Category Archives: Digital Marketing

Disruption in the Rear View Mirror

Oh..it’s so easy to be blasé. I always scan the Mediapost headlines each week to see if there’s anything to spin. I almost skipped right past a news post by Larissa Faw – Zenith: Google Remains Top-Ranked Media Company By Ad Revenue

“Of course Google is the top ranked media company,” I yawned as I was just about to click on the next email in my inbox. Then it hit me. To quote Michael Bublé, “Holy Shitballs, Mom!”

Maybe that headline doesn’t seem extraordinary in the context of today, but I’ve been doing this stuff for almost 20 years now, and in that context – well-it’s huge! I remembered a column I wrote ages ago about speculating that Google had barely scratched its potential. After a little digging, I found it. It was in October, 2006, so just over a decade ago. Google had just passed the 6 billion dollar mark in annual revenue. Ironically, that seemed a bigger deal then their current revenue of almost $80 billion seems today. In that column, I pushed to the extreme and speculated that Google could someday pass $200 billion in revenue. While we’re still only 1/3 of the way there, the claim doesn’t seem nearly as ludicrous as it did back then.

But here’s the line that really made me realize how far we’ve come in the ten and a half years since I wrote that column: “Google and Facebook together accounted for 20% of global advertising expenditure across all media in 2016, up from 11% in 2012. They were also responsible for 64% of all the growth in global ad spend between 2012 and 2016.”

Two companies that didn’t exist 20 years ago now account for 20% of all global advertising expenditure. And the speed with which they’re gobbling advertising budgets is accelerating. If you’re a dilettante student of disruption, as I am, those are pretty amazing numbers. In the day-to-day of Mediapost – and digital marketing in general – we tend to accept all this as normal. It’s like we’re surfing on top of a wave without realizing the wave is 300 freakin’ feet high. Sometimes, you need to zoom out a little to realizing how momentous the every day is. And if you look at this on a scale of decades rather than days, you start to get a sense that the speed of change is massive.

To me, the most interesting thing about this is that both Google and Facebook have introduced a fundamentally new relationship between advertising and it’s audience. Google’s outré is – of course – intent based advertising. And Facebook’s is based on socially mediated network effects. Both of these things required the overlay of digital connection. That – as they say – has made all the difference. And there is where the real disruption can be found. Our world has become a fundamentally different place.

Much as we remain focused on the world of advertising and marketing here in our little corner of the digital world, it behooves us to remember that advertising is simply a somewhat distorted reflection of the behaviors of the world in general. It things are being disrupted here, it is because things are being disrupted everywhere. As it regards us beings of flesh, bone and blood, that disruption has three distinct beachheads: the complicated relationship between our brains and the digital tools we have at our disposal, the way we connect with each other, and a dismantling of the restrictions of the physical world at the same time we build the scaffolding of a human designed digital world. Any one of these has the potential to change our species forever. With all three bearing down on us, permanent change is a lead-pipe cinch.

Thirty years is a nano-second in terms of human history. Even on the scale of my lifetime, it seems like yesterday. Reagan was president. We were terrorized by the Unabomber. News outlets were covering the Iran-Contra affair. U2 released the Joshua Tree. Platoon won the best picture Oscar. And if you wanted to advertise to a lot of people, you did so on a major TV network with the help of a Madison Avenue agency. 30 years ago, nothing of which I’m talking about existed. Nothing. No Google. No Facebook. No Internet – at least, not in a form any of us could appreciate.

As much as advertising has changed in the past 30 years, it has only done so because we – and the world we inhabit – have changed even more. And if that thought is a little scary, just think what the next 30 years might bring.

The Status Quo Bias – Why Every B2B Vendor has to Understand It

It’s probably the biggest hurdle any B2B vendor has to get over. It’s called the Status Quo bias and it’s deadly in any high-risk purchase scenario. According to Wikipedia, the bias occurs when the current baseline (or status quo) is taken as a reference point, and any change from that baseline is perceived as a loss. In other words, if it ain’t broke don’t fix it. We believe that simply because something exists, it must have merit. The burden of proof then falls on the vendor to overcome this level of complacency

The Status Quo Bias is actually a bundle of other common biases, including the Endowment Effect, the Loss Aversion Bias, The Existence Bias, Mere Exposure effect and other psychological factors that tend to continually jam the cogs of B2B commerce. Why B2B? The Status Quo Bias is common in any scenario where risk is high and reward is low, but B2B in particular is subject to it because these are group-buying decisions. And, as I’ll soon explain, groups tend to default to Status Quo bias with irritating regularity. The new book from CEB (recently acquired by Gartner) – The Challenger Customer – is all about the status quo bias.

So why is the bias particularly common with groups? Think of the dynamics at play here. Generally speaking, most people have some level of the Status Quo Bias. Some will have it more than others, depending on their level of risk tolerance. But let’s look at what happens when we lump all those people together in a group and force them to come to a consensus. Generally, you’re going to have a one or two people in the group that are driving for change. Typically, these will be the ones that have the most to gain and have a risk tolerance threshold that allows the deal to go forward. On the other end of the spectrum you have some people who have low risk tolerance levels and nothing to gain. They may even stand to lose if the deal goes forward (think IT people who have to implement a new technology). In between you have the moderates. The gain factor and their risk tolerance levels net out to close to zero. Given that those that have something to gain will say yes and those who have nothing to gain will say no, it’s this middle group that will decide whether the deal will live or die.

Without the Status Quo bias, the deal might have a 50/50 chance. But the status quo bias stacks the deck towards negative outcomes for the vendor. Even if it tips the balance just a little bit towards “no” – that’s all that’s required to stop a deal dead in its tracks. The more disruptive the deal, the greater the Status Quo Bias. Let’s remember – this is B2B. There are no emotional rewards that can introduce a counter acting bias. It’s been shown in at least one study (Baker, Laury, Williams – 2008) that groups tend to be more risk averse than the individuals that make up that group. When the groups start discussing and – inevitably – disagreeing, it’s typically easier to do nothing.

So, how do we stick handle past this bias? The common approach is to divide and conquer – identifying the players and tailoring messages to speak directly to them. The counter intuitive finding of the CEB Challenger Customer research was that dividing and conquering is absolutely the wrong thing to do. It actually lessens the possibility of making a sale. While this sounds like it’s just plain wrong, it makes sense if we shift our perspective from the selling side to the buying side.

With our vendor goggles on, we believe that if we tailor messaging to appeal to every individual’s own value proposition, that would be a way to build consensus and drive the deal forward. And that would be true, if every member of our buying committee was acting rationally. But as we soon see when we put on the buying googles, they’re not. Their irrational biases are firmly stacked up on the “do nothing” side of the ledger. And by tailoring messaging in different directions, we’re actually just giving them more things to disagree about. We’re creating dysfunction rather than eliminating it. Disagreements almost always default back to the status quo, because it’s the least risky option. The group may not agree about much, but they can agree that the incumbent solution creates the least disruption.

So what do you do? Well, I won’t steal the CEB’s thunder here, because the Challenger Customer is absolutely worth a read if you’re a B2B vendor. The authors, Brent Adamson, Matthew Dixon, Pat Spenner and Nick Toman, lay out step by step strategy to get around the Status Quo bias. The trick is to create a common psychological frame where everyone can agree that doing nothing is the riskiest alternative. But biases are notoriously sticky things. Setting up a commonly understood frame requires a deep understanding of the group dynamics at play. The one thing I really appreciate about CEB’s approach is that it’s “psychologically sound.” They make no assumptions about buyer rationality. They know that emotions ultimately drive all human behavior and B2B purchases are no exception.

How Vision and Strategy Can Kill a Marketer’s Job Security

“Apparently, marketers today are losing confidence in their ability to meet key goals, like reaching the right customers with their marketing efforts, or being able to understand or evaluate the ROI of their marketing plans.”

Dave Morgan – Why Are Marketing Losing Confidence in Their Ability to Do Their Jobs?

“I think marketing is going to be getting much, much easier over the next couple of years.”

Cory Treffiletti – CMOs’ Vision Crucial to their Success

A couple of weeks ago, my fellow Spinners offered these two seemingly contradictory prognoses of the future of marketing. The contradiction, I believe, is in the conflation of the ideas of media buying and marketing. Yes, media buying is going to get easier (or, at least, more automated). And I agree with Cory’s prediction of consolidation in the industry. But that doesn’t do much to ease the crisis of confidence mentioned by Dave Morgan. That’s still very real.

The problem here is one of complexity. Markets are now complex. Actually, they’ve always been complex, but now they’re even more complex and we marketers can no longer pretend that they’re otherwise. When things get complex, our ability to predict outcomes takes a nosedive.

At the same time, an avalanche of available data makes marketers more accountable than ever. This data, along with faster, smarter machines, offers the promise of predictability, but it’s a dangerous illusion. If anything, the data and AI is just revealing more of the complexity that lurks within those markets.

And here is the crux of the dilemma that lives between the two quotes above. Yes, marketing is becoming more powerful, but the markets themselves are becoming more unpredictable. And marketers are squarely caught on the horns of that dilemma. We sign on to deliver results and when those results are no longer predictable, we feel our job security rapidly slipping away.

Cory Treffiletti talks about vision – which also goes by the name of strategy. It sounds good, but here’s the potential problem with that. In massively complex environments, strategy in the wrong hands can become a liability. It leads to an illusion of control, which is part of a largely disproven and outdated corporate mindset. You can blindly follow a strategy right into a dead end because strategies depend on beliefs and beliefs can dramatically alter your perception of what’s real. No one can control a complex environment. The best you can do is monitor and react to that environment. Of course, those two things can – and should – become a strategy in and of themselves.

Strategy is not dead. It can still make a difference. But it needs to be balanced with two other “S’s” – Sense making and Synthesis. These are the things that make a difference in a world of complexity.

You have to make sense of the market. And this is more difficult than it sounds. This is where the “Strategy” paradox can creep up and kill you. If your “Vision” – to use Cory Treffiletti’s term – becomes more important to you than reality, you’ll simply look for things that confirm that vision and plunge ahead, unaware of the true situation. You’ll ignore the cues that are telling you a change of direction may be required. The Sense Making cycle starts with a “frame” of the world (a.k.a. “Vision”) and then looks for external data to either confirm and elaborate or refute that frame/vision. But the data we collect and the way we analyze that data depends on the frame we begin with. Belief tends to make this process a self-reinforcing loop that often leads to disaster. The stronger the “vision,” the greater the tendency for us to delude ourselves.

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Sensemaking: Klein, Moon and Hoffman

If you can remain objective as possible during the sense making cycle you then end up with a reasonably accurate “frame” of your market. This is when the Synthesis part of the equation takes over. Here, you look at your strategy and see how it lines up with the market. You look for new opportunities and threats. Knowing the market is unpredictable, you take the advice of Antifragile author Nassim Nicholas Taleb, minimizing your downside and maximizing your upside. You pull this together into a new iteration of strategy and execute like hell against it. Then you start all over again.

By going through this cycle, you’ll find that you create a wave-like approach to strategy, oscillating through phases of sense making, synthesis and strategic execution. The behavior and mindsets required in each of these phases are significantly – and often diametrically – different. It’s a tough act to pull off.

No wonder marketers are having a tough time right now.

 

 

 

 

 

 

 

What Comes After Generation Z?

We’re running out of alphabet.

The latest generation is Generation Z. They were born between 1995 and 2012 – according to one demographic primer. So, what do we call the generation born from 2013 on? Z+One? Do we go with an Excel naming scheme and call it Generation AA? Or should we just go back to all those unused letters of the alphabet. After all, we haven’t touched A to W yet. Thinking along those lines, Australian social researcher and author Mark McCrindle is lobbying for Generation Alpha. It’s a nice twist – we get to recycle the alphabet and give it a Greek flavor all at the same time.

Maybe the reason we short-sightedly started with the last three letters of the alphabet is that we’re pretty new at this. Before the twentieth century, we didn’t worry much about labeling every generation. And, to be honest, much of that labeling has happened retroactively. The Silent Generation (1925 – 1942) didn’t call themselves that right off that bat. Being Silent, they didn’t call themselves anything. The label wasn’t coined until 1951. And the G.I. Generation, who preceded them ((1901 – 1924), didn’t receive their label until demographers William Strauss and Neil Howe affixed it in 1991.

But starting around the middle of the last century, we developed the need to pigeonhole our cohorts. Maybe it’s because things started moving so quickly about that time. In the first half of the century we had the twin demographical tent poles of the two World Wars. In between we had the Great Depression. After WWII we had the mother of all generational events: the Baby Boom. Each of these eras brought a very different environment, which would naturally affect those growing up in them. Since then, we’ve been scrambling madly to keep up with appropriate labels for each generation.

The standard approach up to now has been to wait for someone to write a book about a generation, which bestows the label, and then we all jump on the bandwagon. But this seems reactive and short sighted. It also means that we get caught in our current situation, where we have a generation that remains unnamed while we’re waiting for the book to be written.

We seem hooked on these generation labels. I don’t think they’re going to go anywhere any time soon. Based on our current fascination with Millennials, we in the media are going to continue to lump every single sociological and technological trend into convenient generationally labeled behavioral buckets. So we should give this naming thing some thought.

Maybe we could take a page from the World Meteorological Organization’s book when it comes to naming hurricanes and tropical storms. They started doing this so the media would have a quick and commonly understood reference point when referring to a particular meteorological event. Don’t generations deserve the same foresight?

The World Meteorological Organization has a strict procedure: “For Atlantic hurricanes, there is a list of male and female names which are used on a six-year rotation. The only time that there is a change is if a storm is so deadly or costly that the future use of its name on a different storm would be inappropriate. In the event that more than twenty-one named tropical cyclones occur in a season, any additional storms will take names from the Greek alphabet.”

I like the idea of using male and female names. This got me thinking. Maybe we combine the WMO’s approach and that of the wisdom of crowds. Perhaps the male and female names should be the most popular baby names of that generation. In case you’re wondering, here’s how that would work out:

Silent Generation (1925 – 1942): The Robert and Mary Generation
Baby Boomers I (1946 – 1954): The James and Mary Generation
Baby Boomers II (1955 – 1965): The Michael and Lisa Generation
Generation X (1966 – 1976): The Michael and Jennifer Generation
Millennials (1977 – 1994): The Michael and Jessica Generation
Generation Z (1995 – 2012): The Jacob and Emily Generation
Generation ??? (2013 – Today) – The Emma and Noah Generation

The sharp sighted amongst you will have noticed two problems with this. First, some names are stubbornly popular (I’m talking about you Michael and Mary) and span multiple generations. Secondly, this is a very US-Centric approach. Maybe we need to mix it up globally. For instance, if we tap into the naming zeitgeist of South Korea, that would make the current generation the Seo-yeon and Min-jun Generation.

Of course, all this could be needless worrying. Perhaps those that affixed the Generation Z label knew something we didn’t.

The Cathedral and Bazaar Cycle of Mar -Tech Innovation

Each year my friend Scott Brinker sits down to update his marketing technology landscape and each year he is amazed by the explosion of vendors he has to fit on a single slide. Last year’s version clocked in at 3874 Mar Tech solutions – almost twice as many as 2015. He started in 2011 with about 150 and it has effectively doubled with each iteration. While everyone has expected eventual consolidation this hasn’t happened to date.

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Scott’s Marketing Technology Landscape – 2016

Why?

For a possible answer, we can look at a fascinating study conducted by a UCLA team looking at the fossil record of cars. Since 1896, there is a reliable record of the introduction of new automobile makes and models. In essence, this creates a “fossil” record, similar to biology, where we can look at the evolution of a technology over an extended time period. In this case, the researchers were looking to isolate the factors that led to the greatest introduction of new models and the discontinuation of old models. When many new models were being introduced, the evolution of the automotive technology accelerated. The researchers wanted to see if this pace of evolution was tied to strength of the economy, changes in oil prices or the number of other cards on the market. What they found was that competition in the marketplace played a bigger role in the variety of car models than either economic growth or oil prices.

However, these periods of rapid innovation didn’t last forever. Inevitably, there was a period of consolidation, where the major manufacturers focused on a few models to increase profitability. It’s a lot more profitable to produce a popular model with relatively few changes over a long period of time.

Once again, we have an oscillation or wave happening.

What is interesting about this is that these periods of rapid innovation always come from an open market with many competitors – exactly what is happening in marketing technology right now. That is because open markets always drive more innovation than can be achieved within hierarchal organizations. As Eric Raymond showed in his brilliant essay on the open source movement – The Cathedral and the Bazaar – the evolutionary forces of a distributed open market (or “Bazaar”) always trump vertical integration (“Cathedrals”) when it comes to spinning off fresh ideas.

In their book “Creative Destruction,” authors Richard Foster and Sarah Kaplan show that organizations (cathedrals) tend to favor incremental innovation with occasional forays into substantial innovation. But markets (bazaars) unleash transformational innovation. The unpredictability and risk increases by a factor of ten as you go from one version of innovation to the other, but so do the rewards. Innovation in markets grow on a logarithmic scale. It’s why some players – like Tesla and Google – have espoused the open-source “Bazaar” approach in areas like sustainable transportation and artificial intelligence where rapid innovation is essential.

There is another critical factor at play here as well. The market/bazaar, being ruthless, quickly culls the competitors down to those that have the best market potential. This explosion of innovation and the subsequent winnowing need a brutally competitive market environment – a rugged landscape in evolutionary terms. Organizations/Cathedrals are reluctant to pull the plug on losers as they fall victim to the sunk cost fallacy and loss aversion. Markets/bazaars operate like nature – “red in tooth and claw” – with a brutal efficiency in dispatching the less fit.

After this explosion of innovation and the subsequent purge, there is a period of consolidation where the biggest players benefit. Let’s call this the Cathedral phase. Here, operational efficiency takes over, looking for greater profitability. Here, market tested innovation is acquired by the largest organizations and systematically incorporated into a replicable template that allows for scalability. Here, the Cathedral model does what it excels at, maximizing profits. Of course, there is a trade off. Innovation withers and dies in this environment, leading to eventual stagnation, which triggers the need for break out innovation all over again.

Will marketing technology follow the Cathedral/Bazaar pattern? In his last landscape, Scott mentioned that rather than coalescing around an “a small oligopoly of platform providers competing for that starring role” the Mar-Tech ecosystem seems to be embedding plug and play compatibility allowing for a longer “Bazaar” phase. Perhaps, with the elimination of market friction, we’re getting to a point where profitability can be uncoupled from the need for scale. I guess we’ll have to wait and see how many mar-tech vendors end up on the 2017 version of Scott’s slide.

 

 

 

 

Why Millennials are so Fascinating

When I was growing up, there was a lot of talk about the Generation Gap. This referred to the ideological gap between my generation – the Baby Boomers, and our parent’s generation – The Silent Generation (1923 – 1944).

But in terms of behavior, there was a significant gap even amongst early Baby Boomers and those that came at the tail end of the boom – like myself. Generations are products of their environment and there was a significant change in our environment in the 20-year run of the Baby Boomers – from 1945 to 1964. During that time, TV came into most of our homes. For the later boomers, like myself, we were raised with TV. And I believe the adoption of that one technology created an unbridgeable ideological gap that is still impacting our society.

The adoption of ubiquitous technologies – like TV and, more recently, connective platforms like mobile phones and the Internet – inevitable trigger massive environmental shifts. This is especially true for generations that grow up with this technology. Our brain goes through two phases where it literally rewires itself to adapt to its environment. One of those phases happens from birth to about 2 to 3 years of age and the other happens during puberty – from 14 to 20 years of age. A generation that goes through both of those phases while exposed to a new technology will inevitably be quite different from the generation that preceded it.

The two phases of our brain’s restructuring – also called neuroplasticity – are quite different in their goals. The first period – right after birth – rewires the brain to adapt to its physical environment. We learn to adapt to external stimuli and to interact with our surroundings. The second phase is perhaps even more influential in terms of who we will eventually be. This is when our brain creates its social connections. It’s also when we set our ideological compasses. Technologies we spend a huge amount of time with will inevitably impact both those processes.

That’s what makes Millennials so fascinating. It’s probably the first generation since my own that bridges that adoption of a massively influential technological change. Most definitions of this generation have it starting in the early 80’s and extend it to 1996 or 97.   This means the early Millennials grew up in an environment that was not all that different than the generation that preceded it. The technologies that were undergoing massive adoption in the early 80’s were VCRs and microwaves – hardly earth shaking in terms of environmental change. But late Millennials, like my daughters, grew up during the rapid adoption of three massively disruptive technologies: mobile phones, computers and the Internet. So we have a completely different environment for which the brain must adapt not only from generation to generation, but within the generation itself. This makes Millennials a very complex generation to pin down.

In terms of trying to understand this, let’s go back to my generation – the Baby Boomers – to see how environment adaptation can alter the face of society. Boomers that grew up in the late 40’s and early 50’s were much different than boomers that grew up just a few years later. Early boomers probably didn’t have a TV. Only the wealthiest families would have been able to afford them. In 1951, only 24% of American homes had a TV. But by 1960, almost 90% of Americans had a TV.

Whether we like to admit it or not, the values of my generation where shaped by TV. But this was not a universal process. The impact of TV was dependent on household income, which would have been correlated with education. So TV impacted the societal elite first and then trickled down. This elite segment would have also been those most likely to attend college. So, in the mid-60’s, you had a segment of a generation who’s values and world view were at least partially shaped by TV – and it’s creation of a “global village” – and who suddenly came together during a time and place (college) when we build the persona foundations we will inhabit for the rest of our lives. You had another segment of a generation that didn’t have this same exposure and who didn’t pursue a post-secondary education. The Vietnam War didn’t create the Counter-Cultural revolution. It just gave it a handy focal point that highlighted the ideological rift not only between two generations but also within the Baby Boomers themselves. At that point in history, part of our society turned right and part turned left.

Is the same thing happening with Millennials now? Certainly the worldview of at least the younger Millennials has been shaped through exposure to connected media. When polled, they inevitably have dramatically different opinions about things like religion, politics, science – well – pretty much everything. But even within the Millennial camp, their views often seem incoherent and confusing. Perhaps another intra-generational divide is forming. The fact is it’s probably too early to tell. These things take time to play out. But if it plays out like it did last time this happened, the impact will still be felt a half century from now.

Why Our Brains are Blocking Ads

On Mediapost alone in the last three months, there have been 172 articles written that have included the words “ad blockers” or “ad blocking.” That’s not really surprising, given that Mediapost covers the advertising biz and ad blocking is killing that particular biz, to the tune of an estimated loss of $41 billion in 2016. eMarketer estimates 70 million Americans, or 1 out of every 4 people online, uses ad blockers.

Paul Verna, an eMarketer Senior Analyst said “Ad blocking is a detriment to the entire advertising ecosystem, affecting mostly publishers, but also marketers, agencies and others whose businesses depend on ad revenue.” The UK’s culture Secretary, John Whittingdale, went even further, saying that ad blocking is a “modern-day protection racket.”

Here’s the problem with all this finger pointing. If you’re looking for a culprit to blame, don’t look at the technology or the companies deploying that technology. New technologies don’t cause us to change our behaviors – they enable behaviors that weren’t an option before. To get to the bottom of the growth of ad blocking, we have to go to the common denominator – the people those ads are aimed at. More specifically, we have to look at what’s happening in the brains of those people.

In the past, the majority of our interaction with advertising was done while our brain was idling, with no specific task in mind. I refer to this as bottom up environmental scanning. Essentially, we’re looking for something to capture our attention: a TV show, a book, a magazine article, a newspaper column. We were open to being engaged by stimuli from our environment (in other words, being activated from the “bottom up”).

In this mode, the brain is in a very accepting state. We match signals from our environment with concepts and beliefs we hold in our mind. We’re relatively open to input and if the mental association is a positive or intriguing one – we’re willing to spend some time to engage.

We also have to consider the effect of priming in this state. Priming sets a subconscious framework for the brain that then affects any subsequent mental processing. The traditional prime that was in place when we were exposed to advertising was a fairly benign one: we were looking to be entertained or informed, often the advertising content was delivered wrapped in a content package that we had an affinity for (our favorite show, a preferred newspaper, etc), and advertising was delivered in discrete chunks that our brain had been trained to identify and process accordingly.

All this means that in traditional exposures to ads, our brain was probably in the most accepting state possible. We were looking for something interesting, we were primed to be in a positive frame of mind and our brains could easily handle the contextual switches required to consider an ad and it’s message.

We also have to remember that we had a relatively static ad consumption environment that usually matched our expectations of how ads would be delivered. We expected commercial breaks in TV shows. We didn’t expect ads in the middle of a movie or book, two formats that required extended focusing of attention and didn’t lend themselves to mental contextual task switches. Each task switch brings with it a refocusing of attention and a brief burst of heightened awareness as our brains are forced to reassess its environment. These are fine in some environments – not in others.

Now, let’s look at the difference in cognitive contexts that accompany the deliver of most digital ads. First of all, when we’re online on our desktop or engaged with a mobile device, it’s generally in what I’ll call a “top down foraging” mode. We’re looking for something specific and we have intent in mind. This means there’s already a task lodged in our working memory (hence “top down”) and our attentional spotlight is on and focused on that task. This creates a very different environment for ad consumption.

When we’re in foraging mode, we suddenly are driven by an instinct that is as old as the human race (actually, much older than that): Optimal Foraging Theory. In this mode, we are constantly filtering the stimuli of our environment to see what is relevant to our intent. It’s this filtering that causes attentional blindness to non-relevant factors – whether they be advertising banners or people dressed up like gorillas. This filtering happens on a subconscious basis and the brain uses a primal engine to drive it – the promise of reward or the frustration of failure. When it comes to foraging – for food or for information – frustration is a feature, not a bug.

Our brains have a two loop learning process. It starts with a prediction – what psychologists and economists call “expected utility.” We mentally place bets on possible outcomes and go with the one that promises the best reward. If we’re right, the reward system of the brain gives us a shot of dopamine. Things are good. But if we bet wrong, a different part of the brain kicks in: the right anterior insula, the adjacent right ventral prefrontal cortex and the anterior cingulate cortex. Those are the centers of the brain that regulate pain. Nature is not subtle about these things – especially when the survival of the species depends on it. If we find what we’re looking for, we get a natural high. If we don’t, it’s actually causes us pain – but not in a physical way. We know it as frustration. Its purpose is to encourage us to not make the same mistake twice

The reason we’re blocking ads is that in the context those ads are being delivered, irrelevant ads are – quite literally – painful. Even relevant ads have a very high threshold to get over. Ad blocking has little to do with technology or “protection rackets” or predatory business practices. It has to do with the hardwiring of our brains. So if the media or the ad industry want to blame something or someone, let’s start there.

Sorry Folks – Blame it on Ed

Just when you thought it was safe to assume I’d be moving on to another topic, I’m back. Blame it on Ed Papazian, who commented on last week’s column about the Rise of the Audience marketplace. I’ll respond to his comment in multiple parts. First, he said:

“I think it’s fine to speculate on “audience” based advertising, by which you actually mean using digital, not traditional media, as the basis for the advertising of the future.”

All media is going to be digital. Our concept of “traditional” media is well down its death spiral. We’re less then a decade away from all media being delivered through a digital platform that would allow for real time targeting of advertising. True, we have to move beyond the current paradigm of mass distributed, channel restricted advertising we seem stuck in, but the technology is already there. We (by which I mean the ad industry) just have to catch up. Ed continues in this vein:

“However, in a practical sense, not only is this, as yet, merely a dream for TV, radio and print media, but it is also an oversimplification.”

Is it an oversimplification? Let’s remember that more and more of our media consumption is becoming trackable from both ends. We no longer have to track from the point of distribution. Tracking is also possible at the point of consumption. We are living with devices that increasingly have insight into what we’re doing at any moment of the day. It’s just a matter of us giving permission to be served relevant, well targeted ads based on the context of our lives.

But what would entice us to give this permission? Ed goes on to say that…

“Even if a digital advertiser could actually identify every consumer in the U.S. who is interested—or “in the market” for what his ads are trying to sell and also how they are pitching the product/service—and send only these people “audience targeted ads”, many of the ads will still not be of interest…”

Papazian proposed an acid test of sorts (or, more appropriately – an antacid test):

“Why? Because they are for unpleasant or mundane products—toilet bowel cleansers, upset stomach remedies, etc.—-or because the ads are pitching a brand the consumer doesn’t like or has had a bad experience with.”

Okay, let me take up the challenge that Ed has thrown down (or up?). Are ads for stomach remedies always unwanted? Not if I have a history of heartburn, especially when my willpower drops and my diet changes as I’m travelling. Let’s take it one step further. I’ve made a dinner reservation for 7 pm at my favorite Indian food restaurant while I’m in San Francisco. It’s 2 pm. I’ve just polished off a Molinari’s sandwich and I’m heading back to my hotel. As I turn the corner at O’Farrell and Powell, an instant coupon is delivered to my phone with 50% off a new antacid tablet at the Walgreen’s ahead, together with the message: “Prosciutto, pepperoncinis and pakoras in the same day? Look at you go! But just in case…”

The world Ed talks about does have a lot of unwanted advertising. But in the world I’m envisioning, where audiences are precisely targeted, we will hopefully eliminate most of those unwanted ads. Those ads are the by-product of the huge inefficiencies in the current advertising marketplace. And it’s this inefficiency that is rapidly destroying advertising as we know it from both ends. The current market is built on showing largely ineffective ads to mainly disinterested prospects – hoping there is an anomaly in there somewhere – and charging the advertiser to do so. I don’t know about you, but that doesn’t sound like a sustainable plan to me.

When I talk about selecting audiences in a market, it’s this level of specificity that I’m talking about. There is nothing in the above scenario that’s beyond the reach of current Mar-Tech. Perhaps it’s oversimplified. But I did that to make a point. In paid search, we used to have a saying, “buy your best clicks first”. It meant starting with the obviously relevant keywords – the people who were definitely looking for you. The problem was that there just wasn’t enough volume on these “sure-bet” keywords alone. But as digital has matured, the amount of “sure-bet” inventory has increased. We’re still not all the way there – where we can rely on sure-bet inventory alone – but we’re getting closer. The audience marketplace I’m envisioning gets us much of the way there. When technology and data allow us to assemble carefully segmented audiences with a high likelihood of successful engagement on the fly, we eliminate the inefficiencies in the market.

I truly believe that it’s time to discard the jury-rigged, heavily bandaged and limping behemoth that advertising has become and start thinking about this in an entirely new way. Papazian’s last sentence in his comment was…

“You just can’t get around the fact that many ads are going to be unwanted, no matter how they are targeted….”

Do we have to accept that as our future? It’s certainly the present, but I would hate to think we can’t reach any higher. The first step is to stop accepting advertising the way we know it as the status quo. We’ll be unable to imagine tomorrow if we’re still bound by the limitations of today.

 

The Rise of the Audience Marketplace

Far be it from me to let a theme go before it has been thoroughly beaten to the ground. This column has hosted a lot of speculation on the future of advertising and media buying and today, I’ll continue in that theme.

First, let’s return to a column I wrote almost a month ago about the future of advertising. This was a spin-off on a column penned by Gary Milner – The End of Advertising as We Know It. In it, Gary made a prediction: “I see the rise of a global media hub, like a stock exchange, which will become responsible for transacting all digital programmatic buys.”

Gary talked about the possible reversal of fragmentation of markets by channel and geographic area due to the potential centralization of digital media purchasing. But I see it a little differently than Gary. I don’t see the creation of a media hub – or, at least – that wouldn’t be the end goal. Media would simply be the means to the end. I do see the creation of an audience market based on available data. Actually, even an audience would only be the means to an end. Ultimately, we’re buying one thing – attention. Then it’s our job to create engagement.

The Advertising Research Foundation has been struggling with measuring engagement for a long time now. But it’s because they were trying to measure engagement on a channel-by-channel basis and that’s just not how the world works anymore. Take search, for example. Search is highly effective at advertising, but it’s not engaging. It’s a connecting medium. It enables engagement, but it doesn’t deliver it.

We talk multi-channel a lot, but we talk about it like the holy grail. The grail in this cause is an audience that is likely to give us their attention and once they do that – is likely to become engaged with our message. The multi-channel path to this audience is really inconsequential. We only talk about multi-channel now because we’re stopping short of the real goal, connecting with that audience. What advertising needs to do is give us accurate indicators of those two likelihoods: how likely are they to give us their attention and what is their potential proclivity towards our offer. The future of advertising is in assembling audiences – no matter what the channel – that are at a point where they are interested in the message we have to deliver.

This is where the digitization of media becomes interesting. It’s not because it’s aggregating into a single potential buying point – it’s because it’s allowing us to parallel a single prospect along a path of persuasion, getting important feedback data along the way. In this definition, audience isn’t a static snapshot in time. It becomes an evolving, iterative entity. We have always looked at advertising on an exposure-by-exposure basis. But if we start thinking about persuading an audience that paradigm needs to be shifted. We have to think about having the right conversation, regardless of the channel that happens to be in use at the time.

Our concept of media happens to carry a lot of baggage. In our minds, media is inextricably linked to channel. So when we think media, we are really thinking channels. And, if we believe Marshall McLuhan, the medium dictates the message. But while media has undergone intense fragmentation they’ve also become much more measurable and – thereby – more accountable. We know more than ever about who lies on the other side of a digital medium thanks to an ever increasing amount of shared data. That data is what will drive the advertising marketplace of the future. It’s not about media – it’s about audience.

In the market I envision, you would specify your audience requirements. The criteria used would not be so much our typical segmentations – demography or geography for example. These have always just been proxies for what we really care about; their beliefs about our product and predicted buying behaviors. I believe that thanks to ever increasing amounts of data we’re going to make great strides in understanding the psychology of consumerism. These  will be foundational in the audience marketplace of the future. Predictive marketing will become more and more accurate and allow for increasingly precise targeting on a number of behavioral criteria.

Individual channels will become as irrelevant as the manufacturer that supplies the shock absorbers and tie rods in your new BMW. They will simply be grist for the mill in the audience marketplace. Mar-tech and ever smarter algorithms will do the channel selection and media buying in the background. All you’ll care about is the audience you’re targeting, the recommended creative (again, based on the mar-tech running in the background) and the resulting behaviors. Once your audience has been targeted and engaged, the predicted path of persuasion is continually updated and new channels are engaged as required. You won’t care what channels they are – you’ll simply monitor the progression of persuasion.

 

NBC’s Grip on Olympic Gold Slipping

When it comes to benchmarking stuff, nothing holds a candle to the quadrennial sports-statzapooloza we call the Summer Olympics. After 3 years, 11 months and 13 days of not giving a crap about sports like team pursuit cycling or half heavyweight judo, we suddenly get into fist fights over 3 one hundredths of a second or an unawarded Yuko.

But it’s not just sports that are thrown into comparative focus by the Olympic games. It also provides a chance to take a snap shot of media consumption trends. The Olympics is probably the biggest show on earth. With the possible exception of the World Cup, it’s the time when the highest number of people on the planet are all watching the same thing at the same time. This makes it advertising nirvana.

Or it should.

Over the past few Olympics, the way we watch various events has been changing because of the nature of the Games themselves. There are 306 separate events in 35 recognized sports that are spread over 16 days of competition. The Olympics play to a global audience, which means that coverage has to span 24 time zones. At any given time, on any given day, there could be 6 or 7 events running simultaneously. In fact, as I’m writing this, diving, volleyball, men’s omnium cycling, Greco-Roman wresting, badminton, field hockey and boxing are all happening at the same time.

This creates a challenge for network TV coverage. The Olympics are hardly a one-size-fits-all spectacle. So, if you’re NBC and you’ve shelled out 1.6 billion dollars to provide coverage, you have a dilemma: how do you assemble the largest possible audience to show all those really expensive ads to? How do you keep all those advertisers happy?

NBC’s answer, it seems, is to repackage the Olympics as a scripted mini-series. It means throttling down real time streaming or live broadcast coverage on some of the big events so these can be assembled into packaged stories during their primetime coverage. NBC’s chief marketing officer, John Miller, was recently quoted as saying, “The people who watch the Olympics are not particularly sports fans. More women watch the games than men, and for the women, they’re less interested in the result and more interested in the journey. It’s sort of like the ultimate reality show and miniseries wrapped into one.”

So, how is this working out for NBC? Not so well, as it turns out.

Ratings are down, with NBC posting the lowest primetime numbers since 1992. The network has come under heavy fire for what is quite possibly the worst Olympic coverage in the history of the games. Let’s ignore for a moment their myopic focus on US contestants and a handful of superstars like Usain Bolt (which may not be irritating unless you’re a international viewer like myself). Their heavy-handed attempt to control and script the fragmented and emergent drama of any Olympic games has stumbled out of the blocks and fallen flat on its face.

I would categorize this as a “RTU/WTF” The first three letters stand for “Research tells us…” I think you can figure out the last three. I’m sure NBC did their research to figure out what they thought the audience really wanted in Olympics game coverage. I’m positive there was a focus group somewhere that told the network what they wanted to hear; “Screw real time results. What we really want is for you to tell us – with swelling music, extreme close ups and completely irrelevant vignettes– the human drama that lies behind the medals…” And, in the collective minds of NBC executives, they quickly added, “…with a zillion commercial breaks and sponsorship messages.”

But it appears that this isn’t what we want. It’s not even close. We want to see the sports we’re interested in, on our device of choice and at the time that best suits us.

This, in a nutshell, is the disruption that is broadsiding the advertising industry at full ramming speed. It was exactly what I was talking about in my last column. NBC may have been able to play their game when they were our only source of information and we were held captive by this scarcity. But over the past 3 Olympic games, starting in Athens in 2004, technology has essentially erased that scarcity. The reality no longer fits NBC’s strategy. Coverage of the Olympics is now a multi-channel affair. What we’re looking for is a way to filter the coverage based on what is most interesting to us, not to be spoon-fed the coverage that NBC feels has the highest revenue potential.

It’s a different world, NBC. If you’re planning to compete in Tokyo, you’d better change your game plan, because you’re still playing like it’s 1996.