As if Taxes Could Save Outdated Business Models

A month ago I've attended the “Austrian Media Days Conference 2016” (#oemt2016), and it kept me thinking. On September 20th & 21st, 2016 the country's leading media, advertising and marketing experts discussed the status quo and the outlook of their industries at the University of Economics and Business in Vienna, Austria. Of course, there was some agitated melancholia about disruption, destructive changes and threats to old fashioned business models in print and TV. And yes, I could even hear statements like

“Google and Facebook are evil.”

Invited politicians picked that up immediately. Hereupon the Secretary of State for Media, Thomas Drozda, foolishly proposed the idea of a new tax for digital advertising. Any believed positive effect of this measure is a strong misconception of course. The said extra tax of currently 5% on paid advertising already exists for print media and goes back to 1927 (!). Originally it was supposed to be limited for a period of 5 years. Well, we are in Austria: The tax at some point rose to as high as 20% and even 30% and survived all efforts to abolish it altogether. In June 2000 the corresponding tax law was adapted and changed the last time. The Professional Association Advertising and Market Communication within the Austrian Federal Economic Chamber argues with politicians against this industry specific tax for ages. Obviously without much success so far. Now the time has come to tackle it again, and even more vigorously, because an expansion of this obsolete tax into the digital domain is not useful nor acceptable. To have large international corporations pay higher taxes to individual nations in general is heavily debated not only in the European Union right now. However, it is a much larger issue and cannot be solved on the back of the advertising industry. The problem with tax avoiding practices is of global scope and is not limited to companies like Google, Facebook, and Apple in Silicon Valley. As if any such tax could save individual businesses or industries that do not embrace change. Outdated business models will disappear inevitably. New generations of founders and smart business owners will embrace the digital age and seize the opportunity. Media formats like linear TV, radio, print, and certain types of agencies that serve the advertising industry are under high pressure. They are literally forced to find alternative business models, create new offers, and operate on a more efficient and effective level than ever before. What else should they do? International keynote speakers and successful local business owners shared what works in order to thrive in the digital era. Here is a short list in arbitrary order:

• Mobile services, location based features
• Anything with high entertainment and fun factor
• Unique, quality content goes a long way, e.g. local content or niche content: Free medium with paid advertising or subscriptions paid by readers work in digital space, in print or in a combination of both
• Connecting people with alike interests
• Providing room for user generated content and user engagement
• Collaborating with other participants in the market
• Advertising becomes more cost-effective with programmatic advertising, ad re-targeting and cross media marketing. (Works well for publishers and for advertisers.)

And the list goes on. Much has changed but not those economic principles:

• No money is made unless a product or service has been purchased by someone.
• People buy what they want from sources they trust if the provided value exceeds the perceived price.

The digital revolution has turned previously expensive goods and services into commodities of which many have become available to everyone for free altogether. It's too late for those young commodities, but there is infinite possibility for creating something new people are willing to pay for. Yours Truly John W. Furst