What does the future hold for advertising?

Article used with permission from Emerald Group Publishing

The advertising-media symbiosis by which advertising firms have, for a century or more, placed ads in newspapers, on television, and on the radio seems to be breaking down.

Now, you might be asking what this has to do with business strategy. Well, there are several answers to that. The most direct answer is that every company needs to advertise in one way or another, and the traditional way of doing that seems to be in crisis.

Newspapers

With the notable exception of the Wall Street Journal, print newspapers in this country are losing daily circulation amazingly fast. Almost every major metropolitan newspaper in the country has lost over a quarter of its daily circulation in the past five years; some have lost more than half. Classified advertising, once a core profit centre for newspapers, has been almost entirely devoured by the internet; online versions of the newspapers carry advertising the effectiveness of which is highly debatable, debated, and badly compensated.

The publisher of the New York Times made it clear a year or two ago that eventually the newspaper will be delivered strictly on line. Virtually all newspapers have on-line versions nowadays; these have cannibalized their print circulations to a major extent. Efforts to put up “pay walls” for content have had extremely limited success; only national brands and extremely specific, narrow commercial news sources have succeeded with this strategy.

Television

Television seems to be doing pretty well for the moment, at least financially. The rise of cable has certainly atomized their marketplace, but there have been opportunities for profit there as well. But there are serious clouds on the horizon even here: as the border between television and the internet blurs, the same advertising conundrum rears its ugly head. Internet watchers of television programming seem to have the same low tolerance for advertising that internet readers of newspapers do.

Magazines

Magazines face the same problem, with the possible exception of the glossy textbook-sized monstrosities such as Vogue, Vanity Fair and other such perfumed high-end coffee-table fare, which only seem to get thicker and smellier; and the New Yorker, whose readers are single-mindedly committed to reading the prose contained therein with a minimum of ads (but are willing to pay for the privilege of doing so relatively unhindered).

Radio

Radio ad revenue has been essentially flat from 2006 to 2010, even as audience has grown. The internet has had an influence there as well. Podcasts are a venue in which there is, if anything, even less appetite among users to endure sitting through an ad or two. At best, they will listen until the segment is definitively identified as an ad; then they will mute that portion of the broadcast, or if they are unable to do so, will commence cursing the source of the disruption, which is probably not precisely the effect that the advertiser had in mind.

Demise of traditional advertising

So what, or who, will pay for our nation's vital reality TV, sitcoms and “serious journalism” in the future? On-line ads simply do not pay what traditional print ads historically have. Streamed TV ads are fewer and less remunerative than network or even cable ads. Paywalls so far have provided dismal results. What is the solution?

Gerard Smith, who was a senior executive at Ogilvy & Mather and Publicis, proffers one alternative model that seems to have been explored extensively: exploiting the apparent advantages provided by new technology and the latest networking venues to get to know your customers more and more “intimately.”

On the face of it, the new networks such as Facebook, and the higher general availability of information on the preferences of consumers as a result of the Internet, would seem to provide marketers with a plethora of opportunities to target said consumers on an individual, customized basis. Anyone who has been on Facebook has seen the way ads off to the right tend to change to reflect what appears to be the member's preferences, as reflected in the content of their typed messages. Type the word “Texas,” for example, or mention your favourite baseball or football team, and Texas- or Chicago Cub-related ads pop up in the upper right-hand corner of your Facebook page.

E-mailed come-ons also used to mine similar data motherlodes, though spam filters have knocked that approach down quite a bit, and the new networks seem to employ far more efficient and effective algorithms to target their audiences.

Here is the problem, though. The more uncannily marketers are able to target network members, the more disturbing that targeting becomes to the target consumer. Even in the case of straightforward targeting, where you can tell why they think you might be interested, there is still an “ick factor” involved. As Gerard Smith says, “there is a certain honesty to an ad. You know what it is and what they are after, and they are not pretending to know you well or to be your bestest friend. You can despise it, think it is boring, resent that the jingle gets into your head – but you cannot say that you do not know what it is about or that they are trying to say they have plumbed the depths of your soul.”

But these new targeted approaches that utilize the internet and other related technological advances are different. On-line marketers gather up some set of data points about you and run them through an algorithm, and out comes a very precise prediction of what you might like. Sometimes it is just hilariously wrong, annoying but perhaps a bit amusing, and of no use to the marketer. But sometimes it is spookily accurate, and that is annoying in a more disturbing way.

So it is quite plausible that the traditional business model of advertising as we know it is dying. And it is also quite possible that the hopes of technology providing fantastically customized and targeted marketing opportunities are going to be dashed. So what is the future for companies and how are they going to reach their customers?

Future advertising

Let us assume for the sake of argument that advertising as we know it is kaput and that on-line advertising cannot slot in to take over the traditional place of television or print ads due to intolerance on the part of viewers to sit through ads, or else because of some sort of limited effectiveness of on-line ads in persuading people to buy. (It may not be kaput at all; large sums of money are being bet that the internet will be just another venue for a rather traditional approach to reaching customers).

And let us assume that the more sophisticated, technological, intrusive approach to reaching consumers fails to find a sweet spot between the comically off-base on one hand and the creepily accurate on the other hand. How do companies reach their customers in the future?

One hypothesis is “The Better Mousetrap Model.” Rather than trying to establish personal relationships with one's customers, something neither party really wants (or, in the case of corporations, can afford), firms can give up trying to “advertise” at all, and simply try to make a better product that will create “crowdsourced” word-of-mouth buzz. This dispenses with the attempt to target potential customers, and lets customers themselves, who have the sort of built-in credibility that an interested party such as the manufacturer can never duplicate, tell the story of the product.

Naturally, this means ceding partial control of the marketing process to the customer – something that may be intensely uncomfortable to more traditionally-minded (and more numerically-driven) marketeers. However, the alternative may be completely untenable.

January 2012.

This is a shortened version of “Once you can fake sincerity …”, which originally appeared in Journal of Business Strategy, Volume 32 Number 6, 2011.

The author is Patrick B. Marren.

© Emerald Group Publishing Limited