A version of this piece was published in Marketing in 2008
About this time of year, it’s traditional to gasp in amazement as online continues to absorb a still greater share of the UK’s advertising spend. The Internet Advertising Bureau announce another notch on their bedpost, analysts start trying to identify the winners and losers, and the advertising community continues to polarise into those who are seizing the opportunity with both hands, and those who are sticking their fingers in their ears, closing their eyes and humming loudly to themselves.
In the US, where internet advertising grew 18.9% in 2007 (the overall ad market grew 0.6%), publishers are looking to the UK to understand our experience here. Share of total advertising spend here is double what it is in the US, and relative to population, the UK online advertising market is the biggest in the world.
So given the strong base built over the past five years, it’s all the more remarkable that the new figures published this week by the IAB have shown yet another substantial rise in online budgets.
The market grew by 38% in 2007, only slightly behind its 2006 growth of 41%. But this hides the fact that in volume terms the market actually expanded faster – by £797m in 2007 compared to £649m in 2006.
Search held its share of online, increasing 38%, and the IAB’s numbers show that market to have reached £1.6bn. Google makes up 79% of that, their growth surging ahead of the market and continuing to consolidate the lead that they’ve successfully established in Europe.
The big success story is display advertising, which grew 31% in the year – boosted by the continued boom in ecommerce.
The online market has continued to confound the ability of the industry’s Nostradamus wannabees – with both the major media agencies and the big analysts once again significantly underestimating the real rate of growth.
So what’s driving this unparalleled expansion?
It’s easy to look at the micro here. Automotive up, recruitment up, FMCG up. But these are symptoms rather than causes of this extraordinary growth – there are two, more fundamental, factors at play.
First, internet advertising is a global market.
Whereas technologies (HDTV, DAB radio, colour newsprint) in traditional media tend to emerge in single geographies and expand on a territory by territory basis, internet technologies can emerge in any place in the world, and spread overnight across the planet.
This applies as much to applications (skype, BitTorrent) as it does to media properties (YouTube, Craigslist) and hybrids of the two (Facebook) – and it means that the internet market has a global mindset.
It’s often assumed that internet companies regard traditional media businesses as old-fashioned. In fact, they often regard them as parochial – slower, strategically cumbersome and competitively less challenged.
And this is the second factor. This openness, this bigger worldview has led to a hypercompetitive environment, where evolution and revolution happen before our eyes. It’s a business that’s attracted ambitious, creative and driven people whose interest is sparked by the disruptive effect of their businesses – finding new ways to do things, often in ways that firstly undermine and then frontally assault the status quo.
eBay didn’t copy Sothebys, Google didn’t copy Yellow Pages, Craigslist didn’t copy Loot.
So we shouldn’t expect incremental change.
The internet media market has challenged the status quo not least because it is more than just an advertising market. It’s a distribution medium, a channel between people and a consumer research lab, and those who model its revenue potential on the basis of simple advertising end up looking merely parochial.
UK marketers are leading the world in their adoption of digital, both as a marketing channel and as a channel to market. But online advertising reaching £2.8bn in 2007 is a symptom of something much bigger – an indication that perhaps we still haven’t yet really scratched the surface.
Thursday, April 3, 2008
Thursday, March 27, 2008
Online retail and the struggle for brand control
A version of this piece was published in Marketing in 2008
In 1921, Wolseley Motors commissioned the architect William Curtis Green to create an opulent and impressive showroom in the heart of Piccadilly, next door to the Ritz. In doing so, they anticipated a very modern trend – a drive to control the environment in which their marque was displayed, and a desire to create a direct line of contact with the consumer.
Then as now, the motor industry sold through networks of independent dealerships – an arrangement which enabled them to scale rapidly to achieve national distribution without bearing the huge capital cost of establishing local presence. But lack of control of the retail environment created a particular challenge for Wolseley, which was a premium brand, and the Piccadilly store was their response.
Fast forward eighty years, and brands face the same challenges today.
The internet has created a new distribution channel, one where retailers have multiplied and competition is intense. But unlike in the physical retail environment, in-store merchandising skills are still in their infancy, and online retailers are often criticised for poor images and inaccurate product information.
Brand managers have been slow to get to grips with the new demands of the online retail space, and the lack of effective merchandising continues to do nothing to discourage price competition.
And whilst brands are often insufficiently proactive about their brands’ representation in online retail, price comparison websites add further fuel to this commoditisation, encouraging consumers further to value price above other elements of the service package.
So where does this leave brands online?
Ironically, back where Wolseley started in 1921. Brands like Panasonic, Nike and Levi’s have all opened stores online, selling direct to consumers.
In doing so, they regain control of their brands – displaying them online as they want them displayed, and at the same time creating direct contact with consumers that they can then use for eCRM programmes, building aftersales support, cross-selling initiatives as well as communities of their users.
These sites are rarely at the sharp end of price competition – their role is a different one. They carry a comprehensive range of branded products, rarely available in a retailer, and more detailed information about products – allowing customers to look more closely, even if subsequently they complete a purchase from a different retailer.
But it isn’t just online that manufacturers have pushed into direct retail operations. The much-praised Apple stores have built on the brand’s design heritage to create an immersive experience for consumers – a place to bathe in the brand and to love it. Sony have launched their concept store in Heathrow’s new Terminal 5, where their ‘technology garden’ will give cash-rich time-rich passengers hands-on contact with the latest kit. And BMW in Munich have just opened BMW World, a glass and steel landmark building that incorporates restaurants and a café – but most particularly, a special service for customers as they collect their new vehicle.
As digital channels grow in importance as distribution and marketing channels, they tend to push manufacturers towards commoditisation, emphasising the directly comparable features of products – primarily their functionality and their price.
But what Sony, BMW and Apple have shown is that the key to fighting commoditisation is in amplifying the distinctiveness of their brands, through design, proximity and experience. To do this, they’ve brought together the different channels, and used them to complement one another.
In doing so they’ve moved the debate on from whether the internet is a branding medium, valuing instead the part each channel can play in the customer’s overall interaction with the brand. To these brand innovators, the online/offline, retail, advertising and direct channels are all opportunities to make the brand manifest to the consumer, and by allowing the consumer to choose where/when to play with the brand, they’re responding directly to customer demand.
It didn’t work for Wolseley, whose showroom is now a restaurant. But its many modern imitators are testament to the continued importance of managing the retail experience for brands – something most brands still struggle with in digital.
In 1921, Wolseley Motors commissioned the architect William Curtis Green to create an opulent and impressive showroom in the heart of Piccadilly, next door to the Ritz. In doing so, they anticipated a very modern trend – a drive to control the environment in which their marque was displayed, and a desire to create a direct line of contact with the consumer.
Then as now, the motor industry sold through networks of independent dealerships – an arrangement which enabled them to scale rapidly to achieve national distribution without bearing the huge capital cost of establishing local presence. But lack of control of the retail environment created a particular challenge for Wolseley, which was a premium brand, and the Piccadilly store was their response.
Fast forward eighty years, and brands face the same challenges today.
The internet has created a new distribution channel, one where retailers have multiplied and competition is intense. But unlike in the physical retail environment, in-store merchandising skills are still in their infancy, and online retailers are often criticised for poor images and inaccurate product information.
Brand managers have been slow to get to grips with the new demands of the online retail space, and the lack of effective merchandising continues to do nothing to discourage price competition.
And whilst brands are often insufficiently proactive about their brands’ representation in online retail, price comparison websites add further fuel to this commoditisation, encouraging consumers further to value price above other elements of the service package.
So where does this leave brands online?
Ironically, back where Wolseley started in 1921. Brands like Panasonic, Nike and Levi’s have all opened stores online, selling direct to consumers.
In doing so, they regain control of their brands – displaying them online as they want them displayed, and at the same time creating direct contact with consumers that they can then use for eCRM programmes, building aftersales support, cross-selling initiatives as well as communities of their users.
These sites are rarely at the sharp end of price competition – their role is a different one. They carry a comprehensive range of branded products, rarely available in a retailer, and more detailed information about products – allowing customers to look more closely, even if subsequently they complete a purchase from a different retailer.
But it isn’t just online that manufacturers have pushed into direct retail operations. The much-praised Apple stores have built on the brand’s design heritage to create an immersive experience for consumers – a place to bathe in the brand and to love it. Sony have launched their concept store in Heathrow’s new Terminal 5, where their ‘technology garden’ will give cash-rich time-rich passengers hands-on contact with the latest kit. And BMW in Munich have just opened BMW World, a glass and steel landmark building that incorporates restaurants and a café – but most particularly, a special service for customers as they collect their new vehicle.
As digital channels grow in importance as distribution and marketing channels, they tend to push manufacturers towards commoditisation, emphasising the directly comparable features of products – primarily their functionality and their price.
But what Sony, BMW and Apple have shown is that the key to fighting commoditisation is in amplifying the distinctiveness of their brands, through design, proximity and experience. To do this, they’ve brought together the different channels, and used them to complement one another.
In doing so they’ve moved the debate on from whether the internet is a branding medium, valuing instead the part each channel can play in the customer’s overall interaction with the brand. To these brand innovators, the online/offline, retail, advertising and direct channels are all opportunities to make the brand manifest to the consumer, and by allowing the consumer to choose where/when to play with the brand, they’re responding directly to customer demand.
It didn’t work for Wolseley, whose showroom is now a restaurant. But its many modern imitators are testament to the continued importance of managing the retail experience for brands – something most brands still struggle with in digital.
Thursday, March 20, 2008
Privacy, not just a worry for people wearing tinfoil beanies
A version of this piece was published in Marketing in 2008
From Whitehall losing CDs containing the child benefit records of 25 million citizens, to customer databases being hacked, every week seems to bring another story of incompetence or criminality in the data world.
Everywhere we go, we leave a data cloud behind us. From shopping habits to tube journeys, little bits of information track our behaviour, whilst an estimated 4.2 million cameras watch our indiscretions.
When we move online, we bask in the assumed privacy it brings us. People act out fantasies, masquerading as members of the opposite sex. Vast amounts of porn are watched, and otherwise responsible people download illegal copies of Hollywood movies.
But we also value our privacy for legitimate purposes. We talk to our friends online, and prefer of these conversations to remain private. We give our credit card details to websites when we buy stuff. And as Sir Tim Berners-Lee, inventor of the Web said this week in an interview with the BBC,
"I want to know if I look up a whole lot of books about some form of cancer that that's not going to get to my insurance company and I'm going to find my insurance premium is going to go up by 5%”.
Because once we get online, the data cloud gets denser. Every search we make, web page we view, someone is tracking our interest. When in 2006, AOL released the search behaviour of 650,000 users, it caused an outcry. Few had realised just how much information was routinely kept by online companies – every search made by these users was suddenly revealed, and it made fascinating reading (if you’re a bit nosy and had time on your hands).
Berners-Lee was responding to a question posed about Phorm – the behavioural targeting company that’s just signed a deal with Virgin, Talk Talk and BT.
Behavioural Targeting (confusingly also know as BT) is the practice of gathering data about what people do online, in order to make decisions about what sort of content then to display to them.
So a media owner tracks visitors to their site, and this enables them to serve ads for gardening products to people who have visited the gardening section of the site, even when those people are subsequently looking at the finance channel.
Until now though, BT has been limited to tracking only behaviour on websites that had the tracking code installed – and with competing systems that gives each quite limited coverage.
Phorm is different though. Through a deal with ISPs, Phorm watches everything you watch, and takes notes. If you look at gardening content, it adds you to a gardening segment of its users, and enables interested advertisers to target you later. But Phorm differs from other behavioural systems in one other major way. They don’t keep any data.
The search you make, or site you look at, allows them to segment you as a user. But Phorm discards the information it scanned to conclude this – it doesn’t need it anymore. So in some senses, Phorm is a lot less worrying than Google, Yahoo and Microsoft, who keep your search history for between 13 and 18 months.
Most of us value our privacy, guarding it both from crooks and unwarranted intrusion from government. But privacy is also an area where you find a lot of people wearing tinfoil on their heads, convinced the CIA is reading their brains using microwaves, and this can make it harder for the rest of us to tell what’s really important to worry about.
So Phorm have opened a can of worms. It may be that what they do is in reality less invasive of privacy than many of the practices its critics object to. But this is ignored because Phorm are a good target, and they’ve helpfully stuck their head above the parapet. And in doing so they may have successfully spread consumer concerns about privacy beyond just the tinfoil lobby.
From Whitehall losing CDs containing the child benefit records of 25 million citizens, to customer databases being hacked, every week seems to bring another story of incompetence or criminality in the data world.
Everywhere we go, we leave a data cloud behind us. From shopping habits to tube journeys, little bits of information track our behaviour, whilst an estimated 4.2 million cameras watch our indiscretions.
When we move online, we bask in the assumed privacy it brings us. People act out fantasies, masquerading as members of the opposite sex. Vast amounts of porn are watched, and otherwise responsible people download illegal copies of Hollywood movies.
But we also value our privacy for legitimate purposes. We talk to our friends online, and prefer of these conversations to remain private. We give our credit card details to websites when we buy stuff. And as Sir Tim Berners-Lee, inventor of the Web said this week in an interview with the BBC,
"I want to know if I look up a whole lot of books about some form of cancer that that's not going to get to my insurance company and I'm going to find my insurance premium is going to go up by 5%”.
Because once we get online, the data cloud gets denser. Every search we make, web page we view, someone is tracking our interest. When in 2006, AOL released the search behaviour of 650,000 users, it caused an outcry. Few had realised just how much information was routinely kept by online companies – every search made by these users was suddenly revealed, and it made fascinating reading (if you’re a bit nosy and had time on your hands).
Berners-Lee was responding to a question posed about Phorm – the behavioural targeting company that’s just signed a deal with Virgin, Talk Talk and BT.
Behavioural Targeting (confusingly also know as BT) is the practice of gathering data about what people do online, in order to make decisions about what sort of content then to display to them.
So a media owner tracks visitors to their site, and this enables them to serve ads for gardening products to people who have visited the gardening section of the site, even when those people are subsequently looking at the finance channel.
Until now though, BT has been limited to tracking only behaviour on websites that had the tracking code installed – and with competing systems that gives each quite limited coverage.
Phorm is different though. Through a deal with ISPs, Phorm watches everything you watch, and takes notes. If you look at gardening content, it adds you to a gardening segment of its users, and enables interested advertisers to target you later. But Phorm differs from other behavioural systems in one other major way. They don’t keep any data.
The search you make, or site you look at, allows them to segment you as a user. But Phorm discards the information it scanned to conclude this – it doesn’t need it anymore. So in some senses, Phorm is a lot less worrying than Google, Yahoo and Microsoft, who keep your search history for between 13 and 18 months.
Most of us value our privacy, guarding it both from crooks and unwarranted intrusion from government. But privacy is also an area where you find a lot of people wearing tinfoil on their heads, convinced the CIA is reading their brains using microwaves, and this can make it harder for the rest of us to tell what’s really important to worry about.
So Phorm have opened a can of worms. It may be that what they do is in reality less invasive of privacy than many of the practices its critics object to. But this is ignored because Phorm are a good target, and they’ve helpfully stuck their head above the parapet. And in doing so they may have successfully spread consumer concerns about privacy beyond just the tinfoil lobby.
Friday, March 14, 2008
Gamification and life
A version of this piece was published in Marketing in 2008
Spiralling petrol prices and blanket coverage of global warming don’t compare with the thrill of tearing up to the traffic lights and standing on the brakes. Let’s face it – driving a car in an ecologically-friendly way is dull, and the personal benefit is remote; a petrol bill at the end of the week (which might not be paid until the end of the month).
So being driven last week in a Toyota Prius hybrid taxi the other day, I was struck by how the car was creating feedback for the driver, and how he in turn was responding by altering his driving technique to improve fuel economy.
The screen on the centre console has a graphical representation of the wheels, the engine and the battery. When the driver accelerates hard, energy is shown being conducted from the engine to the wheels. Gentle driving shows the engine unused, with the battery powering the electric motor, and braking is illustrated by energy flowing back to the battery.
The energy flows directly represent the economy of the driver, and the result is a game. My driver had half an eye on the screen, and as he negotiated his way around town he was constantly striving to maximise his score. Fuel economy had moved from a worthy but irrelevant issue (he’s not paying the bill) to a little game that could leaven the dull routine of city driving.
As digital media have become a greater part of our lives, games have been emerging as a key tool in influencing behaviour, helping to inform and developing skills.
The US army produced America’s Army with game creator Ubisoft in 2002, and is about to launch its third version, to play on the Xbox360 console. Over nine million people have registered for the game, which has become a key recruitment tool for the military, as well as a training tool.
The US military are no strangers to video gaming, having commissioned games before, but America’s Army reflects their view that games can be an effective marketing and communications medium – an approach which has led to accusations of propaganda.
In the UK, the Home Office used an online game back in 2003 as part of a consultation exercise on the Youth Justice green paper. Knowing that this group would be unlikely to complete a Home Office questionnaire, the COI created an online game with scenarios that dramatised real crime situations – a talking point to explore teenagers’ views on rights, responsibilities, crime and punishment. And this game-based approach worked – three times as many teens completed the game/survey as would have been expected from a conventional study.
Games have always been a naturally accepted way for children to learn. Whether hand-eye coordination, interpersonal skills or language, children’s own games help them to assimilate these skills. Education has long made use of the principle that learning within a meaningful context is more effective than in the absence of such a context – as is the case with most formal learning. Psychologists call this ‘situated cognition’, and it’s behind the popularity of role playing in all sorts of training.
But there’s an increasing understanding that those who grow up with digital media learn more effectively in these environments, and are developing new ways of consuming information. Graphics vs text, random access vs step by step, parallel processing vs linear – characteristics identified by Marc Presky, a writer on education, as the new norm for the learning style of the digital native.
So whilst much of the attention given in recent years to the marketing potential of online and video games has focused on their capacity as an advertising medium – placing posters and banners in-game, the real potential of games though would appear to much greater – as the game itself becomes both the message and the means by which we learn from consumers.
Spiralling petrol prices and blanket coverage of global warming don’t compare with the thrill of tearing up to the traffic lights and standing on the brakes. Let’s face it – driving a car in an ecologically-friendly way is dull, and the personal benefit is remote; a petrol bill at the end of the week (which might not be paid until the end of the month).
So being driven last week in a Toyota Prius hybrid taxi the other day, I was struck by how the car was creating feedback for the driver, and how he in turn was responding by altering his driving technique to improve fuel economy.
The screen on the centre console has a graphical representation of the wheels, the engine and the battery. When the driver accelerates hard, energy is shown being conducted from the engine to the wheels. Gentle driving shows the engine unused, with the battery powering the electric motor, and braking is illustrated by energy flowing back to the battery.
The energy flows directly represent the economy of the driver, and the result is a game. My driver had half an eye on the screen, and as he negotiated his way around town he was constantly striving to maximise his score. Fuel economy had moved from a worthy but irrelevant issue (he’s not paying the bill) to a little game that could leaven the dull routine of city driving.
As digital media have become a greater part of our lives, games have been emerging as a key tool in influencing behaviour, helping to inform and developing skills.
The US army produced America’s Army with game creator Ubisoft in 2002, and is about to launch its third version, to play on the Xbox360 console. Over nine million people have registered for the game, which has become a key recruitment tool for the military, as well as a training tool.
The US military are no strangers to video gaming, having commissioned games before, but America’s Army reflects their view that games can be an effective marketing and communications medium – an approach which has led to accusations of propaganda.
In the UK, the Home Office used an online game back in 2003 as part of a consultation exercise on the Youth Justice green paper. Knowing that this group would be unlikely to complete a Home Office questionnaire, the COI created an online game with scenarios that dramatised real crime situations – a talking point to explore teenagers’ views on rights, responsibilities, crime and punishment. And this game-based approach worked – three times as many teens completed the game/survey as would have been expected from a conventional study.
Games have always been a naturally accepted way for children to learn. Whether hand-eye coordination, interpersonal skills or language, children’s own games help them to assimilate these skills. Education has long made use of the principle that learning within a meaningful context is more effective than in the absence of such a context – as is the case with most formal learning. Psychologists call this ‘situated cognition’, and it’s behind the popularity of role playing in all sorts of training.
But there’s an increasing understanding that those who grow up with digital media learn more effectively in these environments, and are developing new ways of consuming information. Graphics vs text, random access vs step by step, parallel processing vs linear – characteristics identified by Marc Presky, a writer on education, as the new norm for the learning style of the digital native.
So whilst much of the attention given in recent years to the marketing potential of online and video games has focused on their capacity as an advertising medium – placing posters and banners in-game, the real potential of games though would appear to much greater – as the game itself becomes both the message and the means by which we learn from consumers.
Thursday, March 6, 2008
Is search advertising?
A version of this piece was published in Marketing in 2008
In 1928, universities in the USA announced that continental drift was impossible, and banned the teaching of it – a ban that largely remained in place until the theory of Plate Tectonics was published in the sixties.
It’s not unusual for the old to struggle with the new. But perhaps we should be more surprised when the old struggle with the established.
It’s been ten years since Google launched, and five years since they started charging for search. Since then there’s been an explosion in search marketing, and it’s become a vital weapon in the marketer’s armoury – making Google one of the biggest media companies in the world.
So if search isn’t new, we’re hearing some remarkable thinking about it from the traditional media world.
I was at the WARC research conference a couple of weeks ago, and was struck when one of the speakers opined that he “wasn’t sure that search was really advertising – it’s really just distribution.”
Nobody picked him up on it, and clearly smoking the same meme, M&C Saatchi chairman Moray MacLennan at the FT Digital Media Conference a couple of days later picked up on the same theme:
“When you’re putting money into search you’re taking it out of marketing,” he said. “All you’re doing is buying a space on the internet high street. You’re commoditising your brand.”
So are they right? Is search ‘advertising’ or ‘marketing’ at all? Is it just distribution?
Let’s for a moment assume that MacLennan’s right – search is just buying space on the internet high street. If he means that it’s a part of distribution, then that would certainly make it part of McCarthy’s four P’s of marketing. If he means that it’s part of what many marketers call ‘the last six feet’, then to dismiss it as commoditisation of the brand is to similarly exclude in-store merchandising.
And are you commoditising your brand by using search? A commodity has no differentiating characteristics, and is bought on price only – so is search leading brands this way?
In reality, that’s up to us. If we choose as marketers to throw up our hands in resignation at this challenge, then the brands we nurture will probably wither – either becoming commoditised, or more likely, beaten into submission by those who rise to the challenge.
Because consumers make brand choices in search.
This isn’t speculation – it’s empirically demonstrated by the data. Search engine users don’t just make one search before a purchase – they typically make several. We can track this behaviour, and understand how the process works as they progress – “flat screen TV”, “Sony TV”, “Bravia”, and often the model number. We can see where they were diverted to competitors, and where competitors lost them to us – and most importantly we can influence this with the copy we use in the listing (and A/B test that copy to refine its effectiveness).
If we say the right things, and do so in the right places, we can work to protect and even build our brand premium.
This is marketing alright, and moreover, it’s advertising – in a pure, analytical and rather detail-obsessive way. To master it truly, we must understand how it creates value in the marketing and media mix – where and how it influences users on their journey to being customers (either of ours or of the competition). And we’re not going to get there if we dismiss it.
I suspect MacLennan was being deliberately provocative. But what he said plays to the prejudices of the luddite faction, and is on the lips of many in what for want of a better term might be referred to as ‘traditional’ advertising. For these increasingly beleaguered folk, these new forms of advertising/marketing are sparking a semantic debate – rather than a determined attempt to master new techniques that bring real value to marketers.
For these folk, the barbarians really are at the gate – and they’re using Google to get in.
In 1928, universities in the USA announced that continental drift was impossible, and banned the teaching of it – a ban that largely remained in place until the theory of Plate Tectonics was published in the sixties.
It’s not unusual for the old to struggle with the new. But perhaps we should be more surprised when the old struggle with the established.
It’s been ten years since Google launched, and five years since they started charging for search. Since then there’s been an explosion in search marketing, and it’s become a vital weapon in the marketer’s armoury – making Google one of the biggest media companies in the world.
So if search isn’t new, we’re hearing some remarkable thinking about it from the traditional media world.
I was at the WARC research conference a couple of weeks ago, and was struck when one of the speakers opined that he “wasn’t sure that search was really advertising – it’s really just distribution.”
Nobody picked him up on it, and clearly smoking the same meme, M&C Saatchi chairman Moray MacLennan at the FT Digital Media Conference a couple of days later picked up on the same theme:
“When you’re putting money into search you’re taking it out of marketing,” he said. “All you’re doing is buying a space on the internet high street. You’re commoditising your brand.”
So are they right? Is search ‘advertising’ or ‘marketing’ at all? Is it just distribution?
Let’s for a moment assume that MacLennan’s right – search is just buying space on the internet high street. If he means that it’s a part of distribution, then that would certainly make it part of McCarthy’s four P’s of marketing. If he means that it’s part of what many marketers call ‘the last six feet’, then to dismiss it as commoditisation of the brand is to similarly exclude in-store merchandising.
And are you commoditising your brand by using search? A commodity has no differentiating characteristics, and is bought on price only – so is search leading brands this way?
In reality, that’s up to us. If we choose as marketers to throw up our hands in resignation at this challenge, then the brands we nurture will probably wither – either becoming commoditised, or more likely, beaten into submission by those who rise to the challenge.
Because consumers make brand choices in search.
This isn’t speculation – it’s empirically demonstrated by the data. Search engine users don’t just make one search before a purchase – they typically make several. We can track this behaviour, and understand how the process works as they progress – “flat screen TV”, “Sony TV”, “Bravia”, and often the model number. We can see where they were diverted to competitors, and where competitors lost them to us – and most importantly we can influence this with the copy we use in the listing (and A/B test that copy to refine its effectiveness).
If we say the right things, and do so in the right places, we can work to protect and even build our brand premium.
This is marketing alright, and moreover, it’s advertising – in a pure, analytical and rather detail-obsessive way. To master it truly, we must understand how it creates value in the marketing and media mix – where and how it influences users on their journey to being customers (either of ours or of the competition). And we’re not going to get there if we dismiss it.
I suspect MacLennan was being deliberately provocative. But what he said plays to the prejudices of the luddite faction, and is on the lips of many in what for want of a better term might be referred to as ‘traditional’ advertising. For these increasingly beleaguered folk, these new forms of advertising/marketing are sparking a semantic debate – rather than a determined attempt to master new techniques that bring real value to marketers.
For these folk, the barbarians really are at the gate – and they’re using Google to get in.
Thursday, February 28, 2008
The agency deal: poor value for advertisers
A version of this piece was published in Marketing in 2008
See also this later post from 2010 - nothing changes!.
Media folk are hitting the slopes or heading south for the sun right now – the year’s work is done, and it’s time to hand over the reigns to the enforcers, those beleaguered media buyers who will spend the rest of the year chasing media owners and winkling the delivery out of the deals their masters struck in December and January.
The Agency Deal has been a feature of media trading right back to the mid-eighties, when Media Independents wrested control of the budget from full-service agencies.
The theory is, an agency’s advertisers all gain. By lumping their budgets together and trading as one, the argument goes, greater leverage is exercised over media owners – and that translates into better value.
But balancing the books becomes a constant challenge for the agency – particularly as the year-end approaches. If trading has been mismanaged, the agency may have to play catchup – and it could be you that’s funding that shortfall, finding your ads in less appropriate environments.
It’s a prix-fixe menu for media. You know you don’t get the best dishes and the portions are going to be smaller, but you do know what it’s going to cost.
Except of course, you don’t. Because once a deal has been struck over an agency’s entire trading book it becomes very hard to tell who’s getting what, and the agency is often taking a rake off the top as undeclared ‘volume’ discounts.
But all of this relates to traditional media right? Wrong.
The two staples of the agency deal, the ‘volume discount’ and the limited menu are alive and well in digital advertising too.
You might ask why in a world of super-diverse media options, with thousands of websites to choose from and tools that allow management of advertising across hundreds of sites, do agencies use the agency deal model?
Surely, you’d think, it’s a model best applied to media where supply is limited, and share is one of the few levers you’ve got to play with? Surely when a media market is changing constantly, it’s disadvantageous to tie yourself into year-long deals?
You’d be forgetting one important factor.
Aside from the extra income it can generate, an agency deal is cheap for the agency to run. A month or two’s running around, and you can tie up the whole agency’s trading for the year, fixing prices, quality and delivery parameters for the enforcers to work to until next Christmas. Buyers don’t need to buy, and planners don’t need to plan – the menu’s there for them, and the decisions have been made.
Put 80% of your trading into just a few sites, and you’ve got a dealbase that’s easy to administer, and you’ve maximised your leverage against those sites by offering them the bulk of your trading. Using the diversity of the medium to reflect the nuance of a brand’s requirements is subjugated to the prime aim of getting away the media at the lowest administrative cost.
This model has been letting advertisers down for years in traditional media, and it has been enthusiastically imported wholesale into the online advertising business.
The problem as ever, is one of money. All this non-standardisation costs. If you ever asked yourself; how come no matter what my brief says, I always get the same three sites on the media plan, then this is probably the answer.
Digital media gives us accountability. It’s amazingly adaptable and enables us to react quickly – pumping investment into stuff that works, diverting funds away from areas that underperform. Stick an agency deal on the front of that, and you’ve just limited your options. Growth is slower, performance weaker, flexibility hampered.
It’s time for the agency deal to die. And the best way to kill it is to evaluate agencies on the value they bring, rather than how cheap the media is, or how low their fees are.
See also this later post from 2010 - nothing changes!.
Media folk are hitting the slopes or heading south for the sun right now – the year’s work is done, and it’s time to hand over the reigns to the enforcers, those beleaguered media buyers who will spend the rest of the year chasing media owners and winkling the delivery out of the deals their masters struck in December and January.
The Agency Deal has been a feature of media trading right back to the mid-eighties, when Media Independents wrested control of the budget from full-service agencies.
The theory is, an agency’s advertisers all gain. By lumping their budgets together and trading as one, the argument goes, greater leverage is exercised over media owners – and that translates into better value.
But balancing the books becomes a constant challenge for the agency – particularly as the year-end approaches. If trading has been mismanaged, the agency may have to play catchup – and it could be you that’s funding that shortfall, finding your ads in less appropriate environments.
It’s a prix-fixe menu for media. You know you don’t get the best dishes and the portions are going to be smaller, but you do know what it’s going to cost.
Except of course, you don’t. Because once a deal has been struck over an agency’s entire trading book it becomes very hard to tell who’s getting what, and the agency is often taking a rake off the top as undeclared ‘volume’ discounts.
But all of this relates to traditional media right? Wrong.
The two staples of the agency deal, the ‘volume discount’ and the limited menu are alive and well in digital advertising too.
You might ask why in a world of super-diverse media options, with thousands of websites to choose from and tools that allow management of advertising across hundreds of sites, do agencies use the agency deal model?
Surely, you’d think, it’s a model best applied to media where supply is limited, and share is one of the few levers you’ve got to play with? Surely when a media market is changing constantly, it’s disadvantageous to tie yourself into year-long deals?
You’d be forgetting one important factor.
Aside from the extra income it can generate, an agency deal is cheap for the agency to run. A month or two’s running around, and you can tie up the whole agency’s trading for the year, fixing prices, quality and delivery parameters for the enforcers to work to until next Christmas. Buyers don’t need to buy, and planners don’t need to plan – the menu’s there for them, and the decisions have been made.
Put 80% of your trading into just a few sites, and you’ve got a dealbase that’s easy to administer, and you’ve maximised your leverage against those sites by offering them the bulk of your trading. Using the diversity of the medium to reflect the nuance of a brand’s requirements is subjugated to the prime aim of getting away the media at the lowest administrative cost.
This model has been letting advertisers down for years in traditional media, and it has been enthusiastically imported wholesale into the online advertising business.
The problem as ever, is one of money. All this non-standardisation costs. If you ever asked yourself; how come no matter what my brief says, I always get the same three sites on the media plan, then this is probably the answer.
Digital media gives us accountability. It’s amazingly adaptable and enables us to react quickly – pumping investment into stuff that works, diverting funds away from areas that underperform. Stick an agency deal on the front of that, and you’ve just limited your options. Growth is slower, performance weaker, flexibility hampered.
It’s time for the agency deal to die. And the best way to kill it is to evaluate agencies on the value they bring, rather than how cheap the media is, or how low their fees are.
Thursday, February 21, 2008
Record companies and their Canute moment
A version of this piece was published in Marketing in 2008
The story famously associated with King Canute is most commonly interpreted as an example of hubris. But Canute was in reality smarter than this, attempting to demonstrate to his fawning courtiers that even he as King could not stop the incoming tide.
It seems though that the music industry has no such self-awareness. Like a bunch of people who’ve never heard of King Canute, its struggle continues to hold back the tide of illegal downloading that continues to rise.
Threatening to take single mums to court for their kids’ downloads, suing file-sharing site Napster, pursuing site after site, the business has fought tooth and nail to halt the growth of piracy and the file-sharing sites that feed it.
Despite all this effort, consumers have been voting with their mice – over ten million people sharing files on Pirate Bay (closed by Swedish police earlier this month), 26 million on Napster before it’s shutdown in 2001. Over a third of web traffic is said to be in the form of torrents (typically video files being shared between users), and the appetite for illegal downloads is seemingly insatiable.
And now they’ve dragged the Department of Culture, Media and Sport into building dykes for them to stick their finger into. A draft copy of the forthcoming Green Paper on the creative industries, quoted in the Times, set out the Government’s intention to force Internet Service Providers to “take action on illegal file-sharing”.
In other words, the idea is that ISPs will have to start to monitor not just what types of files are being shared by users, but the actual content (and presumably copyright status) of those files. Many ISPs already discriminate between file types, usually to ensure quality of service for users – data for a phone call has to be prioritised to avoid the sound breaking up, whilst an email arriving half a second later rarely makes any difference to anyone.
But this is quite different, because it will require ISPs firstly to spy on users, and then to punish them for infringing the law, withdrawing service from them and providing evidence to record companies.
The BPI has been lobbying for ages for this. Chief exec Geoff Taylor is quoted on their website calling for ISPs to partner with the music industry to help grow the creative economy, and accusing them of having “built a business on other people’s music”. Ignoring the fact that ISPs (and the internet) have been built on a fair bit more than just music, his proposed partnership is in reality a bit one-sided. ISPs will act as his police force, and he doesn’t propose to pay them for the job.
ISPs argue that like the Post Office and the phone companies, they’re ‘common carriers’ – having no responsibility for what they convey. That responsibility should remain with the user they say. This seems self-evident, but perhaps Mr. Taylor would contend that Tarmac should be held accountable for the development of the getaway car in robberies.
Whilst it’s disappointing that the Government seem to have been suckered into supporting this dummy, it’s perhaps not surprising of the music industry.
Digital represents a huge threat to their existing business model. It’s a threat that’s not going to go away, and a threat that’s only going to grow. But digital also represents an exciting set of opportunities for content owners.
New businesses will be built, new industries created and new fortunes made, and record companies are in a prime position to capitalise on the potential. Perhaps if the music business spent half the time thinking about how to build, create and make these that it devotes to trying to turn back the tide, it might have a chance of succeeding.
To achieve this, it needs to face forwards not backwards. And having an industry body called the British Phonographic Industry isn’t really much of a sign that they’re ready for that.
The story famously associated with King Canute is most commonly interpreted as an example of hubris. But Canute was in reality smarter than this, attempting to demonstrate to his fawning courtiers that even he as King could not stop the incoming tide.
It seems though that the music industry has no such self-awareness. Like a bunch of people who’ve never heard of King Canute, its struggle continues to hold back the tide of illegal downloading that continues to rise.
Threatening to take single mums to court for their kids’ downloads, suing file-sharing site Napster, pursuing site after site, the business has fought tooth and nail to halt the growth of piracy and the file-sharing sites that feed it.
Despite all this effort, consumers have been voting with their mice – over ten million people sharing files on Pirate Bay (closed by Swedish police earlier this month), 26 million on Napster before it’s shutdown in 2001. Over a third of web traffic is said to be in the form of torrents (typically video files being shared between users), and the appetite for illegal downloads is seemingly insatiable.
And now they’ve dragged the Department of Culture, Media and Sport into building dykes for them to stick their finger into. A draft copy of the forthcoming Green Paper on the creative industries, quoted in the Times, set out the Government’s intention to force Internet Service Providers to “take action on illegal file-sharing”.
In other words, the idea is that ISPs will have to start to monitor not just what types of files are being shared by users, but the actual content (and presumably copyright status) of those files. Many ISPs already discriminate between file types, usually to ensure quality of service for users – data for a phone call has to be prioritised to avoid the sound breaking up, whilst an email arriving half a second later rarely makes any difference to anyone.
But this is quite different, because it will require ISPs firstly to spy on users, and then to punish them for infringing the law, withdrawing service from them and providing evidence to record companies.
The BPI has been lobbying for ages for this. Chief exec Geoff Taylor is quoted on their website calling for ISPs to partner with the music industry to help grow the creative economy, and accusing them of having “built a business on other people’s music”. Ignoring the fact that ISPs (and the internet) have been built on a fair bit more than just music, his proposed partnership is in reality a bit one-sided. ISPs will act as his police force, and he doesn’t propose to pay them for the job.
ISPs argue that like the Post Office and the phone companies, they’re ‘common carriers’ – having no responsibility for what they convey. That responsibility should remain with the user they say. This seems self-evident, but perhaps Mr. Taylor would contend that Tarmac should be held accountable for the development of the getaway car in robberies.
Whilst it’s disappointing that the Government seem to have been suckered into supporting this dummy, it’s perhaps not surprising of the music industry.
Digital represents a huge threat to their existing business model. It’s a threat that’s not going to go away, and a threat that’s only going to grow. But digital also represents an exciting set of opportunities for content owners.
New businesses will be built, new industries created and new fortunes made, and record companies are in a prime position to capitalise on the potential. Perhaps if the music business spent half the time thinking about how to build, create and make these that it devotes to trying to turn back the tide, it might have a chance of succeeding.
To achieve this, it needs to face forwards not backwards. And having an industry body called the British Phonographic Industry isn’t really much of a sign that they’re ready for that.
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