ManSavesDog

For nearly a decade now I’ve been hearing, “This is the year for mobile advertising.” However, based on recent polling research I suspect the mobile industry has a bigger, underlying problem that that will greatly slow its adoption: Even advertisers hate the idea of ads on their phones.

In polls conducted with more than 2,000 visitors to Adweek.com, developed in conjunction with research provider Vizu, research showed that 76 percent of advertising types said, “Over my dead body” would they be willing to receive advertising on their cell phones. Only 15 percent said “Yes,” but it was a qualified “yes,” requiring permission. And these were ad people being surveyed, not general consumers.

As former CEO of the IAB, I believe I learned a thing or two about what it takes to create a new medium and garner advertising industry support.

First, know that I believe in the vitality of mobile advertising because I think it has a compelling, unique selling proposition and the power of locality — a new way for advertisers to target and bring relevance to their advertising messages. Mobile has many other strengths, including: interactivity; the fact that it’s personal (and will hopefully be personalized); its omnipresence (which, while unique, could also be accomplished with media mix); and its ability to do sight, sound and motion, with which marketers tend to be enamored.

As a marketer, I’d really want to be looking at those elements, in particular the USP, to figure out how they can be leveraged to get a competitive advantage for my brand. And it’s best to do that now, before my competition figures it out.

Today, cell phones and other devices already have a major audience. In the same research, we found that 77 percent of Adweek.com’s readers have a cell phone, 63 percent have a Blackberry or BB-like device and 72 percent have an iPod or similar device. It makes you wonder if the ubiquity and familiarity of mobile might be working against itself.

Plus, it’s not like advertisers don’t use the standard “medium” feature of their phones. Fifty percent of Adweek.com’s readers said they access the Internet on their cell phone at least once a week and 35 percent of those said they do it every day.

Additionally, 49 percent take business calls “anytime” and another 14 percent said they take calls from 7 a.m. to 9 p.m. Thirty-one percent said they check their Blackberries until 11 p.m. and 22 percent said they check them all night. Finally, 63 percent said they text every day.

The data surely suggest this is not a medium that’s going to die from lack of reach, low usage or not having a USP. No, this is a medium that the most important consumers in the world, the advertisers, prefer not to be tainted with ads.

In my last Adweek.com piece I highlighted that the rate of ad blocking on the Internet is out of control and DVRs in TV land are demonstrating that consumers are fed up with advertising’s practices. Mobile is apparently suffering from contempt (as a medium) prior to execution.

I suspect that marketers, at some level, are afraid their own typical spray & pray approach used in other media might be applied to this much more personal medium.

I often get asked to speak on how we can avoid making the same mistakes the Internet made, to which I answer the following.

First, a new medium needs to prove not just its advertising effectiveness, but its cost effectiveness versus other options. Mobile hasn’t done this in the way that it needs to yet, and it needs to look beyond the value of a click, which the Internet was way too slow to address.

Second, as the new kid on the block, mobile needs to make sure an agency makes a profit in working within the medium, which requires there to be good operational processes, integrated technology to their other systems, common measurement, consistent nomenclature and, most importantly, standards across the board. Mobile appears to have just gotten started in these areas.

Third, mobile needs to figure out ubiquitous and compelling ad units that invite creative exploration. In 2003, the IAB announced the death of the 468 x 60 banner not because the banner didn’t work, but because creatives didn’t like it.

Fourth and most challenging is it needs to figure out how to minimize the inherent challenge of fragmentation at various levels including different carrier systems, different handsets, different software,  If TV acted like mobile and every cable network (or cable system) and every TV set was different, then clearly TV advertising spending would not be over $50 billion today. Mobile must deal with the fragmentation of its medium and complexity at every level. These are not small issues.

But in the end, I think the most important lesson learned is not to let your medium get to the place, like Internet advertising did, where anyone thinks pop ups and other consumer-offensive activity are OK. Resist ads like punch the monkey or flashing screens so irritating that some in the U.K. believed the medium could trigger epileptic fits. Don’t let the phrase, “But it’s effective,” be a defense for irritating the consumer.

So my big lesson learned for Mobile?

Fight to the death those who want to use/abuse the medium for short-term gain but long-term loss, even if a marketer. Attack any entity trying to participate in mobile who disrespects the consumer or outright annoys them.  Aggressively protect consumer trust, whether it be around issues of privacy or other issues of transparency to consumer.

Here’s a twist on the famous David Ogilvy quote that the customer is your wife: For new media like mobile, the customer is your advertiser. Act accordingly.

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Reprinted from Adweek Magazine

In a twist on John Wanamaker’s famous quote, research suggests that more than 50 percent of consumers hate what advertisers do for a living. In an online survey conducted by Vizu Answers against a broad sample of over 2,000 Internet users, 56 percent of respondents said that they want to eliminate all advertising, while only 44 percent accept advertising as it is. Even more bleakly, 72 percent said they find advertising “annoying” or “extremely annoying.”

While consumer dislike of advertising may not be new or even surprising, the degree to which consumers hate ads and the action they can and do take to avoid ads today is worrying for the entire industry.

When asked what medium’s ads do you “go to the most effort to avoid,” Internet outpaces all media with 36 percent of respondents answering affirmatively, while 28 percent of the respondents pointed to TV.

When asked “What media has the most invasive and irritating advertisements?” the Internet again gets top billing, with nearly 48 percent choosing it. TV is no slouch in this category either, which at 27 percent rates as the number two most-intrusive and irritating medium.

Consumers’ displeasure with TV ads led to 42 percent noting they’d “pay an extra $20 per month to avoid ads.” (That’s in addition to what they pay for cable.)

The marketplace confirms the distaste for ads with one in five households owning a DVR—a device used to avoid ads as much as to time shift media consumption.

I was at first heartened to see that only 10 percent of responding consumers were willing to pay $20 per month to avoid ads on the Internet. Upon further consideration, however, it seemed obvious that consumers would be reluctant to pay for something they now get for free! Some 79 percent of survey respondents said they already had a pop-up blocker of some sort and 43 percent said they already had ad blocking software.

Blocking ads on the Internet is so easy that even Norton’s Internet Security software had ad blocking built in the first versions because, as their product people told me directly, “our customers wanted it,” And the increasingly popular Firefox browser has a simple, free and downloadable add-on that strips out display advertising on Web pages.

To be clear, while these ad-blocking efforts automatically strip out display advertising, the online advertising business model is not negatively affected because industry counting methodologies do not count blocked ads as impressions.

[GS1] Ad-blocking data I saw in 2005 as CEO of the Interactive Advertising Bureau indicated that 7 percent to 8 percent of all in-page ads were being blocked (this didn’t include pop-up ads, just the graphical ads inserted into the web page). Lest we think Google and search ads are exempt, 5 percent to 6 percent of those ads were estimated to be blocked as well. And these numbers were trending up at the time. A further view of where ad blocking may be going is that increasingly-used Firefox browser users were four times more likely to block ads than users of Microsoft’s Internet Explorer browser.

Here’s a good question for marketers: What is the future of a business where the consumer hates your product, which in our case is the Advertisements? Or where the manufacturer of that product is unresponsive to the viewpoints of the consumer? And where apparently the provider of that product has no respect for the consumer’s time nor makes any major effort to make its products relevant, let alone liked?

My hope is that this research, which should of course be validated by additional studies, causes the advertising industry to evolve its practices. Evolution could include reducing the amount of commercial clutter in TV, or further decreasing the Internet’s use of irriatating and annoying online ads. As ever, the need persists to address the irrelevance and poor targeting of ads in all media.

Additionally, as came out from the research for my book, What Sticks, 47 percent of ad campaigns analyzed did not hit a consumer motivation that mattered or deliver an ad message the consumer understood. By any measure, that’s abysmal. Even worse when you consider that the 30 campaigns analyzed were developed by major agencies for blue chip advertisers such as Procter &Gamble, Kraft, Johnson & Johnson, McDonald’s and others.

As is increasingly apparent to everyone—and as this new research confirms—as all media become digital, the consumer is more in control than ever, and tools for ad avoidance are free and require little to no consumer effort. As a result the advertising industry can afford less than ever to be unresponsive to consumers’ views and preferences. To be insensitive to them will be painful, costly and potentially devastating. Just ask someone in the music industry the power of consumer control in the digital world.

By Greg Stuart

Greg Stuart is an advisor to numerous digital media and marketing businesses. He is also the former CEO of the IAB and co-author of What Sticks: Why Most Advertising Fails….

Advertiser Mag

First published in Advertiser Magazine

Research against $US 1 billion in advertising spending reveals that 47% of campaigns fail before a dime is spent on media[1]. This would suggest that not only was John Wanamaker right but that the ad industry has improved little since he predicted that was the case 100 years ago[2].

While my book, What Sticks, addresses a variety of reasons on why advertising fails, there is one element I believe is doing the most damage to advertising effectiveness. That is the underlying economic fundamentals of the relationship between Agencies and Marketers and in particular the misaligned incentive system. I’ll let the reader decide if this explains a horrific 47% ad failure rate.

So what does the current business relationship between advertisers and their agencies incentivize? Based on what I have observed, it is winning awards. Let’s look at how that works. Commission structures and hourly fees structures incentivize volume, or more revenue, for agencies. When the incentives are directed at volume, then the agency is perpetually directed to win new business (the backbone of any agency today) and one of the contributing factors to winning new business is awards (the backbone of new business). And I’ll go one step further, awards are best garnered from “big idea” high production values TV commercials, which is certainly reflected in today’s media allocation. It’s a perfect system, unless you value effectiveness.

And to be fair, I am not saying that advertisers or agency personnel don’t try to develop effective advertising. Of course they do. However the failure rate seen in the research suggests something else has to be going on. Incentives are insidious like this; they create all sorts of unintended consequences. If you’ve read Steven Leavitt’s Freakonomics[3], you get that incentives play a large role in the outcome of any situation.

So what is the trend in the agency marketer relationships today? Procurement. Much is written in today’s trade press and discussed by both the ANA and AAAA about marketers seeking to reduce agency fees via the insertion of procurement departments into the agency/marketer relationship. The focus of which is to reduce the agency hourly fee, lowering commission or eliminating elements of the agency’s recommended program. None of which directs an agency to act in the interest of producing better and more effective campaigns.

In fact, some of the unintended consequences of reduced agency fees include reduction in agency training programs, decrease in research that seeks to increase learning about how advertising really works, lessening of research into the effectiveness, or ROI, of a particular campaigns, and the lessening of agencies’ ability to hire talent. I am not saying higher agency fees alone would improve these critical elements, however, reduced agency fees and a lack of strong incentive toward advertising effectiveness will pretty much guarantee a high rate of failure.

Oddly, many of the procurement personnel I recently spoke to concurred with my logic above but they are paid to do a specific job (probably even incentivized to do it) and so the negotiation of agency fees continues to be a major industry trend.

The Argument for Procurement & Negotiation of Agency Fees

To better understand today’s trend, let’s look at this in relationship to advertising’s economic impact on earnings – generally the ultimate incentive for any company. As the chart suggests, if a company with $500 million in sales, allocates 10% to Advertising and another 10% of that goes to the agency’s fee, (yes, I am aware that agency fees of 10% are from a bygone era) this leaves the agency with a $5 million fee. If the marketer negotiates 20% off that fee, this ultimately results in a +1% gain in corporate earnings. My guess is that every company today would be very excited about a 1% gain in earnings. Thus, the economic support for procurement and hard-negotiating of agency fees is obvious. Who wouldn’t support that?

But are we missing the boat? What if we invested in advertising effectiveness instead? What happens then?

What Do We Really Know About the Impact of Advertising?

Before we look at this issue, allow me to put some of the research learning’s in context. The focus of the research was to assess the relationship of one medium to another both in effectiveness and most importantly, in cost effectiveness. Cost effectiveness by medium was then used to reallocate dollars from the most expensive media to another medium, obviously seeking to produce a more impactful overall campaign.

Of course, a lot of factors influence cost effectiveness, among them the strength and breadth of the consumer motivation selected, the clarity of the ad message itself, the targeting and timing of the ad, the cost of the medium, and really important, where each medium is on its diminishing return curve (a measure we have seen no marketer making to date). The measures of effectiveness were whatever the brand told us to measure, which would be some variation of awareness, brand imagery, purchase intent, or sales. The cross media optimization analysis was accomplished via real-world campaigns against 1.1 million consumers’ attitudes and sales behavior. Each study was reviewed by the ARF in addition to each marketer’s research group, all of which gave us high confidence in the results[4].

We found that simple optimization (just between media, not within a medium) produces average gains over 30%. Thus we coined the phrase “same budget, better results” for our work. Sometimes this optimized improvement was achieved by just removing ads that didn’t work but more often it was from redistributing funds from one medium to another. Also, many marketers were often very over invested in one medium and the reallocation of those dollars to more cost effective media made a big difference. Here are some examples:

McDonald’s launched a new menu item in 2002 behind a four week campaign of TV, Radio and some Online In this case, we found McDonald’s was spending so much in broadcast that the TV and Radio ads had virtually stopped having any impact. In fact, while the first 80% of spending increased awareness by 35 points (the primary measure), the remaining 20% grew it only 2 points. Therefore, shifting 14% of funds to Online (magazines were not in the mix) and leaving 6% for another campaign another day, brand awareness measures bounced by 5 points (not +5% but 5 whole points). This naturally violated our foundational phrase as we now had “lower budget, better results”.

For the Ford F-150 relaunch in 2004, the results were even more dramatic. In this study we measured through to sales, which involved gathering the vehicle registration data of every Ford F-150 sold and matching that against the 30,000 people whose media habits we were monitoring. In this case, we were able to identify and monitor consumers that were exposed to a media mix without Online and those that had just 2 ½ percent of the budget placed in Online. That campaign with online has Truck sales +21% versus mix with online, or an estimated $750 million in sales. And when we looked at sales against group with a different media allocation F-150 sales were $1.4 billion higher!!!

These are astonishing outcomes that could have the power to totally transform a brand and it was all accomplished with a little extra effort and an investment in research.

Granted, both of these campaigns operated with advertisements that worked and worked very well. Neither of these campaign ads fell in the 47% of campaigns that failed to hit upon a solid consumer motivation or a failed advertising message that didn’t communicate. Optimizing creative that doesn’t change consumer behavior is much like preverbal re-arranging the deck chairs on the Titanic.

What if We Made Sure Each Campaign Worked?

So why don’t all campaigns work this well? This article proposes that as well intended and professional as people are, commissions on media buying and hourly fees simply incentivize the wrong outcome. Driving down agency hourly rates or number of hours forces agencies to spend less time getting a campaign right. This would explain why we found in the course of the research that when we told the agency or client that the advertisement for a particular medium did not work, in all but one case, they said run the ads anyway. The epitome of throwing good money after bad.

But let’s look at the benefits of getting advertising right. Take our chart from before but this time let’s assume the advertising really worked. We’ll take a conservative 10% increase in sales (although we saw much better in our optimizations). We’ll leave the absolute budget allocation to advertising the same (resulting in only 9% of advertising to sales) and keep a full 10% to the agency fee. The result with margins staying the same was that the increase in earnings is +10% versus the paltry +1% before!

And my guess is that any brand getting its marketing right at this level has garnered a significant future producing competitive advantage for some period of time.

So why if it is this easy, does it not happen? Well first, marketing is not easy and I think part of the problem is that industry parishioners don’t give it enough credit for it being hard. Getting the motivation, the message and the media right is both an art and a science and takes more effort (i.e., resources) than is applied today. And given the level of increasing level of complexity in today’s media world, knowing a whole campaign works based on “our gut” just doesn’t cut it anymore.

So What Do We Do Now?

My suggestion is that marketer, their procurement group, and the CEO & CFO (this is that important) look carefully at what they want to achieve and the incentives and climate they are creating to foster that result.

Are you paying your agency to get the advertising right? Are you giving them the latitude to be wrong and the resources to get it fixed fast? Are you making sure the agency is paying its personnel to get it right? Properly aligned incentives are needed at all layers. Heck, are you paying your own marketers in the right way and giving them the lattidude to get the advertising right.

But it’s not going to be easy. I recently communicated a message of “advertising could be so much more powerful” to a group of European brand mangers suggesting in part that one 90 minute meeting in the process of campaign development could greatly improve insuring the campaign elements work. The head of advertising for this large package goods company stood up right after me and said they were not going to do that. Guess there was no incentive to take time to ensure the ads work.

In the end, I think Georg Christoph Lichtenberg, the 18th-century German scientist, satirist and Anglophile said it best. “I cannot say whether things will get better if we change; what I can say is they must change if they are to get better. “ And there sure is a lot of room for better here.

By Greg Stuart

Co-Author: What Sticks

Mobile Advertising: Supercharge...

First printed in Mobile Advertising

Reprinted with Permission in Adweek Magazine

“How do we not make the same mistakes the Internet guys made” is the most common question I get from each of the “newer” media channels, whether it be digital out-of-home media, IPTV (Internet Protocol TV) or mobile.

Looking back at my experience as the CEO of the Interactive Advertising Bureau during the initial growth of the industry from $6B to $17B in online ad spending between 2001 and 2006, it’s clear that success was not easily won. That’s hindsight, of course, for the online ad spending, but it’s opportunity for mobile advertising! No one wants to make the same mistakes and everyone wants to get there quicker.

There are a number of perspectives I gathered from that experience that I’d offer as relevant this time around.

A key obstacle was the degree to which marketers and agencies resisted the internet as a viable ad medium in spite of facts to the contrary. They’d explain away their disinterest with a number of reasons, including “Internet is not a mass medium” (false), or my favorite, “I don’t look at online ads myself” (which is equally not true). All of these caused the vast majority to miss the opportunity right in front of them to build their company; their brands’ and dare I say, even their own careers.

So what is my prognosis for Mobile medium on this score?

The good news is that that like the Internet, Mobile already is a mass medium. With over one billion handsets sold worldwide every year and a mobile broadband network infrastructure that can transmit those ads, mobile is at a basic level, ready for primetime advertising. Equally important is that Mobile has a number of unique attributes versus other media choices, including the locality, or geographic specificity, it can attain in addition to the potential personalization of the medium given that each consumer has their own handset. Both of those I would consider to be major differentiators and of major value to many marketers therefore permitting mobile the opportunity to capture some share of the nearly $500 billion spent worldwide in advertising annually.

But what about the challenges to growth in mobile marketing and advertising? First and foremost, they are up against the same thing we were — marketers/inertia. As progressive as the advertising industry supposedly is, it’s an industry that is, in my experience, very slow to change. Painfully slow. Research we did at the IAB indicated that 2/3rds of marketers describe themselves as “tried and true”. This is not a leading indicator of innovation, particularly when a key part of your job is to chase consumer eyeballs as they get continually bombarded with new places to look.

But why don’t marketers adopt new media easily? There are a lot of reasons but I’d think a big part of it is that they don’t recognize the value and they are uncomfortable with the new and, at least to them directly, unproven.

On some level, this is human nature and understandable. Mobile advertising, just like the early days of online advertising, is emerging, complex and filled with a lot of techno-speak. It would have been helpful back in 2001 to at least have a roadmap: How does the medium fit into what we’ve seen before? And what are its unique capabilities? What is the necessary technology? What’s the existing and evolving industry value chain and potential business models? What are the current challenges and what’s our best thinking on how they will be overcome?

But let’s return to other point raised around the value of the mobile medium and the opportunity within that.

Seminal research we conducted while I was leading the IAB indicated that when online advertising was added to a media plan in the 10 to 15% of total media mix range, the overall campaign results would increase around 20% to 30%. This increase was in part a result of adding any new medium to a mix but also because the demand was low relative to the supply and as a result the pricing made online advertising the so called “deal of the century”. There is no reason to believe that Mobile will not have a similar economics.

And for that reason alone, marketers should consider Mobile as part of the mix. While many marketers are slow to respond, the early adopters have a chance to capture immediate value while locking in long term benefits by gaining valuable experience. The marketing manager at Ford, who we worked with on one of the research studies, put it best. “We will use what we learned here [via the insights regarding online had to his campaign] to kick the competition’s ass”.

Additionally, the value of that unique knowledge to your brand also has value to your career. Many of those that I worked with in the early days of the Internet industry, whether they were at the agency, the client or the media company, witnessed their careers rocketing forward. Sure, the excitement of the business attracted the talented, just as Mobile is doing now, but it went well beyond that. They generally were able to distinguish themselves from their peers in both learning something new and then delivered big value back to their brands and companies. Basically, they leap-frogged normal career paths.

Peter Drucker, the father of Modern Management put it best, “Today knowledge has power. It controls access to opportunity and advancement.” Mobile is the next opportunity to capture knowledge, so go do it.

Greg Stuart

Former CEO of the Interactive Advertising Bureau

Co-author What Sticks: Why Most Advertising Fails and How to Guarantee Yours Succeeds

More on the book

Mobile Advertising: Supercharge Your Brand in the Exploding Wireless Market
by Chetan Sharma (Author), Joe Herzog (Author), Victor Melfi (Author)

Hardcover: 432 pages
Publisher: Wiley (March 7, 2008)

ISBN-10: 0470185988        ISBN-13: 978-0470185988

I thought this was so good, I wanted to reprint it here.  Greg (Man Saves Dog blogger)

By Steven Levitt, Award Winning Economist and author of Freakonomics

There are two kinds of problems in business. Messy ones and neat ones. Inventory forecasting is an example of a neat problem. You can go in and count the inventory in the morning, then count it again in the evening and calculate the depletion and replenishment needs – model it and become more efficient. It might not be easy to develop the tools for optimal control of inventory, but at least the problem is well defined and everything is easy to measure.

Then there are the kinds of problems I like. The messy ones. The ones where it is hard to even know what the right questions to ask are. And once you ask the right question, figuring out how to answer it isn’t easy either. These are the kinds of problems that people tend to fall back on conventional wisdom to answer, but these are also precisely the problems where conventional wisdom is most likely to be wrong.

Marketing falls into the messy category. It is messy, because there are lots of variables like competitive spending, unobserved fluctuations in demand, a complex array of intersecting media. It is messy because people generally do not spend their marketing budget at random. For instance, big electronics firms advertise more before Christmas. Are their sales high that time of year because they advertise more, or do they advertise more because their sales are high at that time of year? It is hard to know for sure.

Marketing is messy, but not impossible. In particular, as the authors of this book so convincingly show, the key to solving the thorny problem of measuring and managing marketing expenditure is experiments. Randomization, so long the gold standard in scientific research, has the power to cut through the Gordian knot of advertising and marketing complexity. What Sticks will show you how to use these tools – remarkably simple ones it turns out – to show you what works and what doesn’t in your own campaigns. The book pinpoints where marketers waste billions, and how anyone in marketing can put in place processes and measurements to significantly improve the ROI.

The fact that the book is built on a foundation of data rather than speculation and hype makes What Sticks a rarity among advertising and marketing books. This book offers a fundamental challenge to existing marketing conventional wisdom. It is going to rile a lot of feathers. It may get messy – just the way I like it.

Steven D. Levitt, author of Freakonomics

Professor, Economics, University of Chicago

April 2006

Always On Article

Or, Dear VC’s, Marketing is s Mess – Please Help

In my recent co-authored book, What Sticks, Why Advertising Fails and How to Guarantee Yours Succeeds (Kaplan Publishing 2006), we estimated that $112 billion of the total $295 billion in U.S. advertising spending is wasted. While most of that a result of ineffective advertising and sub optimal selection of media, I think this is just the tip of the iceberg for the waste and inefficiency in the advertising industry.

As the soon-to-be-former-head of the Interactive Media industry’s trade association (IAB), one symptom of this problem I witnessed firsthand was how slow traditional marketers and their agencies were to adopt the Internet as an advertising medium. While the Interactive Ad industry made a lot of progress during my tenure growing from $6 billion to $17 billion in annual online ad spending, the research that underlies What Sticks suggested that if advertising were rationale online advertising should be closer to $40 to $50 billion.

The retail magnate John Wanamaker over 100 years ago said, “I know that one-half of the money I spend on advertising is wasted. The problem is, I don’t know which half”. Today, say that in a room of advertising people and a ripple of nervous laughter will ensue. In our research, conducted against $1 billion in advertising spending, we found that 47% of the campaigns measured failed before a dime was spent in media, suggesting Wanamaker was right and the industry has not improved much in the last century. As leading edge as advertising is supposedly, it apparently is not progressive.

I would suggest that the ad industry is long overdue for disruptive change. In fact, as a person who really loves the ad business (and who operated as a Venture Partner for a west coast VC); I would go as far as to beg the venture community to get more deeply involved in the advertising industry. Nearly every other aspect of business has gone through disruptive change and technology innovation. Finance departments were revolutionized by both hardware and software developments. Supply chain management has led innovation in manufacturing and distribution. Sales force automation has forever altered businesses and enterprise software has sought to clean up the rest of business wringing out even greater efficiencies. And while there has been an influx of venture capital spending to the Internet, online is only 5% of all of advertising spending. Yes, innovation and disruptive change, often led by venture capital, have affected all others functions of a business, except for marketing.

Having raised money from VC’s for an advertising business, I have heard many VC’s suggest that marketing and adverting are creative businesses and that “VC’s do not do that”. True, it is a creatively driven business but that doesn’t mean there aren’t parts of it that are not and couldn’t use more business science or technology help. While I am sure someone can make a more sophisticated argument, suffice it to say that there have to be a few billion-dollar businesses in addressing over a $100 billion dollars of waste.

Here is where I might focus my efforts in looking for opportunities for venture capitalist to step in.

Infrastructure and wringing inefficiencies out of the processes. Planning, executing, buying, tracking and back office management of advertising is hugely inefficient and an obvious first step for VC’s. The primary billing systems of advertising are not ASP, or even API, driven. In fact, they are closed proprietary systems. Although the Ad Agency’s trade association kicked off an eBiz initiative a few years ago, much of the work is still being done by faxing and phone calls. The enterprise systems that make repetitive processes efficient are badly needed for agencies to continue to make money, especially with the downward pressure on agency fees.

Data and its application to improve Advertising’s performance and relevance: Privacy concerns aside, advertising targeted to consumers that is relevant to the consumer would be major step forward for all media. Irrelevant ads (like men seeing ads for products sold to women) only teach the consumer to ignore advertising. Isn’t there an approach to consistently personalize ads that does not trigger consumers’ privacy concerns (credit cards have figure it out)? Contextual search ads and behavior targeting is helpful but what about the other $285 billion in advertising spending.

Dashboards and better advertising measurement: I suspect most VC’s and the tech industry would be horrified if you knew how media is measured, which is the underlying currency for the business. So prepare yourself. Some TV, and most Radio measurement, is based on paper diaries completed by consumers that are mailed in and compiled by hand (the horror!). It is even embarrassing to me to tell those outside the business. And frankly, what or who is measured is not that great a measurement approach anyway. What is really needed is for marketers to have a dashboard at their desktops, updated daily, of what REAL impact their advertising and marketing is having against consumers attitudes and behavior (sales) in near real time. This is area alone is rife with opportunity. In addition, the issues raised by Click Fraud in search and affiliate marketing still need a world-class solution.

New Channels of distribution to consumers and the ever-increasing new media: How quaint it is to remember back when advertisers had just TV, Radio, Magazines and outdoor to reach consumers just over a decade ago. I believe the world is getting a new medium every 5-7 years at this point. Internet has not seen the last of its development (the Net is not really one medium anyway, it’s many), plus mobile, IPTV and games are coming. There is a lot of investment going into these areas already and that should continue. And please, next time overall advertising suffers a small hick up as it did in mid 2000, do not run for the hills. Generally, advertising resets itself the beginning of each decade (it did in early 80’s, early 90’s and again in 2000) but those adjustments where short lived. I personally will buy and innovate on those dips.

Product improvements and effective advertising: The truth is that advertisers, as pointed out before, are shockingly poor in developing advertising with the assurance it will work. Two years ago, I was in a meeting with the CEO of a major auto company who asked their head of marketing the same question five times, which were all variations of “what do you mean we spend hundreds of millions in advertising and don’t know what it does?” No longer can marketers just rely on their gut. Potential solutions to address this are many and varied, better research tools, better auditing and media measurement, more control over frequency distribution of ads (any commercial shown over 5-7 times to one consumer experiences major diminishing returns) and much more. Maybe not an area for VC’s but still important is making sure ads meet a basic consumer motivation and communicates clearly is critical. I have even suggested to online publishers that they should reject ads that do not work. I would wonder if that process could not be systemized for the entire industry.

And the list goes on and on. What I think is most interesting to me in all this opportunity that if we make the industry work better for marketers and better for agencies then it is likely has be better for media, and for sure better for consumers.

What does all this mean for my friends in the advertising business? Change, you bet. Dramatic change? God, I really hope so. My interpretation of the research from What Sticks suggests that if advertising can really address all these issues, ad spending will not go down and will more likely go up because marketing will play a stronger and more predictive role in boosting a business’s topline and margins. We saw that happen in the research.

I invite the VC’s and Entrepreneurs of Silicon Valley and Silicon Alley and Silicon Beach and other places to look deeply at the Advertising industry. It needs a revolution and you are just the people to do it. Please help.

Originally posted Nov 2006

By Greg Stuart

Soon to be ex-CEO & President of the IAB

Co-Author: What Sticks

I have been reading some recent comments on the accountability of media where some media even lay claim to having the opportunity to be “the most accountable medium”. Accountability is clearly the topic of the day given the increasing need to understand value of advertising and the recent public debate over TV research methodologies.

I’d suggest that much of this current debate is fueled by the more accountable world that many marketers are currently getting via their online marketing efforts.

Accountability can be viewed in two veins. One, what is the confidence that a consumer saw an ad. Two, what measurable direct action did the consumer take as a result of that ad.

Based on my 20 years in the advertising/marketing area (two of which were as an agency media researcher studying media measurement), I would suggest that any media that chooses to claim accountability is politely, absurd.

Television for years has rejected measuring commercials and still thinks that the programming audience is representative of whether a consumer saw an ad. Magazines like-wise think that because a consumer can recognize a magazine cover is an ad impression. This is not to disparage Nielsen or MRI; however, to suggest that accountability is anywhere near possible given the current methods in today’s environment is just fooling ourselves. Radio, Outdoor all share similar issues.

Online, however, does measure that a consumer requested a page where an ad was delivered. Ads DO NOT occur in an Online environment when the consumer is in another room or sometimes not even home, as in the case in TV or

This is not to say that all Online Measurement is perfect because it isn’t yet. However, we are getting much closer, especially given some recent work on-going with the Media Ratings Council, the AAAA’s and the ARF.