The moment of inflection has arrived – Kleiner Perkins announced that based on their analysis, advertisers are spending more on Internet ads than they are on television advertising. Clearly the ad business has left the “Mad Men” era far behind – but what trends should we be thinking about now?
While this is interesting in and of itself, there are unintended consequences to the rise of Internet ad spending. Television was a ‘mass’ medium – large audiences could be aggregated and pitched a common message. The Internet, in contrast, is a splintered place. It is entirely possible for advertisers now to target ever-smaller niches of potential consumers. Phil Kotler anticipated this in a well-known 1989 article “From Mass Marketing to Mass customisation”, and the trend has been picking up speed since, with the latest variant being “mass personalisation.”
The shifting bargain between advertisers and their target audiences – are we headed for a major backlash?
The bargain consumers made back in the days of conventional TV was that they would watch ads in order to get access to programming. It was pretty inefficient – nobody knew exactly what ad prompted what later buying decision, but that was about all there was. Today, the bargain has changed. In exchange for information about you, big Internet players (you know the usual suspects) give you goodies for free. The data collection makes a lot of people uneasy.
For instance, Unroll.me, a company that promised consumers an easy way to unsubscribe from mailing lists was blasted by users after the New York Times revealed that it had sold information about users’ Lyft receipts to rival Uber. The more or less unlimited collection of user information by information brokers (of which Unroll.me is a tiny player) has attracted the attention of government watchdogs. Indeed, the FTC made a strong recommendation that there be greater regulation of what companies could collect and share about their users.
Under pretty creepy scenarios, a person could find themselves discriminated against for personal habits or interests by firms buying information about their Internet behaviour. Such tags as “smoker in the house” or “diabetic interest” could conceivably be used by companies to make decisions as to which individuals they would do business with or not.
Wired magazine recently reported on a leaked memo from the Australian part of Facebook offering an advertiser access to information about teenagers – some as young as 14 – for targeted ads during moments of psychological vulnerability, such as when they were feeling anxious or depressed. An open letter to Mark Zuckerberg, Facebook’s CEO was penned by a series of not for profit groups that want to know what the platform is doing with respect to young people’s information. While legislators in the U.S. have been fairly laissez faire about all the tracking, those in Europe and elsewhere have not. An open question is whether we are on the brink of a meaningful backlash, or whether tracking and data utilization become just another part of business as usual.
The targeted fight back – the rise of ad-blockers
Much to the dismay of the companies who make money by selling information about individuals to advertisers, a technological revolt in the form of ad-blocking technology is starting to make a material difference to their model. Interestingly, the New York Times reports that ad-blockers on mobile devices is most advanced in Asia, because ads (particularly those that show video or otherwise draw on data) eat into expensive data plans. One source put the “lost” revenue due to ad blocking at $22 billion in 2015.
In the escalating battle between ad-blockers and anti-ad blocking technology, a statistic that I found interesting was the proportion of people who would abandon a site rather than allow it to serve them ads. According to the ad block report produced by PageFair, 90% of users reported that when they had encountered difficulty loading a web site with their ad blockers enabled. 74% of these users abandoned the site rather than ‘whitelist’ it.
This of course raises the question – if so many millions of people don’t want to see your ads, what are you doing wrong, key advertiser?
Business Insider suggests that one solution might be to “create and serve ads that people might enjoy”. Well, that’s an idea.
Meanwhile, is advertising the next big thing Amazon plans to disrupt?
Merchant John Wanamaker famously said (back in the day), “half the money I spend on advertising is wasted; I just don’t know which half”. Even with all the new tools in the digital marketing toolbox, measuring ROI continues to be a challenge.
Amazon has had an advertising business for years, but now it seems to be approaching a tipping point. Sir Martin Sorrell, the CEO of WPP, the world’s largest advertising group has gone so far as to say that Amazon’s foray into advertising is what keeps him up at night. After all, if a customer is searching on Amazon for a product, it is a small step to go from search to purchase. And that can have the effect of closing the loop that John Wanamaker so desperately wanted.
This, in turn, is affecting how advertising agencies operate – just as 30 years ago we didn’t have companies focusing on social media strategies, today just a handful emphasise product placements and advertising on Amazon. That is highly likely to change as the company becomes increasingly important to how consumers discover products and brands. Indeed, Sarah Hofstetter of the digital brand agency 360i observed, “Amazon is the new shelf space and if you’re not on it, you may be rendered invisible.”
Another case of advertising showing up where you least expect it.
And, if you think being marketed to on Amazon or Facebook is creepy, what about Burger King’s recent invocation of the Google Home device to promote its burgers. Using the “OK Google” catchphrase to turn the device on, Burger King put it to work to describe the ingredients in a Whopper burger. Initially, the device ‘woke up’ and took listeners to a Wikipedia page where it read out the list of ingredients. Google, apparently not amused, subsequently de-activated that feature of the device. Devices that televisions can speak to and which can themselves place orders for their owners opens up a whole new frontier in the interactions between consumers and the advertisers who want to promote to them.
Rita Gunther Mcgrath: Associate professor at Columbia Business School.
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