As an early stage investor focused on media, marketing tech and analytics, I inevitably wind up in conversations about the future of advertising. These span a range from the predictable (ad campaigns will get better; agencies will get smarter), to the apocalyptic (brands are toast; agencies are dead). But what has surprised me most is what hasn’t been brought up in these discussions. A fundamental question has been left unasked by these ad tech leading lights, and I find myself wondering why don’t they see what is right in front of them?
The question: Who says advertising will have, or even deserves, a future?
Now, this may sound like your basic Molotov cocktail concept – more provocative and flashy than constructive. But that’s not the case. This is a true, deep question which everyone in mobile and Social should be pondering because a logical analysis reveals a forceful case that advertising, as we have known it historically, ought to go away.
To understand why this is so, let’s review some fundamentals. First, advertising isn’t some eternal truth. It is a relatively recent invention, barely more than 100 years old. Prior to that, commerce was utterly local. The shoe maker knew how many shoes he could make and how many of his neighbors would buy shoes in a year. He made all that he could sell and sold all that he could make. When businesses know that they can sell everything they make, there is no need to advertise. This was the case through almost all of human commerce.
Only with the Industrial Revolution and the accompanying revolution in transportation during the late 19th Century did production begin to outstrip the known local buying capacity. This ushered in the potential to ship excess goods far from where they were made to sell to new buyers. And that shift brought about the need to inform those new buyers and to compete with entrenched local sources. And that generated the original need for advertising and all that goes with it.
Back then, and until the past few years, one fundamental reality dominated advertising: The audience only existed at afar, removed from the manufacturer and his message. You may want to sell skis, but the world of skiers is diffuse, ski buyers are hard to find. And, if you can’t find them, you can’t influence them. Same for boats or stereos or children’s cereal or cosmetics. Marketers knew that there were customers out there somewhere; knew that folks already used their products and that more could be induced to begin using them. But how could one actually find the right targets in a milling, amorphous, distant consumer population?
Enter media. Early media players figured out how to use carefully selected, evocative content to draw out of the general population small, efficient sets of folks who cared more about a given subject than everyone else. They did this first with magazines, then radio and then cable TV. All of these media properties had in common that they had some way to show they had attracted the right audience, some way to measure its activities and separation from the norm, and some way for marketers to get messages in front of them. This, of course, was advertising: specialized messaging from companies that—nestled in and among the editorial content—brought the right messages to the right audiences, semi-efficiently.
Media moguls made fortunes because the system they controlled, as imprecise as it was, represented the only way advertisers could get their messages in front of people who would most likely to find them valuable.
So much for Media 101. But think about now, the Social Era. Is the audience at a far, removed? Hardly. The actions, attitudes, connections, and influence of everyone on the worldwide network are available to anyone who wants to examine them. Is it impossible now to know who is active around a particular topic or product? Nope. Consumers are talking about their preferences openly on Social, sharing content and creating content. Do marketers require an intermediary to help them understand who to reach, when, where and why? Certainly not in the way they used to; this is something any marketer so motivated can now do on his own.
What this indicates is that the historical reasons behind advertising’s creation and power have vanished. The whole system—magazine pages, 30-second spots, circulars, Nielsen households, radio giveaways—are all artifacts of a marketing reality that no longer exists. If brilliant marketers-from-outer-space landed on Earth today and looked over the landscape, the last thing they’d consider doing is creating traditional advertising. It would seem insane to build these structures when a marketer could use analytics to target specifically motivated and activated individuals with content and offers specifically tailored for them.
So what would these ET-marketers create to connect buyers and sellers in today’s tightly connected world?
They would build an open market that placed real time value on the clouds of data that surround each and every person on the planet. They would let marketers build just-in-time clusters of people-data as the targets for their messages and compete, just as stock traders do, to place the highest tolerable price against that target. And then this system would let the individuals so targeted decide on their own (either real time or based on rules set by these individuals in advance) whether the value offered to reach them met their expectations of appropriateness and value. When a match occurs, bam!, the message gets delivered. No match, mo message.
What this system does is disintermediate the no longer needed middlemen of media. They are superfluous. Marketers don’t need them to know who to reach or how to reach them. And consumers don’t have to yield up the value of the needs, wants, habits, income and influence they have created through their lives to third parties. Marketers and consumers deal together directly, and fairly, to the satisfaction of both parties.
How would this work in a day-to-day sense? I’m the father of the young woman who tweeted with delight last week that she is now engaged and expecting a June wedding. That makes me a known one-year-out father of the bride. My wife and I will most likely be making a set of big financial choices over the next twelve months, of huge value to those in the wedding racket. Research shows that I spend $50K on my older daughter’s nuptials. I’m a prime prospect! I’m also a savvy consumer. I have let the worldwide network know that I’m now open to hearing from wedding vendors, but only if each and every contact made has at least $50 in immediate value to me, and $500 in benefits, if I buy the offered service. Companies can meet my price, or leave me be. At the same time, I have changed byrules for investment advisors, making it clear that I don’t want to hear from any of them this year. My cash is spoken for.
It’s efficient market economics brought to advertising for the first time. And it’s happening now. because it finally can happen. If early publishers could have done this, they would have. They only built media because it was the best they could do back then.
We have finally addressed the paradox that “I know half my advertising budget is wasted, I just don’t know which half.” Now, marketers do. And that, as they say, changes everything.
Image credit: CC by Sagie