WASTE NOT, GROW NOT

What follows is authored by Bob Hoffman. It bears repeating here over and over again. Bob is author of the popular “Ad Contrarian” blog, named one of the world's most influential marketing and advertising blogs by Business Insider.  His recent book, "Marketers Are From Mars, Consumers Are From New Jersey" is a must read (buy it at Amazon). 

There's a restaurant in my neighborhood that's very popular.

You can go there any evening about 7 pm and I can predict with absolute certainty that every table will be occupied and there will be 80 people there. But I can never predict which 80 people it will be.

It's the same with toasters. I can tell you with absolutely certainty that tomorrow there will be 1,500 toasters sold in the United States. But I have no idea who will buy them.

Also tomorrow there will be about 500,000 t-shirts sold (I'm making these numbers up.) But who's going to buy them? No idea.

Marketers used to deal with these uncertainties in a reasonable but wasteful way. We would use experience and knowledge of the market to anticipate the type of person who would be most likely to eat at a restaurant, purchase a toaster, or buy a t-shirt. Then we would direct advertising at these types of people.

Because we used mass media, this media strategy had the disadvantage of being wasteful. Most people we reached would not be in the market for, say, a toaster.

But it also had three advantages: First, we would reach just about everyone who we thought would be looking for a toaster. Second, we reached an awful lot of people who we did not think were interested in a toaster, but were. And third, it reached just about everyone who would someday buy a toaster.

Advertising has changed. Now we believe we can predict exactly who will be buying a toaster tomorrow. We believe we can identify not just the most likely group of people, but the actual individuals.

All we have to do is follow them around the web and find out where they've been, collect the  data and soon we'll know when they're ready for a toaster.

The idea is to make individual targeting so precise that it replaces demographic likelihoods as the basis for media strategy.

So far this has been a spectacular failure. Each of us is currently inundated with dozens, if not hundreds, of online messages a day -- banner ads, emails, social messages, etc -- that are assumed by  marketers to be particularly relevant to us and reflective of our individual purchasing needs and behaviors. We pay almost no attention to any of them. They are essentially invisible.

The math tells the story. A generous number for display advertising is that it generates 8 clicks in 10,000 exposures. A generous number for Twitter interactions is 4 engagements in 10,000. It's hard to get much closer to zero.

We are thinking like direct marketers, not brand marketers. We are ineffectually using "precision targeting" to try to engage the perfect individual, and by eschewing mass media we are harming our brand in three ways.

1. We are not reaching those within our target segment who are not active on line or whose data we haven't mined.

2. We are not reaching the unexpected toaster buyers, of whom there are legions. 

3. We are not building a brand. Mass media advertising may be "wasteful" by the nearsighted standards of digital and direct marketers. However, some very wise people have pointed out that the nature of what we call "waste" may, in fact, be the very stuff that brands are built on.

Think about it this way. In 2002, Apple spent tens of millions of dollars in mass media to advertise the iPod. There were hundreds of millions of people who were exposed to iPod advertising who had absolutely no interest in an iPod. After 14 months, advertising had reached hundreds of millions of people, but Apple had sold 600,000 iPods.

Many marketers would call the enormous amount of money that Apple spent promoting the iPod to the uninterested "waste." But was it?

Today hundreds of millions of people who had no interest in an iPod own iPhones. Isn't it more than likely that the iPod advertising of 2002 had significant impact on the iPhone buyers of 2007 and beyond?

• Didn't it make the Apple brand more appealing?

• Didn't it raise interest in mobile devices, particularly Apple mobile devices?

• Didn't it set the stage for the phenomenal success of Apple in the mobile device category, that made Apple the most successful company on Earth?

Or think about it this way. Why have almost all the brands in your supermarket been built with "wasteful" mass media advertising and none with the "precision targeting" of online advertising?

Understanding business is understanding that markets don't move in straight lines, people don't think in straight lines, advertising doesn't work in straight lines.

If you're a brand marketer and you want to grow, you have two choices. Be wasteful or be invisible.

FACEBOOK'S BAR CHART FROM HELL

I could not resist the opportunity to copy and paste this post from Bob Hoffman's Ad Contrartian blog.

Facebook has decided that it no longer wants to be in the business of selling clicks. Instead it wants to be in the business of selling reach and frequency, just like the grown-ups.

Of course, this is a cruel joke because reach and frequency mean nothing if the ads are invisible, which they are on Facebook.

This bar chart (to actual scale) does a pretty good job of explaining why they'd rather sell reach and frequency than clicks.




(C) 2012, The Ad Contrarian

For every 10,000 ads they deliver, Facebook gets 5 clicks. What would you want to sell?

WE KNOW WHO YOU ARE

It's not a game any more.

From an article last week in The Wall Street Journal ...

"Some of the most widely used apps on Facebook—the games, quizzes and sharing services that define the social-networking site and give it such appeal—are gathering volumes of personal information.

A Wall Street Journal examination of 100 of the most popular Facebook apps found that some seek the email addresses, current location and sexual preference, among other details, not only of app users but also of their Facebook friends. One Yahoo service powered by Facebook requests access to a person's religious and political leanings as a condition for using it.

The popular Skype service for making online phone calls seeks the Facebook photos and birthdays of its users and their friends......a user's friends aren't notified if information about them is used by a friend's app.

An examination of the apps' activities also suggests that Facebook occasionally isn't enforcing its own rules on data privacy. "

With thanks to Bob Hoffman at Hoffman Lewis for pointing this out in his blog, The Ad Contrarian.

OCCUPY THE WEB!

It's been 10 years and we have not yet come close to realizing the hope for change that the internet was supposed to provide markets and brands around the globe.

Have we been overly hyped? Are we searching for something that simply does not exist and likely never will?

The rant that follows was borrowed, with thanks, from Bob Hoffman of Hoffman Lewis fame. I urge you to read it and bookmark a link to his blog....

I've been in the ad business a long time. But I've never experienced a more bewildering period than we have been through in the past 10 years.We thought we knew what this decade was going to look like.

We thought we knew the script. Just about everything we thought we knew has turned out to be wrong. We thought that interactivity would make advertising far more engaging. We thought that traditional advertising was dead. We thought that TiVo was going to cripple TV. We thought the PC and the television were going to converge. None of this has happened.

Interactivity has not made advertising more engaging. In fact, interactivity is mostly a rumor. Display ads have a click-through rate that is less than 1 in a thousand. While consumers have shown substantial interest in using the web to search for things they've already decided they're interested in, they have shown almost no interest in interacting with the ads we produce.

In other words, the web has proven to be far more effective at fulfilling demand than at creating it.Anyone who still thinks traditional advertising is dead probably didn't watch a football game this weekend. I don't think I have ever seen more commercial messages squeezed into 3 1/2 hours.

TiVo's impact on television viewing and consumer behavior has been a weighty topic inside the marketing beltway but has been a non-event to consumers. While about 40% of Americans now have some sort of DVR, those who own one only watch recorded material about 5% of the time. What's more, owning a DVR has not changed their purchasing behavior one whit.We are essentially no closer to the convergence of TV and the PC than we were ten years ago. We keep hearing that it's right around the corner, but we never seem to get to the corner.

The latest stats I've seen say that over 98% of video is still viewed on a television.The advertising landscape has been riddled with inconsistencies and cross-currents. Print advertising has certainly suffered. But television advertising has been booming. In 2008, as TV ad sales dropped significantly, it looked like the pundits were correct and that advertisers had lost confidence in traditional advertising. But now with TV ad sales growing and viewership at its highest point ever, it looks like the pundits were wrong and 2008 was about the recession.

Online advertising has been hit and miss. Search has certainly been effective, but display ads -- despite impressive sales growth -- have had a very discouraging record of effectiveness.Social media has been a huge worldwide phenomenon, but social media marketing still has to prove it's a sales builder and a brand builder.

With 60% of people who "friend" or "like" a brand saying that their primary motivation is to get something for nothing, it is hard to take seriously the argument that people are engaged in social media because they want to have "conversations" with brands. And we're still waiting for the first major consumer-facing, non-web-native brand to be built primarily by online advertising.

You would think that the gulf between our expectations and the facts would give us pause. But no such thing has happened. Our delusional belief that we understand what is going on has not been weakened at all. If anything it has strengthened. We are just as certain in our prognostications, just as arrogant in our pronouncements, just as sneaky in our data.
We tell our clients half the truth half the time.I am dismayed every week by how much of what is now accepted wisdom in the ad business is nothing but legend. I am disheartened by how little familiarity people in advertising have with the particulars. I am dumbfounded by how tolerant most clients are of false goals and how little appetite they have for the facts.

Perhaps the most confusing part of the past 10 years is not how far reality has veered from expectations, but how reluctant our industry is to validate its assumptions.