December 18, 2014

Ad Industry Is The Web's Lapdog


We continue our holiday reruns today with a piece from last spring.

One of the important responsibilities of the advertising industry is to be an "honest broker" between our clients and the media.

We have failed miserably.

While we have been aggressive about detailing the woes of traditional media -- the decline of the newspaper business; the problems of radio; the movement away from network television -- we have glossed over or completely ignored the shortcomings of the web as an advertising medium.

We have failed to educate our clients on the serious deficiencies related to web advertising:
It is clear why the ad industry has been complicit with online media in covering up these issues -- the web has become a gold mine for agencies.

WPP, the world's largest agency network, currently derives about 1/3 of its revenue of $16 billion from digital work and is aiming for 45% to come from the web within a few years.

Not only is income from digital sources rising, smart agencies have discovered how to squeeze more profit from this income than from traditional advertising.

For one thing, online work is never done. A website is never finished, a social media or content program always needs feeding, and display advertising always needs optimizing. If you're charging by the hour -- and your profit is built into your hourly rate -- more work always means more profit.

But when you're doing traditional work and you're on a monthly retainer or fee, more work means less profit.

The ad industry has become the web's lapdog -- exaggerating the effectiveness of social media marketing, ignoring the abominable click-through rates of "interactive" advertising, glossing over the fraud and corruption, and becoming a de facto sales arm for the online ad industry.

Self-interest has come into conflict with responsibility.

Guess what's winning?

December 17, 2014

End Of Year Reruns


It's the time of year when lazy-ass bums don't feel like working. So, as is customary, I am filling the blog for the rest of the year with stuff from 2014 that I liked. Here's a 2-part series on social media we did in January:

The Slow Painful Collapse Of The Social Media Marketing Fantasy

PART 1

It was going to change business forever. It was going to make traditional advertising irrelevant. It was going to revolutionize marketing.

It was social media marketing. And it's been the biggest disappointment since the NFL hired referees.

While advocates for social media still cling to the wreckage of "the conversation" and continue to hound us with apocryphal tales of social media magic, dispassionate observers are starting to realize what a delusion the whole theory of social media marketing has been.

The idea that consumers were enthusiastic about having conversations about brands online, and they would activate their network of friends and followers to share their enthusiasms and create a socially transmitted tsunami of sales has proven to be deeply fanciful.

It turns out that the average consumer has a lot more on her mind than conducting online conversations about fabric softener. And the ones that do seem to have no ability to generate enthusiasm in others.

While people with a financial or ideological stake in social media continue to propagate the fantasy, those annoying, troublesome things called facts keep popping up to undermine their careless assertions.

The first crack in the wall came in 2011 when the largest, boldest experiment in social media marketing ever attempted -- the Pepsi Refresh Project -- was exposed as a nasty failure that seems to have cost the brand 5% of its market share, which it has never recovered.

Then in September of 2012, Forrester Research reported that...
"Social tactics are not meaningful sales drivers. While the hype around social networks as a driver of influence in eCommerce continues to capture the attention of online executives, the truth is that social continues to struggle and registers as a barely negligible source of sales..."
A few months later, a story in The Wall Street Journal reported on a study IBM had done on the effect of social media on Black Friday sales. While sales were great, the social media contribution to sales were essentially nonexistent.

IBM reported...
Shoppers referred from Social Networks such as Facebook, Twitter, LinkedIn and YouTube generated .34 percent of all online sales on Black Friday, a decrease of more than 35 percent from 2011.
The Journal commented...
"...there’s one notable under-performer in the online shopping frenzy: social media."
But perhaps the most damning report on the negligible influence that social media marketing has on sales was issued a few days ago by McKinsey & Company.

This sentence from the report says it all:
“Email remains a more effective way to acquire customers than social media - nearly 40 times that of Facebook and Twitter combined."
We're talking about email here, not the Super Bowl. Email 40 times more effective than Facebook and Twitter combined? Now that's frightening.

The social media fantasy is in a death spiral. Social media marketing is no longer taken seriously as a sales builder by anyone with a functioning cortex.

Social media marketing will continue to be strangely popular and sporadically effective in some small niche categories.

But when it comes to serious brands, in the vast majority of cases it is evolving into just another cost of doing business.

PART 2

It seems like only yesterday we couldn’t turn on the TV, open a magazine, or go to a website without someone exhorting us to “join the conversation.”

“The conversation” was the physical manifestation of the marketing industry’s fascination with social media. The idea was that people were highly interested in our brands and would be eager to chat and share their enthusiasms on line with other people.

The philosophical seeds of this conviction were planted in the mid-1990’s when it was postulated that the “interruption model” of advertising had run its course. 

The theory went something like this: consumers were no longer responsive to advertising messages like TV spots, radio spots, and magazine ads which interrupted their activities. Instead, marketing was transitioning into a period in which the “permission model” would dominate.

The “permission model” posited that in order to be effective, marketers had to stop bothering people with advertising, and instead gain their permission to market to them.

The way you got permission was to engage consumers with useful, interesting messages (currently known as “content”) that gave consumers value instead of sales pitches. If you did this, they would trust you, like you better, and permit you to market directly to them. In marketing terminology, they would “opt in” to your marketing programs.

Best of all, they would share their passion for your brand with their network of friends and followers who would, likewise, share with their network. A multiplier effect would be born.

There was only one problem with this wonderful proposition. It misinterpreted consumer behavior by substantially overestimating consumers’ fervor for brands, and concomitantly misjudging consumers’ inclination to share their presumed fervor.

Believers in this ideology assumed that a person's use of a product was a demonstration of enthusiasm for the brand. Sadly, in the vast majority of cases, it is merely an indication of habit, convenience, or mild satisfaction. It is not proof of devotion or enthusiasm.
 
Regardless of the time, energy and money we spend “differentiating” our brands, most people see very little difference between our brand and our closest competitors. While there are some brands that people do have great loyalty to, and some categories that people are truly interested in, these are the rare exceptions. In most cases people will change brands with very little bother if it turns out to be convenient or otherwise beneficial.

Most people will gladly switch from Skippy to Jif if they can save a buck or two. If the ballpark doesn’t serve Coke, most people will happily return to their seats with a Pepsi. 

The idea that social media would become a channel in which consumers would share their strong enthusiasms by having “conversations about brands” has turned out to be largely a delusion.

Most brands are finding that their social media programs are more time-consuming, more expensive, and less capable of driving sales growth than was promised. Consequently, they are abandoning the “permission model” and reverting to the “interruption model” in their online advertising.

You can see this most clearly on Facebook. Facebook calls itself a social medium, but its advertising model is good old-fashioned paid advertising plastered all over the page. Compare the number of paid ads you see on your Facebook page with the number of "conversations about brands." 

YouTube calls itself a social medium but it sticks pre-roll (mostly recycled TV spots) everywhere it can. 

The reason is clear: marketers are finding that they can get more value out of these websites by treating them as avenues for advertising, not conversations.
 
And, just a reminder, Facebook, YouTube, Twitter, etc., don't make money from us having conversations about yogurt. They make money the old-fashioned way -- they sell ad space.

Social media are quickly evolving into just another channel for delivering traditional interruptive advertising.

It is also not surprising that the social media lobby has learned another lesson from traditional paid advertising. When you point out to them that they're not very good at generating sales, they default to the universal excuse for failed advertising -- it's not about sales, it's about branding. Whatever the hell that means. 

Social media is not going to die or go away. It will continue to grow. But the fantasy of consumers having conversations about brands and sharing their passion for brands -- and the claim that this will replace or surpass traditional paid advertising -- is simply collapsing as the evidence rolls in.

The “conversation” was a nice idea. It would be lovely if consumers were as eager to share their enthusiasm for our brands as we are. Sadly, they have other things on their minds.

It turns out that “the conversation” has been mostly a monologue.

December 15, 2014

Advertising's Arrow Of Progress


One of the interesting aspects of advertising that we have explored from time to time is whether we should think of it more as art or science.

With the growth in the use of mathematics, metrics, and data, it certainly appears like certain aspects of advertising are becoming more "scientific."

However, I am not convinced that advertising as a whole is any more scientific than ever.

From a practical standpoint, there is one factor that clearly differentiates art from science. In science, there is an "arrow of progress." By this I mean, science points in a direction and progresses toward that end.

If you have high blood pressure today, you are more likely to be successfully treated for it than you were 50 years ago.

If you buy a new car, it is more likely to last longer, be safer, work more reliably, and be more efficient than it was 50 years ago.

If you have a personal computer, it can do more things, more effectively, more quickly and more reliably than it did 50...wait a minute. We didn't have personal computers 50 years ago.

The point is, science provides us with technological progress by degrees that builds on itself and improves stuff.

Art, on the other hand, does not have an "arrow of progress." It's not supposed to. Art is about human interpretation -- emotions and aesthetics -- not ongoing improvements. You want to improve on the Mona Lisa? Good luck.

There is no way to talk about whether the work of Roy Lichtenstein represents "progress" from DaVinci. You may prefer one to the other, but to speak about progress is meaningless.

Similarly, is there an arrow of progress from Beethoven to Gershwin? Or Shakespeare to Updike? One may certainly have influenced the other, and styles certainly change, but talking about "improvement" is moot.

That doesn't mean art isn't inventive or innovative. Or that older forms don't influence newer forms. It just means that art moves unsystematically and, unlike science, we don't judge new art based on having "improved upon" old art.

So the question of whether advertising should be considered more science than art rests on answering this question: Is there an arrow of progress? In other words, is advertising more effective than it used to be?

If advertising contains a growing body of useful knowledge that has lead it to become more effective, it should be considered a science. If effectiveness has not improved over time, than it is probably more an art than a science.

Exploring the literature of advertising over the past ten years, one would have to conclude that advertising is less effective, not more. The literature is rife with assertions and research that conclude that advertising effectiveness has diminished over time.

There are certain elements of advertising that seem to utilize scientific principles more regularly -- direct response advertising, media planning -- but there isn't much in the way of conclusive evidence that there is an arrow of progress.

In fact, despite all the hoo-hah over the precision targeting of online advertising, behavioral targeting seems to be only marginally more effective than no targeting at all. And it is not at all clear that this marginal effect is even due to targeting. It may well be that the reason precision targeting appears to be more effective is that the people who are being targeted have been so carefully selected that they are the most natural candidates for buying the product, regardless of advertising.

But even if we stipulate that certain aspects of advertising have become more scientific, I would still contend that the overarching goal of advertising -- the creation of successful brands -- is no nearer to a scientific practice than it was when I entered the advertising business 40 years ago.

Some would contend that the emergence of interactive media, i.e., the web, has led us to a new understanding of brand building that requires electronic co-creating and community building with consumers. The problem with this argument is that a stroll through any supermarket in the country fails to uncover any significant brand of anything that has been built through either online advertising or social media.

From what I can see, despite all the technology we have applied and all the words that have been written, we have uncovered no new generally accepted principles about the nature of brand building or consumer behavior.

Most marketers are still thrashing around in the dark trying to either build a brand or maintain one.

Regardless of the growing veneer of scientific processes, there is no arrow of progress that has helped us understand how to create more successful advertising.