Intentions & behavior

John Battelle predicted the commercial rise of Search (GOOG) back in 2005 in his book with the subtitle ‘ How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture’ . One of his central metaphors was ‘the database of intentions’. Advertisers would pay huge sums of money to place an ad(word) triggered by a search term  If someone is looking for a nice holiday farm in Tuscany it might make sense to place an ad for just that and hope that someone might click. Right so. The rest is history one might add.

Now intentions are under pressure. Amazon has this huge database with people who actually bought something. An act to buy is behavior. Actual behavior is far more interesting information for advertisers. Not for all products and services maybe, but for a lot.

Amazon woos advertisers with what it knows about consumers.

 

Monocle

During the last two days I had a rather strange experience. I enjoyed reading a magazine. I actually read every article of the last issue of Monocle, studied the design, looked at their website and tried to figure out their business model.

I was impressed by their advertisements. The magazine is packed with them, so advertisers know to find them. They are capable of producing or co-producing stunning new forms of advertising for their clients. I wonder if these brands work directly with the Monocle team or if they go through an agency, be it media or branding.

I bought the magazine at ABC in Amsterdam. The coverprice actually was more or less the same as it’s subscription price. Another innovation, one could say.

Besides the magazine, they produce a televisionshow for Bloomberg and publish a newspaper. How about that!

They own shops and of course sell through their webshop.

The editor already made his mark with Wallpaper* of course, but I think Monocle is top of the bill and a very fresh inspiration for publishers worldwide.

Yes, it can be done. It still is possible to combine surprising and interesting high quality content with 21st century business thinking.  A prime example.

Certainly worth my full attention for the 6 hours it took me to read. And I will keep the issue and reread it.

If you want to experience Monocle, you have to buy the magazine and hold it in your hands.

It can be done

This morning I received a tweet that pointed me to a debate organized by The Economist. This magazine is very succesful as a paper product, with great content and a huge circulation. At the same time it is a prime example of a media company that tries to understand the impact of the move to bits and actually really produces new forms of digital content. Content that matters.

The debate is on the question whether or not computing is the most important technology that originated from the last century. Two opposite views are expressed by top of the bill experts. Everyone can vote and comment. Very interesting views and opinions by readers are posted. The user engagement is quite long, I stayed at least for one hour and it had my full attention. I certainly will come back.

Of course I had to register and of course I will receive marketing materials from The Economist, but I don’t mind. I signed up for it.

The debate is sponsored by Intel. I did not object to this at all, on the contrary, I liked it. When was the last time you admired an advertiser for bringing you something on a screen?

So it can be done. Watch and judge for yourself.

Enter the debate at the medium right.

The box rocks

Last week Sir Martin Sorell, chief executive of WPP, the biggest global ad agency, shared two surprises. One is quite remarkable: the recovery of old media. Not all though. Newspapers, particularly regional papers still suffer. Magazines slowly see budgets come back.

TV, in most countries the main advertising medium, is by far the old media winner.

Campaigns to persuade people to consider one product over another, or actually go out and buy something, are well suited to digital outfits, with their superior ability to track and segment audiences. Experiments with social media are on the rise.

But, when awareness has to be created or emotional experiences need to be offered, TV is the medium to be.

The whole article can be found here.  The box rocks.

What people do

John Battelle, cofounding editor of Wired amongst many other very interesting achievements, published in 2005 his book’ The Search. How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture’.

In this, in my view still unchallenged, book he introduced The Database of Intentions. The concept is very simple. GOOG and others know what we want, like, desire, want to know more about, are looking for, etcetera. That can be monetized and they sure did. 

Now that bits of content are spreading to more mobile media and TV, still the Holy Grail in the eyes af many advertisers, we will see all kinds of search inspired advertisements pop up. Wheter or not one likes this, is not important, it will happen. Advertisers need eyeballs, at least that’s what they think.

A month ago Nedstat, one of the companies I admire and have been following from it’s very early days, has been acquired by comScore. We will see some very interesting moves by them is my expectation.

Intentions are one thing, data another. It still is what people do, isn’t it?

Ad Tech

Terence Kawaja, former investment banker and maker of video parodies, introduced a new version of the ad tech landscape recently.

One wonders why online advertising is such a hassle.

A leak from GOOG?

Advertising Age obtained a document on ad spending on Google Search in the U.S.  Some interesting things can be learned from it. For me it was the simple fact that most of the money comes from large advertisers and is directly billed by GOOG.

Here are some excerpts.

‘………..While the search-spending document obtained by Advertising Age is not a complete list of advertisers on Google, the accuracy of its data was verified by multiple sources with direct knowledge of spending levels. It’s a revealing cross-section of Google’s business that gives some clarity to one of the most opaque areas of ad spending, and the lifeblood of many American businesses……….’

…….’

‘…………The accounts listed are distributed broadly in terms of spending levels. The document shows 47 advertisers that spent more than $1 million in June; 71 that spent between $500,000 and $1 million, and 357 that spent between $100,000 and $500,000. These are direct-billed customers only, not the many thousands of small self-serve advertisers that make up Google’s long tail, a key component in its $23 billion global annual revenue………….

The complete article can be found here. The question remains who leaked the info.

The idea of control

Let’s have a closer look at the value chain of advertising. On top sits the advertiser who spends money to reach people that need to be influenced or persuaded. The only thing the advertiser knows for sure is that half the money he spends is wasted.  Which half is of course the question. So advertisers need reassurance. That’s why they all like to measure. They love data, ratings and models.

Most of the advertising industry is about advertising. Advertisers love to use mass media to transport and transmit their messages. The medium still is the message, one might argue. Mass media advertising techniques are labeled as Above The Line (ATL).  Roughly said everyting else is BTL: Below The Line. Below The Line is growing in importance and in budgets. Why? Advertisers can measure spending and results. They experience the feeling of control. Control of the effectiveness of their actions. In rough times when budgets are tight and spending money is down, one turns to measurable actions.

While budgets at the top of the food chain are shrinking, advertisers still need to hire Above and Below The Line agencies and talents. Some of these agencies do everything, especially a few worldwide operating conglomerates.  Advertisers hire these agencies because they employ the creative talents who can come up with creative ideas and these agencies know how to buy media.

Buying media to place ads used to be very profitable. The 15% commission for buying media has in fact been the only business model of this entire agency based industry. The agency gets the percentage and in turn produces the insights, ideas, artwork and other materials needed. Everybody happy.

Some advertisers however wanted a piece of the action. Why not buy media yourself or through a niche agency willing do it for less? So these days lot of media budgets are handled by media buying agencies.  And they make their living by, exactly, buying mass media. In this crisis something else happened as well. The companies that own and exploit all types of different media are selling directly. Advertising is not bought anymore, it is sold.

So marketing budgets are down. And therefore advertising budgets are slashed. More money moves to BTL, which can be controlled by advertisers themselves. Less and less moves from the upper level to the second line. This link of the value chain is under pressure because commissions are squeezed and new forms of competition drove prices down even faster.

The more new media, the more new media producing companies. The more hype and competition, the more fragmentation. The more fragmentation, the higher the need for models, data, ratings, reports. Advertisers need control to know which half of their budgets is wasted, remember!

This is a classic example of a value chain in distress. And as always the disrupted business needed a solution from an outsider looking in. And as always it came.

If advertisers basicly want to measure, they want to control. If someone offers the idea of 100% control, advertisers will turn to them. The rest is history.  They are also known as GOOG.

The weakest link

Advertising suffers from setbacks and cutbacks in many respects. The advertising industry as a whole is under pressure. The weak links in the value chain of advertising are up for grabs.  Advertising as a once more or less respected trade is getting more and more obscure. Advertising as part and percentage of corporate spending patterns will diminish.

Many smart business writers and thinkers in marketing are very clear in this matter. In this day and age the golden days of advertising are over. End of story. Read Godin. Listen to Garfield. Bob that is, not the cat. Just like mass media and mass production advertising as a way to reach the masses is water under the bridge. Masses have gone, except maybe now during the World Cup. Almost 50% of our kids do not believe advertisers and the media they use.  They actually distrust them. It is difficult to say if the leisure time on the internet surpasses television because a growing majority of people use both at the same time. Almost 60% of Americans use tv and the web simultaneously.

Marketers read these books and reports also. If they do not have the time for it, quotes from these books and reports will reach them through conferences, conversations and social media.  If marketers don’t read and think about these issues, their competing collegues and co workers do and will bring arguments to the table if and when the CFO holds budget meetings.

The concept of the marketingmix was invented not that long ago and still is a rather new discipline. In the 60’s it all started to blossom during the glory days of radio and the early days of tv. Marketing people suffer from myopia, as all professional people do. They think they are indispensable and provide an essential function within a company. Is this really the case?

Let’s have a very brief and rather contrarian look at the history of business after WW II. Cash rich mass markets, homogeneous and huge demand. Golden opportunities for business people. Entrepreneurs and inventors came up with things people needed. Once succesfull, factories produced more and more and wharehouses were filled. Enter the salespeople. Hey, we need to go door to door and sell this stuff. It worked very well, until it didn’t. Enter the discipline of marketing. Hey, we have to figure out who our target groups are and what they want, before we actually start producing things. That worked very well, until it didn’t anymore. Enter marcom & advertising claiming that we should not make things and could not sell or market them without the creation of a brand. That worked well, until it didn’t. Enter the growing number of online experts of today. Are they right? Probably not.

What strikes me is the direction of this trend. Everything  moves away from idea and product, through the phases of selling and marketing to branding and nowadays into online & mobile. All these steps go away from the original starting point. Every step of the way, further away from the source: normal people with normal needs and wants. When Akio Morita started what later on became Sony he and his fellow engineers came up with a wooden (!!!) pan to boil rice, because that’s what people needed in Japan at the time. Find out what people want and deliver it. It still is that easy. Morita never forgot where he came from.

Advertising or in a broader sense marcom is nothing more than a tiny little link in a value chain. The value chain of advertising is broken. The whole chain consists of broken links. Weak links. The first and foremost weakest link is that most parties involved in reaching customers don’t have a clue anymore who the customer is and what it is the customer is doing and wants.

The sole reason for my contrarian view is one of today’s most intriguing phenomena: all value chains have turned upside down. Customers, consumers, people have become the beginning. Again.

All other links in the chain are weak.

Free Soap

When radio started shows were shows and ‘brought to you by’ meant sponsored by advertiser x. Simple and cost effective. People sat down for an hour or so and listened in small groups, meanwhile doing what they were doing. Listening, reading, knitting, playing.

When TV started they copied the same model. ‘Soap’, the worldfamous daily format, essentially was really nothing more then a tv show sponsored by a producer of, yes, soap. People sat down and watched, meanwhile doing what they were doing.

When online media started they copied the same model. People sat down, but the rest is quite different. This time the device was not in the livingroom, it was on a desk and there was only one person active. Not a group of people.  But let’s not think about the implications, this thing is a huge success, isn’t it?

It takes a generation to adopt a new technology, but it takes clearly more than one generation to change the revenue and business models to support producers of original content. Advertising based models do not work for producers of original online content. It works well for search. GOOG still makes quite a bundle, but how about the creative minds that produce the content. If and when it’s a hobby, or a passionate drive to share one’s thoughts, that’s quite okay. But things are different if you have to pay the people who produce the creative and intellectual works.

Recently I heard of a very successfull casual gaming website, attracting 1M unique visitors a month, playing for about 15 minutes. Not bad. CPM however went down to 1$. That amount of money unfortunately is not enough to pay the bills for electricity.

Why did this occur? The crisis, obviously. Advertising budgets have been cut. Advertisers stick to what they consider proven media and models. Money flowed into TV. And GOOG, of course.

In media industries the dependence on advertising, the mood swings of advertisers and volatile corporate spending patterns have become huge problems. Advertising based revenue streams do not offer conditions for a sustainable competitive advantage.

Spending might go up again, although I doubt it. But it certainly will go down again. It’s time for new and more sustainable forms of funding.

Even Chris Anderson had to admit it.