January 25, 2023
Commentary
The End Of Advertising, As We Know It
- by Gary Milner , Op-Ed Contributor, July 23, 2016
Eighty-eight percent of Fortune 500 companies that were around in 1955 no longer exist today.
Industries get disrupted. How’s that working out for advertising?
Until relatively recently, the ad industry has been dominated by the same media that dominated it in 1955: print, radio and TV. Only TV still dominates today, but its grip on media buyers is slipping. It’s hanging on by its fingernails.
That’s about to change. Cataclysmic forces are shifting corporate culture and disrupting pent-up organizational malaise.
Let me explain.
Peter H. Diamandis wrote the “Bold” business book. In it, Diamandis showed how six stages -- digitalization, deception, disruption, demonetization, dematerialization, and democratization -- drive destruction and change industries.
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In 1976, Kodak was a $30 billion corporation. Today it is gone.
What sort of hubris drove an iconic brand’s demise? Let’s start with the business it was in. You could say film, because that’s where it earned most of its revenues. But the reality is that Kodak was in the business of storing personal memories. As technology disrupted the way people do that, Kodak failed to adapt its business model and now is just a memory.
What happened?
Digitalization enabled people to store their memories in solid-state. The photographic film industry failed to react, deceiving itself that the technology was not scalable. That the relatively low storage capacity of early computer memory was so small that it was not a threat. Who would want to spend 23 seconds to store a 0.01-mpixel black-and-white image?
We all know what happened. Thanks to Moore’s Law, capacity jumped exponentially and the technology became disruptive. People stopped buying film and began saving their personal memories as 1s and 0s stored on digital media.
Ultimately, the smartphone integrated all the technology into a single mobile device, effectively completing the mass market destruction of film.
In 1976, 85% of cameras were made by Kodak. By 2009, one year after Apple launched the iPhone, that business was gone.
If the Kodak executives had realized the business they were
truly in -- the business of storing people’s personal memories -- then they would have realized that the digital equivalent of film was Instagram, a business they could have owned if their own
egos and hubris had not taken hold.
So what has all this got to do with advertising?
Media-buying began to digitize in 2008, as advertisements started to be placed by technology across a broad set of media platforms.
Like the film industry before it, the media industry deceived itself, believing digital would never be important as a percentage of total marketing spending and TV has always ruled, because it was where marketers could reach the most people. But that changed as people gained access to more data capacity and began using smartphones, tablets and other devices to consume media content, making it effective for marketers to reach them via media on those devices.
This drove new ways of buying and selling ads through software and the traditional people-based media-buying process began to dematerialize and the marketplace became democratized.
Any person, anywhere in the world, can buy media for any country through a PC-based terminal.
What does this mean in terms of how corporations manage their media buys and the implications for the industry?
Until fairly recently, media-buying was country-dependent. Each market had its own needs for print, radio and TV, and global marketers utilized a distributed model for buying media that involved lots of people and cumbersome processes.
Jump to today.
Media is increasingly homogenizing, thanks to platforms like Facebook, Instagram, YouTube, Snapchat, Twitter, and a variety of public and private video exchanges like Tubemogul, Sprinklr or even Google itself.
Sixty percent or more of digital media is aggregated this way, per eMarketer, May 2016, creating a potential for uniform aggregated buying points.
What happens when all buying is possible via a single point?
Why do corporations still atomize media buying across countries or even brands?
Economies of scale would dictate that adding more work to fixed contact point(s) is the way forward. This is a cataclysmic change in how digital media can be transacted, leading to significant change in how media will be bought.I see the rise of a global media hub, like a stock exchange, which will become responsible for transacting all digital programmatic buys. And if budgets are of a sufficient size, then pan-continental hubs will emerge covering APAC, EMEA and the Americas. This ultimately can be driven by a workflow process capturing budget, creative, target audience, timing and metrics.
Corporations have the opportunity to drive this to an in-house process, outsource to the new specialist shops forming, or transform current agency buying practices and thus transform today’s model.
Existing agencies can add extra value by helping with custom campaign content, providing user research, driving high-engagement formats or driving local private inventory sourcing -- things that can’t easily be done programmatically.
It is, in essence, the marketing renaissance period. We have been living in a disruptive ad model for more than 40 years, and have been increasingly ignorant of what advertising has become. The fact is that a vast majority of advertising is increasingly being ignored.
Today’s new model of advertising is to create targeted, contextually relevant content for an increasingly personal device world. We have a new model developing, where data is driving a new creative requirement process across global, local and niche audiences.
So the massive scale and automation that a central buy unit can provide will still need local content, creative and programs to drive the engine. The local agency and/or brand involvement doesn’t die -- it morphs to an overall planning, strategy and creative excellence role, all backed by results and data driven from a highly efficient and knowledgeable team and systems specializing in global media properties.
Thus, we see the rise of a marketing renaissance where creative excellence excels, media moves to an operational model grounded in results and away from a bulk volume discount model that is more akin to a banking system. Driving more efficiency in the media process could drive more money back into the creative process to allow fulfillment of more personalized, targeted marketing .
What is causing the inertia that stops this from happening?
1 - CEOs of large corporations still have not realized that the common global IT elements found in expense systems, HR systems, and travel systems are increasingly possible with media buying. There is no reason for all of the company to not use the same media-buying systems, globally forming an IT stack for marketing. It is essential that brand marketers control their software stack driving their business by owning the contracts.
2 - Historical control of media to a country level with brand managers and local marketing managers creates decision-making that is disaggregated. The massive strategic changes needed will not be decided by a babble of voices globally. When coal mines are closed and automobile factories are shut down, the local workers are not asked whether things can be changed to drive a strategic opportunity. CEOs of major corporations must drive the transformation.
3 - Agencies have little interest in revolutionizing a corporate business process. Inertia abounds when industries pass through the 6D.
4 - There are still many people running significant brand budgets who don’t understand the field they are playing in and are driven by reach and frequency metrics only. Do you really need the 1.4 billion campaign impressions in a 250 million population, when you are targeting a subsegment of this large population? Waste abounds.
5 - The TV-oriented media-buying process? Say no more.
6 - Lack of understanding of the daisy chain in costs from brand to publisher with the focus on continuing the current agency cost structure rather than revolutionary process change.
7 - Media-planning structures built on how many meetings were conducted with whom in the prior quarter and continuing the vendor testing mantra rather than data and creative testing in consistent tech media buy systems.
What Next For Brands: A New Model
What is needed is pioneers and leaders in major corporations to speak out and drive the change to an industry process that has long been dated but now has the ability to be transformed by technology and organizational change.
Brand leaders need to have the CEOs of corporations champion the change, in the same manner that supply-chain economics drive product cost and go-to-market processes which the CEO is intrinsically a part of. The same should apply to media buying for marketing. All elements of the cost chain should be understood and optimized to drive the maximum efficiency for the creatives that are overlaid to the execution process.
I have been asked what the brands and CEOs get out of this change, as it involves some degree of centralized model. Clearly, the company benefits from lower go-to-market cost. Brands benefit from experts in media and data analysis aligned to the creatives, which are driven by the product, country and brand teams. In essence, it becomes an insight-driven model that is aligned to a customer journey.
However, ultimately not everyone can be asked for change. Major change is not usually by consensus. The coal industry and the automobile industry experienced radical change as they were forced into it by government or business leaders. It’s not the people at the coalface that will change their own industry -- it’s the executive leaders.
So what are you going to do about it?
Brilliant! You could add impediment #8: the IAB wants to roll back the clock and pretend nothing is different. It's time for the ad industry to stop fighting disruption and embrace it instead.
Amazing! Actually there's a bit more to "advertising" then buying media and the idea that supposed refinements in media buying come first and are supported by creative is not going to fly. Also, TV is not hanging on by its fingertips where branding campaigns are concerned. Despite its problems---and what medium---digital for instance---doesn't have problems--- TV remains completely dominant, no one else is even close.
Returning to my first point, most branding campaigns start with the development of a marketing strategy and this includes how the brand is to be positioned, followed by what media---usually TV---will be the primary communications platform. Then ads, including actual or, to save money, story board-style mock up comercials are tested until one executional strategy is decided upon. Only then does media come into play and, let's face it, by then it's already been decided that TV is the main medium. In some cases the client will tolerate sugestions for alternative media mixes, perhaps involving a modest reduction of TV spending and more dollars invested in magazines or digital, but once the basic die is cast, media's main job is buying the required targeted exposures when and where they are needed.
It may well be that better ways of targeting consumers can be developed for TV, but only if the ad sellers are, somehow, completely crushed and on their knees to the point where they abandon bundling and multi-brand upfront time sales and give total control of their GRP inventories to programmatic buying desks. But so far nothing like that is happening----or about to happen. I'm not necessarily saying that the current template is an ideal situation---it isn't---but if we are talking about your typical TV branding campaign, not direct response or some other activity---we need to be relistic. Right now, the ad comes first, buying time comes second. Reversing that will be a very difficult task no matter how much "data" you have.
Digital online is only an aspect of the advertising mix. It is primarily a research tool like the yellow pages. Unable to create the type of noticing you get from disruptive media.
Nice article. The growith of programmatic TV is an interesting phenomena. TV will morph (eventually; very small right now).
Your explanation is rather good. However, what you describe is not democratic; it is completely oligarchic.
Kodak is not gone
Kodak were a $120bn business and are now $2bn business after emerging from chapter 11 in 2013. They are gone in the sense of what they were....
Great read, Gary! I believe there is a massive education process underway as brands get up to speed on nuances of programmatic media and also re-evaluate agency business practices (thank you, ANA).
Greater transparency and control should deliver new levels of business intelligence for marketing depts, which should lead to improved attribution models and ROAS. CEOs should be on board here, as you point out - as maintaining the status quo puts an organization at risk long-term.
However, implementing technology is the easy part - changing internal business processes and corporate culture remains the bigger challenge.
I worked AT&T and Ma Bell just after the breakup. Included was the "Yellow Pages" telephone book. Remember that? Now we have Google in the same position as 30 plus years ago. Google controls the new version of the Yellow Pages with online search, they control ad distribution with AdSense and AdWords, then the feeding company is DoubleClick. Now they are into hardwire our homes and business, into social media (Google +), video (YouTube) and electric cars of all things. Thank god they haven't got into the toilet paper business where we might see ads on each sheet square.
The point is, it is time for the courts to break up Google like Ma Bell and AT&T was. Even if this is done, they will have a dominate position in each category mentioned.
Who will agree on this point?
I'm not saying that it will happen for sure but the Feds have acted in the past to break up perceived media monopolies. In the early 1940s, RCA was forced to sell off one of its two radio networks with the result that its "Blue" network became ABC. In 1971, The FCC obliged the three TV networks to reduce their primetime schedules by an average of thirty minutes per evening to circumvent a monopoly on new program development and kicked them out of the TV syndication business and profit sharing pacts with producers. Can this kind of thing happen with digital? Interesting question, however in the two cases I cited the Feds were the bestowers of broadcast licenses to the affiliated stations and this was their mechanism for making the changes. For example, in 1971 the network stations in the top 50 markets weren't allowed to carry more than three hours of network TV fare nightly; the networks could offer all the shows they wanted but with this restriction, they had to do what the FCC wanted. How would a Federal agency handle digital media without being able to exert such pressure?
Outstanding piece on the future of advertising. When you take the story of Kodak and compare it to the publishing world today there are many similarities. The publishing industry is at the decision point (right now) where Kodak was at the beginning of the digital explosion. The risk for publishers today is that many of them continue to operate as a print model dabbling in the digital rather than become digital first and drive the change coming. I believe the Gannett organization has this vision with it's very aggressive model with acquisitions. Great piece!
Great article and certianly something that needs to be addressed more. I've been running into brick walls with most clients to understand that the old measurements and planning models simply wont work in today's audience first environment. Things like reach, frequency, and impressions are back end metrics and should not drive the planning and strategy. Audeince segments and creative/message need to be starting points. Its time to put big data to use and redefine the entire media mix model.
Eric, even if you are able to use "big data" to create a better way of determining the potential value of a particular consumer-----if reached----don't you care how often you expose said consumer to your ad campaign or what percent of all similar consumers you reach? If not, how do you come up with an ad budget? While better per-impression targeting---if feasible---is a good thing, it seems to me that especially for branding efforts but also for many direct response campaigns, that you would not treat anticipated reach and frequency patterns as a back end consideration but as a front end way to structure your audience attainment. I suspect that what you are really saying is that "impressions" and old fashioned reach and frequency patterns are no longer important because they use poor target definitions. Maybe so, maybe not. However, if the target was well defined would you still not care how many of your potential consumers were reached, when this was attained and how often your ads were "seen"?
The technology can be global, but there are still cultural differences that call for local and national approaches to media strategy, planning and buying. Even within the USA, there are differences depending all where you live. Systems could be globalized, but it helps to have people who understand nuances of different areas. The person can live anywhere in the world, but they need to know who the mores, tastes and culture of the people they are communicating to.
Also, distribution is still key. It's great to reach everyone in the world with certain characteristics, but if you can't deliver the product to them in their country (for whatever reason), what is the point.
FYI - TV will not die - it's just changing and the lines are blurring. People want to be able to watch content that interests them on their preferred device whenever it is convenient to them. Why do you think that Hulu, Netflix and Amazon Prime have become so popular and are running broadcast and cable TV shows along with theatrical movies and original content.