Negative patterns are the root cause of online failure

The UK online market has had a rough time lately, after a year of considerable optimism and growth.

The recent closure of a number of high-profile new media agencies, Web consultancies and sales houses has raised the spectre of failure in a hitherto untarnished medium.

None of the remaining players can draw any comfort from such events because of the persistence of the underlying causes that have brought about such “shakeouts”.

Some commentators have suggested that this is an inevitable feature of a maturing medium. The argument runs that the victims have either failed to gain critical mass by achieving significant market share, or have failed to specialise sufficiently to have a niche strength.

Others have speculated that some of these company failures are down to the peculiarities of how the companies were run – the subtext being that the management just wasn’t up to the job.

Neither of these explanations can be considered sufficient. Many of the companies affected are wholly or partly owned by either major agencies or media owners. Most of these have publicly declared their belief in the long-term importance of online media, and already have the necessary human resource skills in-house.

The truth is much more structural and therefore better hidden under the heat and dust of commercial battle.

The UK online media market is being handicapped by two factors.

First, too many online media practitioners, both on the planning/buying and selling side, seem intent on treating the medium as if it were a commodity.

While seemingly helpful in the very short term, campaigns booked solely on the lowest cost-per-thousand available ill-serves the medium in the longer term. It penalises content providers trying to invest in quality editorial, and reinforces advertisers’ poor perception of the value of the online medium.

This means that the learning curve as to what online really can contribute to the marketing mix, by way of brand and community building, is not always being climbed. Both planner/buyers and sellers need to set their sites a little higher.

Secondly, established media players entering the online arena also need to raise their game. In many cases, there is a strong hint of “me-tooism” in going online.

Such non-strategic reasons for an online department can lead to a vicious circle. The failure to appreciate the initial small returns from online can lead to an undue emphasis on cost minimisation rather than expansion, and create a viscous circle of understaffed operations generating too many dissatisfied clients.

This in turn leads to client defections, uncertain cashflow and structurally small returns.

But if the various players in the UK online industry can break out of these two negative patterns of behaviour, we can begin to emulate the online marketing success stories coming out of the US. It requires a few people with real guts, vision and – perhaps – big cheque books. But fortune favours the brave.

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