“We are navigating uncertain times.” How often have you heard some variation of this phrase in the last three years? It’s been used to explain everything from layoffs to schedule changes to service disruptions, and — while it may be true — it’s getting exhausting. I think it’s fair to say that we’re all looking for more “certain times.”
Perhaps more certainty and predictability lie in the future, but they remain to be seen. Right now, everyone (especially those in marketing) needs to focus on navigating uncertainty.
Adjust Investment Strategies for Uncertain Times
In the past year, we have seen the tide shift from a general policy of “grow at all costs” to “show profitability.” This means that companies’ investment strategy needs to focus on protecting the bottom line, and if the correction is not done gradually over time, the marketing budget is the most exposed to cuts and pullbacks.
This is usually because of two reasons:
A structural adjustment like laying off part of your staff comes with expensive severance packages and therefore requires time to show an impact on the bottom line.
Because companies that need to prioritize revenue and profits in the short term are often willing to forgo a medium to long-term impact for immediate relief, favoring sales costs that can bring immediate revenue vs. marketing expenditures that bring both short, medium, and long-term benefits.
This is the reason why companies that are seeing a softening demand (i.e., topline decline) or are anticipating a market contraction, tend to cut media and marketing budgets before reducing sales costs.
The problem is that if this pullback is done too abruptly, inbound demand will soften to the point where your sales efforts become less effective and will therefore worsen the company’s need to cut costs to maintain margins. Moreover, if your disinvestment strategy is more drastic than your competitors, the market share loss will make a later recovery 2-3x more expensive than the initial savings.
At this point, people may be tempted to suggest that to prevent this tricky situation, companies should have been more conservative in bolstering costs during a growth period. Still, we need to remember that limiting spend in a moment of growth also presents the opportunity cost of losing “fair” market share with respect to the market and competition.
Since we can’t go back in time, let’s discuss how companies can navigate a worsening financial outlook and how marketing and finance departments can partner together to adjust their investment strategy to manage the current environment.
Attention is the most valuable resource in the advertising industry. It is a prerequisite for message reception, encoding, and ultimately, the ability to change perception and drive behavior. As advertising legend Bill Bernbach said, “If your advertising goes unnoticed, everything else is academic.”
While the idea of measuring and optimizing for human attention to improve advertising effectiveness is becoming more prominent in the industry, thereare still those who believe it’s a concept too ephemeral to properly be measured or too marginal to grant the investment needed to make it mainstream.
This adverse perspective is often driven by a limited understanding of the nuances around this topic or a deliberate effort to protect a business interest. While there’s little I can do about the latter, I want to help address the former. I do so here by laying out some of the foundations for a constructive conversation around this fundamental resource.
When Apple rolled out new privacy changes in iOS 14 that gave the option to block apps from doing any kind of tracking on their device, an estimated 94% of users decided to opt-in, rendering impossible almost any type of targeting on nearly 60% of smartphones in the US. While this comes across as a righteous move from Apple, it delivers a devastating blow to the advertising industry and the many companies that depend on it. In addition, it also brings a long-term toll on consumers, creators, and journalists that will not be immediately evident.
We’re not talking enough about this impact.
User privacy is of paramount importance, and further regulation is needed, but the way this change was implemented was a crass and selfish fix from a company that decided to create a polarizing narrative to a nuanced issue to contrive a differentiating feature. The communication associated with the release aggravates the situation by further distorting user perception and forcing other companies to quickly follow suit with similar one-sided solutions to avoid falling at a competitive disadvantage. Not to say there aren’t bad actors or companies that use consumer data irresponsibly or illegally, but these should not characterize the rest of the industry. As the saying goes, let’s not “throw out the baby with the bathwater.”
But while Apple is exploiting common perceptions around advertising and tracking to its own advantage, the blame for making this possible goes to someone else. The advertising industry, the operators, the trade associations, and the executives (myself included) who have focused all their energies and resources in the past thirty years to make advertising more efficient and effective, should have taken time to educate people on the benefits of a functioning, transparent, and privacy-compliant advertising ecosystem.
For this reason, every time people think about advertising, targeting, tracking, and the use of data associated with it, they immediately assume nefarious intent or an invasion of their privacy. We shouldn’t be surprised if 94% of the population opts out of it when given a choice.
I want to take a moment to highlight some often-neglected aspects of the use of data in advertising and encourage a more nuanced conversation about advertising and privacy.
Four aspects we should consider when thinking about advertising.
Inspired by the 2019 State of Digital Marketing report by Luma Partners, I’ve decided to combine what they have shared with some of the data points I’ve been collecting over the past few months and come up with my 4 predictions for the TV and video industry in 2020 and related trends over the next two or three years. Based on these predictions, we can also speculate what advertisers and companies should do to keep their competitive edge.
It has been a long hiatus. A new role at ABI has kept me busy in the past six months. During that time, I wrote a couple of pieces for AdExchanger that took me away from this blog, but I have had an itch to write a new opinion post.
As a digital marketer who is now responsible for a large TV budget, I decided to write about the current state of the TV advertising industry. It’s not surprising that someone with my background would be critical of a medium that has hardly evolved in the past 70 years, but I feel I can provide a different perspective. Besides, there’s little point in me discussing some hot topics of the digital marketing industry. Marc Prichard is already doing a tremendous job at demanding transparency and fair practice in the digital space, and he definitely has more pull than I have. There are also people with the caliber of Scott Galloway and Elizabeth Warren arguing for the need to break up and regulate “big tech.” They have eloquent and extensive arguments; there’s little I can add there.
I see three idiosyncrasies as clear signs that the TV industry is desperate to reinvent itself to avoid disruption or obsolescence. While not extensive or equally applicable to all the players in the market, these signs serve to make a larger point:
Audiences are traded like crude oil
Fluctuating moral compasses
In this analysis, I don’t want to only point out what’s wrong. I also want to offer some thoughts on how the TV industry could evolve to live a new golden age and truly oppose players like Amazon, Netflix, Facebook, and Google, who are not afraid of short-term losses, sit on piles of cash, will likely spend north of $30 billion in content, and pride themselves of being “category disruptors.”