Running Shoes, Cheese Doodles and Beer
By Ron Elwell, CEO and Founder of Swoop
I’ve been noodling on this post for a while, and I decided that the launch of our service to the public was the perfect time to sit down and polish it off. First let me give full credit to Bob Gilbreath for surfacing this idea in one of his blog posts. You can find his full post here: http://www.marketingwithmeaning.com/2011/03/04/how-new-media-is-eroding-the-mass-interruption-model/
Back in the late 1800’s John Wannamaker uttered the famous words “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” Over 100 years later we have had innovations like the car, radio, television, powered flight, space travel and the Internet, yet this is an axiom that is still held to be true by most marketers. Given all the advances in technology and the tools at our disposal, doesn’t this represent a complete and abject failure of the advertising industry? How can it not? If we can really target consumers, if we can really understand the types of goods and services that you are most likely to be interested in, and if we can really forecast when you will be interested in them, then not knowing which half is wasted is inexcusable. Sure, the online video guys will tell you the waste is in TV, the TV industry will tell you it is in online display, and the online display people will tell you it is in search. But that is just so much parochial finger pointing.
One of the amazing trends in our industry is the constant stream of forecasts of tremendous growth. Gartner expects Global Mobile Advertising to grow from $3B in 2011 to $20B in 2015. Emarketer tells us that online advertising in the US will grow from $26B in 2011 to $50B in 2015. And on and on. If you believe all these forecasts then aren’t they really telling us that in 5 years we will be wasting another $100B of Marketers dollars? Is that really the best we can do? Is that really fulfilling the promise of better understanding of the consumer, better targeting and more innovative advertising?
Let’s step back a minute and look at what is really happening to advertising spend. To do this I prefer to look back at recent history since this is the best predictor of future behavior. Over the last 5 years, from 2006 to 2011, overall Global Advertising spend has been relatively flat, growing from $392B to $411B, a growth rate of less than 1% a year. Yes, we have seen good economic times and bad economic times during those 5 years, but cycles are typical in any 5 to 10 year period. So clearly the Marketers are speaking with their pocketbooks. Even with the advent during that time of on-line video, social media, mobile advertising, iPhones and iPads, and the continued explosive growth of the Internet, they have not been willing to pour even more dollars down a black hole of 50% waste. In fact, all we have seen over the past 5 years is a shift in spend from Print to Online, with print decreasing by $39B and online increasing by $37B. The shift has simply followed consumer consumption habits as I now read my newspaper and magazine online (in whatever internet form they now take). The online ad display format looks very much the same, and the targeting, be it hyper local, lifestyle or contextual is also very similar to what print has been doing for the past several decades.
The chart below shows total Global Ad Spending by Category in over the past 5 years.
(Quick Quiz; How many of you knew that total Print Advertising spend was still 39% greater than all Online spending?)
So what’s really changed?
Well, when you strip away all the hype and look at the numbers…not that much. And unless we do a better job of delivering results it means we will continue to see a modest shift in spend between Print and Digital and overall anemic growth in the total market spend.
So what does it mean if we actually live up to the hype? What happens if we really do find a way to deeply engage with a consumer at the point in time that they become in market for a product or service? What happens if, as a marketer, I can be invited into the consumer’s life to help them make an informed decision? What happens if we stop wasting at least a large proportion of that 50%? Will that mean we finally achieve that dramatic growth that has been forecast? Well, here’s the dirty little secret, if we can actually accomplish all of this, if we actually do our job, the overall spend will GO DOWN. Think about it, when I traded in my gas guzzling squirrel killer for a nice eco-friendly sedan my gas bill was cut in half. I still go everywhere I want to go and do everything I want to do. What I don’t do is drive twice as far. The money I save gets spent on important things like new running shoes, Cheese Doodles and beer. So if we can deliver more effective advertising what do you think the Advertisers will do? Will they continue to spend as much, or will they take those savings and invest them in R&D and productivity tools, or just drop it to the bottom line?
So here we sit in our office in Cambridge, MA. After 12 months of hard work by a lot of people a whole lot smarter than I am, we are excited to launch our new service. What you see today is just the tip of the iceberg, but you will see how we can uncover billions of serendipitous moments of deep contextual relevance, all within existing content. For our Publisher Partners we provide incremental content and utility for their users. For Advertisers we invite consumers, at the moment of declared intent, to have a conversation at an unmatched level of engagement. And for consumers we provide timely and relevant access to information they may not have known was even available, or would have needed to search to find. We believe that this invitation driven engagement is the most valuable interaction a brand can have with a user. We believe it so much we deliver only engagement driven, pay for performance campaigns. We believe it so much we think that in the future we will be able to deliver better results, at lower spend, to allow Marketers to know which half of their Advertising Spend is wasted and ultimately lower their overall spend.