In the late 19th century, John Wannamaker (inventor of the department
store) famously said "Half the money I spend on advertising is wasted;
the trouble is, I don't know which half".
Since then, this adage has been central to the logic of the advertising business model: when in doubt, carpet bomb media with messages, reaching probably 20% of the intended target by flooding messages to almost everyone. Although "affinity" was deemed important, most of the big budgets would be aimed toward "power". Of course, TV once it caught on got the best of it: what other device could make so many people receive the same message at the exact same time? The Superbowl ad is the ultimate conclusion of this logic: pure power, telling 100 million viewers simultaneously that they need beer, beauty products, high tech devices, perfume or a new car. Basically the advertising equivalent of destroying a building with an atomic bomb: efficient but not utterly precise, and very costly.
That's probably why we went from being exposed to a few messages a day in 1966 to a whopping 5,000 messages a day nowadays, not factoring in that I can now receive adverting messages everywhere, including airport bathrooms, hotel rooms and probably my bedroom if some brilliant business innovator could find a way. In 1995 thousands of brands wanted to talk to everyone, there wasn't such things as enough inventory.
Strangely enough, the web made it worse. Like every other geek (sorry, technology enthusiast) my initial thought when the web first sprouted up was: "cool, at last a media where all data can be collected, measured, analyzed and fed back - at last I'll only get advertising on stuff that actually interests me."
I was very wrong. From 1996 to now, exactly the reverse has happened: more and more advertising, in more and more intrusive formats, with more and more messages and banners and skyscrapers and squares, not even including spam and pop-unders. Since 1996, technology has only made things worse, and the only way now to have a pleasurable surfing experience is to disable all cookies and uninstall flash (try it, you'll be surprised). But of course, as a tradeoff, I have almost no ads and have to proactively search for new products, new and interesting brands.
The other result the web had on advertising was that that prices went down. Unlimited and undifferentiated inventory cannot create value. Even in the digital world, editors, intermediaries and adSales house still sold context and media presence (real estate really), if possible at a fixed price and with little measurement. They just used technology to create more inventory and real estate, thus actually not changing the model at all.
But in 2002, Google came up with a silly idea: sell the right qualified audience (searching for "fuzz guitar pedal review" on Google is actually a pretty strong qualification), at the right price through auction, and on a pure performance basis. The advertising market reaction was simple: "That's not advertising". Thus from 2004 to now, search engine marketing was not considered by the industry to be advertising, although performance priced advertising is now anywhere between 70 and 80% of online marketing spends.
Originally, only Google could make this work. One reason for this was that managing real time auction bidding, inventory and ad messages was reserved for the few that could afford it and had the volume of traffic to build a business on roughly 1.5% of its actual inventory. The other reason was that traditional players were not too keen on breaking their business model: selling in a bundled package the half of advertising that was useless together with the half that wasn't.
Nonetheless, an industry cannot resist disruption forever: the smart advertising revolution is now starting, and I hope it is truly a revolution.
Now, technologies, entrepreneurs - and I believe advertisers and readers - are ripe. Technology can now, in a economically sound model (i.e. for not much money), collect, manage, calculate, restitute and store petabytes of data in real time, and in the cloud. Entrepreneurs took all of that into account, and I am glad to see that most of the new companies in RTB, DMP, AdExchanges, Trading desk markets are built and led by young and talented people really wanting to disrupt the market, and believing in a better advertising model for the future.
More importantly, advertisers themselves are getting it. After a few years buying and operating SEM and understanding the potential of technology more and more, they are starting to realize that it works. And increasingly they are frustrated that on one hand they can buy, optimize, retarget, and manage campaigns in real time, and pay on a performance basis for their views, leads and customers, while on the other hand, their traditional campaigns are still sold on a pure real estate basis. In simpler words, they're starting to get that all those technologies and players can sell them an audience, not a media. And the idea audience planning, of being able to do laser surgery rather than carpet bombing is compelling, and it works.
But most of all, I think it is a win for readers, for us. I do not dislike advertising, at all. Advertising is information, and I like being informed. I do not mind at all, when I am reading a "fuzz pedal review" to have brands pitching me, to discover new products, to get a sound sample. I do mind A LOT when I am reading a "fuzz pedal review" to have a full screen video about the latest hair care product for women pop up, then frantically trying to find the well hidden close button to stop it. I do mind A LOT when I have to watch 15 seconds of a totally-irrelevant-because-I-just-bought-a-car video advertisement before being able to skip to the latest Youtube funny video. And I think sometimes I actually degrade some brands that I could have considered (were I to want a new insurance policy) just because they are annoying me, A LOT.
But it's happening. And I do not believe it will go back. Advertising will become smart, is becoming smart.
What is a smart advertising experience ?
- I search "fuzz pedal review" on Google. I get on top of the list the brand leaders in pedal review (and not a price comparison engine), and sponsored links that catch me by actually proposing fuzz guitar pedal information, because google knows I am considering at this stage, not buying.
- On all the sites I visit to read those reviews, I have advertising on fuzz pedals, preferably not all on the one I am already reading about.
- When retargeted by fuzz guitar pedal sellers (who learned through Facebook data that I like brand x and brand y), I see ads with an actual real offer, meaning a fuzz pedal (not an instrument, not a banjo, not another type of pedal, preferably in my area, preferably with good ratings from my friends…)
- Once I've bought (I'm a pretty easy customer when it comes to guitar pedals) I stop having any advertising on fuzz guitar pedals, because I just got one (and I told my friends). But maybe within one week, I get a special ad format that asks me to review the and rate product.
- Maybe then I can click on a "Keep in touch" button, that opts me into an advertising/CRM database, and will (when something interesting happens) sometimes use advertising to tell me about new products, or cross sell me?
- Maybe there is a "stop annoying me I'm a guy" button on the women's beauty care advertising, so that the advertiser can stop spending budgets on me?
- Maybe in one year, I receive an ad for the new fuzz pedal, with a rebate if I want to switch, because the advertisers remember I'm a sucker for fuzz pedals?
- Maybe advertising becomes smart, at last ?
In the end of the 19th century, this was impossible. In 2013, it is doable, economically sound, and in the interest of the media (they will regain value and prices will increase), Advertisers (they will gain in cost, efficiency and loyalty) and most importantly, readers, us (a direct connections with what I like, now, and brands and products I care for).
Of course the real fun will begin when TV, the most powerful media, also becomes smart and data driven (2016 I think). Then we might stop being "poked" by irrelevant brands hundred times a day, and only have a few, but the right ones.
Our latest presentation was released on Slideshare today in conjunction with our upcoming Retail Mixer at PARISOMA: Digital Interfaces For Real World Shopping.
Enjoy the presentation, and if you are in San Francisco, please come to the mixer on December 12th. Retailers, relevant start-ups and investors will all be in attendance.
If you're NOT in San Francisco but would like to know more about the mixer or be involved somehow, drop us a line at email@example.com.
Hello! It's time once again for faberNovel to create our annual Study on one innovative company that is changing how things happen in their field and in the world.
What company would you like to learn about this year? We want to hear your thoughts.
Once a year for the past four years we have authored a study about a company and then published it on Slideshare with a Creative Commons license and shared it with the public.
The studies are deep-dives into the inner workings of that organization - what they do differently, from business models to management approach, to company culture and beyond.
We do this to inspire people -- ourselves included -- with insights into the innovative things these organizations do to move ahead in their industries. And hopefully people learn from these studies, and put some of what they learn into action to create new brilliant things of their own.
Our past studies have been:
Facebook, The Perfect Startup (2012)
Amazon, The Hidden Empire (2011)
Apple: 8 Easy Steps to Beat Microsoft (and Google) (2010)
Everything You Always Wanted To Know About Google... But Were Afraid To Ask (2009)
Now it's time for us to choose which company will be the focus of our next study. We have lots of ideas of our own, but this year we decided we would open the discussion up to everyone in our community, and ask them to weigh in.
So now we ask you: what company would you like to see the next faberNovel study be about?
What company inspires you with its innovative ways more than any other?
What company mystifies you?
Which company's secret sauce do you want to know the recipe to?
Please tell us - the more conversation, the better.
We go into the kitchen to begin cooking this up in December, so please send us your ideas before November 30th to be included in this conversation.
Tell us who you'd like to see our next study focus on *here*.
Thanks, we look forward to sharing the results with you.