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5 Trends To Watch
What marketers need to know about the short-term challenges of Hispanic-targeted media, marketing and advertising
September 01, 2005
By Luis Clemens
These are heady times for the U.S. Hispanic market. There is a prevailing sense of dot-com déjà vu, only without the buckets of money.
Practically every week a new magazine is launched or another radio station flips to a Latino format or yet another Spanish-language newspaper starts in a city or town where there were almost no Hispanics 10 years ago. There is a similar flurry of activity on the marketing side.
Amid the crush of announcements of this new Hispanic media outlet or that new Latino marketing initiative, it is a challenge to spot trends, identify the most important issues and maintain perspective. The key is to stop, think, talk to people in the know and then think some more in the hopes of understanding and describing the state of Hispanic marketing and media, and its current and future direction.
To that end, Marketing y Medios interviewed 10 individuals whom reporters and editors considered particularly insightful. From those conversations, five distinct trends were selected. The first and arguably foremost trend is that Latino youth are about to pass from being the fault line of the Hispanic market to being in the frontline. The simultaneous consolidation of media ownership with the diversification of media outlets is the second-most-important trend. Then there are three tendencies that deserve more attention than they currently receive: the Hispanic agencies are under assault, Latin American companies are moving into the Latino market, and evangelical Protestants are gaining more Latino followers.
Latino Youth: It's the Numbers, Stupid
"In 20 years, everyone will be Hispanic," jokes John Trainor, co-owner of Chicago-based Papel Media, a print sales rep firm.
The federal government's decision to include the term Hispanic for its 1980 Census has had enormous ramifications for the Hispanic market. Once the counting began, it rapidly became apparent this group was too large for mainstream marketers to ignore. And the numbers are most striking when it comes to Latino youth.
According to the Census Bureau, Hispanics "accounted for about one-half of the national population growth of 2.9 million between July 1, 2003, and July 1, 2004. The Hispanic growth rate of 3.6 percent over the 12-month period was more than three times that of the total population (1 percent)." Almost 11 percent of Hispanics are less than five years old, compared to 6 percent of non-Hispanic whites. Half of all Hispanics are under the age of 27, according to the Census Bureau. The Latino market's most salient feature is its youth.
Tomás Cookman, president of Los Angeles-based youth-marketing firm Cookman International and Nacional Records, says, "The short-term trend will be addressing ads to young Latinos." Cookman acknowledges "a youth market in every country, but here the youth have true economic power [thanks to] after-school jobs and the availability of credit. They can actually go out and respond [to ads] by buying."
But it's not that the Latino youth market is being ignored. On the media side, there is plenty of awareness and experimentation.
The explosion of reggaeton as a popular music genre and its power to turn around the ratings of otherwise dormant radio stations may well be this year's most dramatic example of the rising influence of the Latino youth audience.
Alfredo Alonso, senior vice president of Clear Channel Communications, coined the term Hurban, an abbreviation of Hispanic and Urban, and created a radio programming format to go along with it, which is heavy on reggaeton. Over the course of nine months, Alonso has switched (or flipped, in the industry vernacular) the formats of five underperforming stations. Since Clear Channel is the largest owner of radio stations in the nation, its actions carry weight. Alonso, in effect, helped kick-start the flipping stampede. But it is Hispanic youth who made those stations popular. The power of that audience has translated into sharp increases in Arbitron ratings but not intense advertiser interest. Alonso is surprised that "we haven't had a great response from advertisers. At this point they are still considering and haven't jumped on it."
A wait-and-see attitude still prevails when it comes to Latino youth, although Antoinette Zel, senior vice president of network strategy for mun2, Telemundo's bilingual youth-focused cable network, insists "there is tremendous intrigue and desire" among advertisers. Desire that has not translated into large amounts of money.
Latino youth present a series of near-existential challenges to Hispanic marketers who have spent large amounts of time, effort and resources trying to understand older, foreign-born and Spanish-dominant Latinos. First, there is the question of language. Do you reach this audience in English or in Spanish? The second issue is identity. Do they consider themselves Latino?
The answers to both questions are messy. Robin Behar, managing partner of Los Angeles-based direct response agency Vivar Advertising, says "[Latino youth] have a hand raised saying 'I am Latino, I am Hispanic. I am of these roots [yet] they are completely immersed in English-language culture." Or as Zel puts it, "they are picking and choosing from two worlds to create a third."
Whether in English or Spanish, "youth have to be talked to, listened to and marketed to," Cookman says.
Consolidation of media ownership; Diversification of media outlets
"Everything is consolidating. The whole world will be run by three companies," says Debra Nason, vice president and managing director of Bromley Interlink, with her tongue firmly in cheek. Yet she readily acknowledges that "there are [now] more and frankly better outlets."
That is the crux of the second major trend in the industry. The consolidation in ownership of media outlets targeting Hispanics is taking place simultaneously with the launch or reformatting of a large number of publications, radio stations and television channels, all competing for the eyes and ears of Latinos. And both, the consolidation of ownership and the diversification of outlets, are happening at a frenetic pace.
Consolidation is typically seen by media critics and medium-sized companies as a sort of forced march to a stultifying sameness of content driven by a cost-cutting and risk-averse corporate culture. This was the tenor of much of the criticism by the Spanish Broadcasting System (SBS) and a broad range of public interest groups ahead of Univision's purchase of Hispanic Broadcasting Corporation (HBC) in 2002. Except that, for now, Univision Radio offers a much more diverse range of listening options than previously offered by HBC. This is not the result of some previously unstated commitment by Univision to providing a plethora of programming formats over publicly-owned airwaves. This is the result of market forces.
"We are evolving from being mass marketers to micro marketers," says Richard Israel, the vice president of sales for Northern California-based Web marketing firm Informative Inc. There is both greater advertiser interest in targeting more and more segmented audiences and greater capacity among media outlets to narrowcast to fragmented audiences. This, plus the overall growth of the Hispanic market and its geographic expansion to hitherto unheard of locations such as Nebraska and Utah, is driving the accelerated change in the Latino media landscape.
And nowhere are all these factors more clearly evident than Hispanic radio.
"Latin radio is the most conservative, let's-not-change-a-thing industry [but now] more and more stations are flipping," Cookman says. "There was no way so much Latin radio could have stayed so freaking boring."
Alonso is one of those responsible for livening up Hispanic radio even though his employer, Clear Channel, has been heavily criticized for contributing to a sameness of format among its English-language stations. He talks about the "tremendous growth opportunity" afforded by Hispanic radio, and he is not the only one who thinks so.
Veteran Spanish-language radio entrepreneurs such as Amador Bustos of Bustos Media and Peter Davidson of Davidson Media Group are busy acquiring stations in much smaller Hispanic markets such as Charlotte N.C., and Indianapolis, cities with a recent but rapidly growing Latino population. In the past, Bustos and Davidson have sold their radio interests to larger groups. The novelty is that consolidation is taking place for properties in such small markets.
Papel Media's Trainor expects something similar will happen with the Spanish-language newspaper industry. He believes the consolidation in Spanish-language print that began with the 2004 ImpreMedia purchase of La Opinión in Los Angeles and El Diario La Prensa in New York will pick up steam in 2006. "The trend of consolidation is inevitable, the size of the market is not big enough [for all the mom and pops]," Trainor says. He expects newspapers in much smaller markets will be bought up and grouped together as chains. It is not a welcome prospect for Trainor. "What I fear is as non-Hispanic owned organizations become more important in market share ... our voice will become weaker, smaller and become a disservice for [the Latino] community."
For now, the predominant voice of newspapers and radio stations for Latinos in the secondary and tertiary markets still can be heard in Spanish even if the media outlets are not necessarily owned by Hispanics. In the larger markets, though, English is increasingly becoming part of the Latino media mix in response to the perceived demand of young, U.S.-born Hispanics.
This is the case of cable channels such as Sí TV, magazines such as Tu Ciudad Los Angeles, newspaper supplements such as the New York Daily News' Viva and Clear Channel's Hurban format radio stations. "The 18-to-34 demographic shouldn't be given up ... We shouldn't deliver it on a silver platter," Alonso says. The key, he believes, was finding a way to talk to them in the same mix of Spanish and English that they use among themselves. "A bilingual crossover media shift" is how Vivar Advertising's Behar describes the change. "People are throwing stuff at the wall and seeing if it sticks" is how Cookman puts it.
From a media-buying perspective, the dramatic increase in outlets, both English and Spanish, can only be a benefit. However, it does not mean Spanish-language broadcasting is dead or dying. Univision continues to experience significant ratings and sales growth, which probably explains why Fidelity, the gargantuan investment fund, recently increased its shareholding stake in Univision to 15 percent.
Advertisers, though, are placing a greater emphasis on reaching consumers somewhere other than in front of the television, namely a computer. However, an afterthought is an apt description of the bulk of online advertising for the Hispanic market. The amounts involved are underwhelming. "The estimates for the total market range from $65 million to $100 million," Israel says. "It is still very much in its infancy."
The Hispanic interactive market is bucking the overall media trend of simultaneous consolidation of ownership and diversification of outlets. Ownership of the leading properties is already highly concentrated and there is little in the way of major new properties, even though Telemundo intends to relaunch its Mun2 Web site in October and the main network site sometime thereafter. Ad revenues are growing but the structural dynamics are very different from what is taking place in print, radio and television. The number of major online players remains constant; namely, Univision, Yahoo, Google, MSN, Terra and AOL Latino. "You can kind of count on your hand where the bulk of [the] money is going to," Israel says. "Maybe there is a handful of others and that probably represents 70 to 80 percent of [total Hispanic online advertising revenue]."
Online advertising has jumped in the last year in the general market, but it is still a fringe affair in the Latino market. The Hispanic interactive market is ensconced in a Catch-22 in which limited content begets limited advertising. Israel says, "The total amount of content online that is going to be appealing to Hispanics is pretty paltry."
AD Agencies Under Assault
"These could be the best of times" for Hispanic ad agencies, says Alex López Negrete, president of López Negrete Communications and of the the Association of Hispanic Advertising Agencies (AHAA). He highlights the growing budgets and greater client interest without downplaying the significant challenges. "Ya no se trata de hacer los comerciales y lanzarlo al aire y ver lo que pasa," he says. ("It's no longer a matter of making a commercial, putting it on air and seeing what happens.")
But some darkly mutter and privately suggest these might, in fact, be the worst of times.
The growth of Latino-targeted advertising budgets has attracted intense attention from general-market agencies. The Henry Gomez opinion piece in the July-August issue of Marketing y Medios and the response to it in the industry demonstrates the contentiousness of this issue. Media-buying budgets are increasingly poached by advertising conglomerates, and minority-owned agencies find themselves competing for creative-only accounts such as Macy's, which was awarded this year to Latinvox.
That is, when the general-market agencies that don't have a Hispanic division still manage to keep the Hispanic account in-house. They simply farm out the work of translating existing creative.
Trainor, who routinely deals with a number of Hispanic advertising shops, voices a concern that is often mumbled by industry insiders but rarely stated aloud, "If the Hispanic agencies don't buy media right, then their future will be as creative boutiques." He adds, "they have the cookie-cutter approach, and they've been doing it the same way for 10 years."
Israel echoes the same concern, "[Hispanic ad shops] are all relying on the same model. Let's advertise on Univision, People en Español. They are doing the same thing over and over again and they are reliant strictly on the creative." Israel is most concerned about what he describes as the failure of the Hispanic agencies to tackle the interactive market. "I have seen too many Hispanic agencies ignore digital media, just completely ignore it flat-out."
Víctor Arroyo, vice president of the recently formed Matraca, an experiential marketing firm based in Dallas, is openly skeptical of the future of many Hispanic ad agencies. "We are in an industry that is looking at the world through advertising eyes and that is ... pretty archaic."
Equally archaic, Arroyo believes, is the obsession with "holding onto and selling the Spanish-dominant ... We talk about 40 million Hispanics, but we are only reaching 24 million."
The Hispanic agencies, however, have their staunch defenders. "They were built to reach Latinos and are good at reaching Latinos," Alonso says. Ironic, then, that their success at doing so has attracted increased attention from general-market agencies. Nason says, "They now see the Hispanic accounts as low-hanging fruit."
An additional round of consolidation of the Hispanic advertising agencies is envisioned by Israel who believes those who don't move into the interactive market will "find themselves ... either bought or out of business in a few years." The hope among the optimists such as López Negrete is that the increased budgets will allow the agencies to rapidly acquire additional competencies.
The most crucial of these may well be the need to understand the online Hispanic consumer. Understanding comes with research but research is expensive. Yet research and measurable return on investment attracts clients.
To say the Hispanic agencies are under assault, which they are, does not mean they don't make money now or won't prosper in the long-term. López Negrete remembers when a million-dollar Hispanic account was considered a big deal, whereas $40 million is now considered serious money. Yet there is no way to deny the seriousness of the multiple and structural challenges facing the Hispanic agencies. However, it must be acknowledged that they have struggled through wrenching changes at repeated times in their history. It has never been easy or straightforward for the Hispanic agencies.
From Matehuala to Guatemala
One of the most consistent ways the agencies have renewed themselves is by importing talent from Latin America. "There are an increasing number of individuals who know that Guatemala is a country and Matehuala is a small town in Mexico," says Traynor, who splits his time between Mexico City and Chicago. "The reality is that the continent is not that big."
To suggest the border between the United States and the rest of the Americas is disappearing would be nonsense. Yet, there is an increasing influence of Latin American corporations and culture on the U.S. Latino market.
That may sound obvious given the longstanding presence of Latin American telenovelas and recording artists in the U.S., but there is a newness and critical mass of influences that didn't exist before. A sense that brand insight and loyalty derived south of the border can and should be exploited in the Latino market as well.
One of the best examples is Chivas USA, a northern offshoot of the enormously popular Guadalajara-based football club Club Deportivo Chivas. "I think it is brilliant," Behar says. An easy way, she suggests, to build a brand on the basis of nostalgia, which is an incredibly powerful emotion.
Mexican corn flour and tortilla maker Grupo Maseca, for example, capitalized on its knowledge of the success in Mexico of the telenovela Amor Real to design a promotion for the U.S. Hispanic market.
But there is more going on in the media side than just importing and airing telenovelas. In yet another sign of Grupo Televisa's designs on the Hispanic market, the Mexican broadcaster signed a distribution deal with EMI in late July. Azteca America is organizing a seven-city tour for the finalists of its reality show, La Academia. Latin American Web sites such as EsMas now segment their U.S. traffic and sell advertising to Hispanic readers.
Concerts by Latin recording artists are far from a novelty in the U.S., but some of the places where they are performing are most definitely new. Juanes recently played in Detroit. Café Tacuba sold out a show in Boston. Juan Gabriel played for the first time in Kansas City, attracting fans from as far away as Arkansas.
The link between the United States and Mexico will become even stronger as time goes on. Immigration constantly renews the ties between the United States and Latin America, whether it be culture or, for that matter, religion.
a matter of faith
The Reformation is still very much in full swing among Christian Latinos in the United States. The Evangelical churches are busy winning converts both in Latin America and among Latino immigrants. A majority of U.S. Hispanics identify themselves as members of the Roman Catholic Church, but one quarter are Protestants. Of these, an estimated 6.2 million are evangelicals, folks who routinely go to church once or twice a week and consider themselves born-again Christians.
Only one of the 10 interviewed for this article, Esteban Fernandez, the head of Spanish-language Christian book imprint Editorial Nueva Vida, mentioned the growing number of Latino Evangelicals as an important trend in Hispanic marketing and media.
"The Christian-Latino market is growing day by day," he says. "We too eat hamburgers, consume soft drinks, take commercial flights and read good books." So far, a million copies of Una Vida con Propósito, the Spanish-language translation of Rick Warren's blockbuster The Purpose-Driven Life, have sold. On the music front, Jaci Velasquez has sold 5 million, mostly English-language Christian pop albums and Marcos Witt has upped her with 8 million Spanish-language albums.
Aside from the specifically Christian material, Latino Evangelicals obviously consume a full range of consumer services. Fernandez cites the opportunities for word-of-mouth marketing that exist in churches. This has not escaped the notice of financial service firms such as Pittsburgh-based PNC, who has marketed credit cards to the faithful through local churches in Pennsylvania. Health insurance firms in Georgia are signing up new clients and promoting their wares by offering free insurance to pastors and discounted group rates to churches.
'Unstoppable'
Fernandez categorizes the growth of the overall Hispanic market as "unstoppable," which captures the prevailing optimism. Together the five trends represent a moving picture of a dynamic population that is constantly being reshaped by intermarriage with non-Hispanics and, more importantly, by immigration.
As the proportion of Latinos born in the United States increases, there is the possibility of a cultural rift with foreign-born Hispanics. The daily life of a college-educated Latino professional with limited Spanish and a passion for reggaeton will increasingly diverge from the daily life of a Mexican day laborer with a primary-school education, limited English and a passion for norteño music.
Clear Channel's Alonso, who is arguably the year's most important Hispanic media trendsetter, says, "The real definition of Hispanic marketing is knowing how to blend these two universes well."
It is this challenge more than any other that will define the future of Hispanic marketing and media.
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