The most interesting thing about it, is that in the first decade, there was one company associated with search.
During the second decade, there was one company associated with social media. But in the third wave, there is no one company associated with video. Particularly at the local level, local advertisers need a vast amount of help with producing a video.
What should they say? What should they wear? What should the lighting look like? It’s not like social, where they can say, “We can just shoot a picture, and post something, and type some words,” or search where they can say, “We’ll just buy HVAC dealer in Baltimore, and bid $50 a click on it.” Video is much more complex. That’s where local agents, whether it’s an agency or a media company, or somebody else, need to come in and help them because there is no big internet company that’s just going to have a DIY platform that works.
MB: Do you see agencies becoming more important than they are today? Do you see an increase, or decrease, in brands buying media without an agency, because of the complexity of video?
GB: There’s an increase across the board of businesses seeking help in marketing. If you look at it like in the older days, before 2000, if you wanted to buy advertising, you had to call somebody that owned a medium and buy advertising in their medium. Now you own the medium. It’s your own website, your own mobile app, if you have one, or your own email list. You have your own audience.
Now you have to figure out how to use it. Figuring that out is not easy. You’re going to seek help because you’re an expert at what you do, but you’re not an expert in marketing. So you’re going to do one of two things. You’re going to hire people in. And we see a lot of that occurring, particularly hiring in younger people who know about this stuff.
So you’re going to hire people to manage your Facebook page, craft your emails, and know what to put in the subject line and what day of the week to send it out. Things like that. Or if you have a bit of money, you’re going to go to an agency. If you don’t have that money, but you buy advertising, you’re going to rely on your local media rep. About five years ago, the traditional local business that spent money on advertising dealt with eight different companies. Today, they deal with three companies.
So they’re pairing it down, and going, “We’re going to work with one, or two, or three people who can help me understand all of this video stuff and how to produce it, and where to place it.” And that person might also be selling them newspaper advertising, or TV advertising, or cable advertising, or radio advertising. That’s the path I see things taking. Either hiring somebody in, doing it on their own, or working with an agency, or a media company that also has its own medium to sell.
MB: We had the opportunity to give a talk at the Borrell Conference, and one of the things we went through was trying to estimate the total number of local advertisers. You are pointing out it is a really big market, but when we compared it to the number of people that buy national television, there were roughly 800 local video advertisers for every national video advertiser. From a technology perspective, what are the key areas that need to be built specifically for the local video market to reach its full potential?
GB: The company that might help another business with video is really to going to need to have technical proficiency, a production proficiency. They will need an ultra HD camera. That’s where they start at a minimum. Good sound equipment. I think the bar is going to rise as more people see higher definition video, better sound, and things like that. Really simple things like having a lavalier, instead of a camera with a little microphone up here and a guy standing next to his plumbing truck, talking about why he’s the greatest plumber on Earth.
So the basic proficiency and equipment, audio, lighting, and things like that need to be learned. Really basic, not so sophisticated as a television station, but the bar’s going to rise over time. There are a significant amount of creativity and editing skills that are required. This is not easy to come by. So how do you tell that plumber who’s leaning against his truck what to say? What should he say? And how long should it be? If you’re not skilled, it’s very easy to write something 4-5 minutes long. That doesn’t work, you need something that’s 30 seconds. Or if it’s a commercial, maybe 15 seconds. And it’s got to be the exact right thing to say, not wordy. That’s not an easy task. And I think that’s going to be the most difficult one.
Because the advertisers themselves aren’t going to be able to do it for the most part. They’re not skilled at writing a script and editing it. And the media companies themselves have basic production skills or basic media skills, they might not have skills specific to scripting video. On top of that, you’re going to need to understand placement, pricing, and targetability.
Right now, it’s very simple, but I think over time and over time, in the next three or four years, the bar is really going to be raised.
MB: At the conference, you showed marketing and advertising jobs being roughly the same. Since then, those have gone in completely opposite directions, to where marketing is a much greater share. How do you define those positions? Is there any kind of crossover blending of the responsibilities? I’ve seen those technologies starting to merge over the long term. Is that what you’re seeing as well?
GB: The data was from BLS (Bureau of Labor Statistics.) It showed that a decade ago, there were far more advertising jobs as opposed to marketing jobs. An advertising job is someone who is selling advertising. Helping a business develop its advertising, and then placing it somewhere. A marketing job is everything that’s related to that but doesn’t involve advertising.
If you want to develop a flyer for a company, or you want to design a logo, or you want to put on an event, or a conference, or a promotional event, all of those nuanced things that help get the word out about a business, that’s marketing.
If you look at that, there’s a huge difference between the number of jobs in advertising and the number of jobs in marketing, almost a million. But about five or six years ago, the lines crossed, and now they’re far wider. When you looked at what the pandemic did, all of a sudden the margin between the two is now twice as high. During the pandemic, lots of businesses went, “We can’t advertise. We don’t have enough money, but we can do marketing. Meaning, we need to update our website, upload some videos, and push out more social posts.”
These are all marketing tasks, not advertising tasks. So they began hiring. So there are more, and more, and more jobs in marketing, and fewer and fewer jobs in the business of selling advertising, because the businesses themselves can market themselves.
MB: Any recommendations on what to read If our audience wants to dive deeper into local advertising topics?
GB: I get a lot of stuff in my inbox, by e-mail. So, the stuff that tends to stick around in my inbox, the newsletter, and the websites that I go to are MediaPost, Adweek, Ad Age, and State of the Screens.
There’s another one that a friend does in New York. It’s called HocusFocus, by Mitch Oscar. I think you have to be invited onto that list. There’s eMarketer. They are an aggregate of information. So it’s everybody’s information, consensus, estimates. They have some interesting things there.
Trade associations, and trade publications, like the NAB (National Association of Broadcasters), RAB (Radio Advertising Bureau), TVB, and The Outdoor Advertising Association. The research is often biased towards making their type of advertising look good. So all those associations tend to provide pieces to the puzzle of what’s going on.
I’ll tell you another secret of how I view things, and what helps me predict what’s going to happen: I ignore stuff as long as I possibly can. When I can’t just ignore it anymore, when people ask me questions and I have to say, “I don’t know,” and the questions are strong enough, I go,” I better brush up on this.”
There’s just too much to track. I didn’t track Clubhouse for a long time. And I thought, “That’s ridiculous. I don’t even own an iPhone. I hope it fails.” Sure enough, Clubhouse did not become the thing that everybody thought it would, so it worked. But TikTok did not work because TikTok for me was ridiculous.
And then it got to the point, a year, or a year and a half ago, where I thought, “This can’t be ignored anymore.” 40% of national brand advertisers are using TikTok in some way. 4% of local businesses are using TikTok. In other words, 90% of local businesses, aren’t using it. Why am I tracking it? Because I can’t ignore it anymore, and national is always the forerunner of what happens locally.
So it’s going to come up pretty quickly. And like I said before, it might not be TikTok, but it’s going to be some short burst of video that has all these people and influencers in it. It’s a different form of video advertising.
Those are the sources I typically look at to get information.
MB: I know you were in the middle of doing the advertiser survey, is that still open? Our audience wants to be a part of it.
GB: No, It closed out the first week in April. It’s very big this year. We’re doing it twice a year. This is the first time we’ve decided to do it twice because it’s gotten so big and because things are changing a lot quicker. It’s the largest survey of local advertisers in the country. We’ll probably begin to trickle out some results of it in late June. If you go to our website and look at surveys, you’ll be able to see of the initial findings of that.
MB: Excellent. We’ll look forward to covering that in the newsletter. Well Gordon, I appreciate your time and I know our audience is going to really enjoy the conversation. Thank you.
GB: Thanks, Michael. And thanks for being at our conference. Your session was great. Thanks for having me on the show.
See the rest of the Screen Wars Thought Leader Interviews here!
Gordon Borrell founded Borrell Associates in 2001 and has become the local media industry’s leading analyst. He is ranked in the top 2% among Gerson Lehrman Group’s 150,000 consultants worldwide and is quoted in Ad Age, Media Post, Editor & Publisher, The Wall Street Journal, The New York Times, Forbes and other publications. Prior to starting Borrell Associates, Gordon was vice president for new media for Landmark Communications, where he started his career 22 years earlier as a newspaper reporter. He is past chairman of the Local Media Association and of the Local Media Foundation. Gordon has five children and lives with his wife, a writer and book author, in Hampton Roads, Va.
Cross Screen Media is a marketing analytics and software company empowering marketers to plan, activate, and measure Connected TV and audience-driven Linear TV advertising at the local level. Our closed-loop solutions help brands, agencies, and networks succeed in the Convergent TV space. For more information, visit CrossScreenMedia.com.