How today’s news with ESPN, Ai, and WPP is indicative of the death of “advertising.”
Sports entertainment goliath¬†ESPN has laid off¬†approximately¬†100 people, with about half of them being on-air talent. Amazon is introducing a new feature via their¬†Echo that will help you choose your outfit¬†of the day. Multinational advertising conglomerate WPP Group¬†reports exceedingly slow revenue growth¬†as clients “spend less.”
These three seemingly unrelated stories¬†de jour¬†actually are symptomatic of the new construct that is¬†disrupting¬†rocking the advertising industry.¬†¬†And the foundation of this GAMECHANGING dynamic is¬†something that we’ve been saying for some time: Consumers aren’t really consumers, anymore.
They are marketing partners. To remain viable, the advertising industry must treat them as such.
These three news items underscore why.
Going….going….GONE!
On Wednesday, 4/26 the buzz began to build that significant layoffs were imminent at ESPN. Watching Twitter in real time, it was apparent that phone calls were being made across the network. One moment a reporter tweets his best wishes for “the people being let go,” and the next minute returns¬†to Twitter to reveal that he had¬†just learned he is “one of those people.” The purge wasn’t confined to obscure analysts, either. Some fairly prominent names and former athletes were on the list.
Aside from the notoriety of some of the talent who were laid off, what makes this move interesting is that is was more proactive than reactive. Traditionally layoffs occur as a cost-cutting measure in the face of hard economic times. It has been recognized for sometime that ESPN has been “leaking subscribers.” But this is really misleading. As people cut the chord and ditch their cable packages, ESPN has been a victim of the bundle. The network is part of practically every basic cable subscription. The actual number of viewers of ESPN (versus subscribers) is far less than those who actually pay for the service as part of the bundle. The network’s penetration peaked at a little over 100 million households back in 2009/2010, and has fallen precipitously to under 90 million homes today. But again, that number is based on subscribers, not actual viewers. While it is true that its flagship TV properties like¬†Sportscenter¬†have experienced an actual decline in ratings, its other platforms – especially its digital and podcast properties – have grown.
This is no indicator of declining sports fandom. It says everything about trends in media consumption.
“ESPN has been actively engaged throughout its history in navigating changes in technology and fan behavior in order to continue to deliver quality, breakthrough content. Today, we are again focused on a strategic vision that will propel our vast array of networks and services forward.”
– ESPN president John Skipper in memo to company.
ESPN’s falling subscriber numbers have certainly¬†hampered the stock price of parent company Disney. That being said, it remains one of the single most valuable properties owned by the entertainment giant, and generates tons of cash. The staffing shakeup¬†isn’t a last-ditch effort to save a legacy brand. It is a move to intended¬†to ensure the brand remains relevant in new media environment.
“Our content strategy… still needs to go further, faster… and as always, must be efficient and nimble.”
Here Skipper is specifically referring to digital offerings. And it is here that the advertising industry should taketh note. If a behemoth like ESPN is unable to shoehorn the old television construct into the digital age, you can sure as hell bet advertisers won’t be able to do it, either. It won’t be enough to pick up a thirty-second¬†TV commercial and simply repurpose it as a thirty-second web ad. ESPN is changing their content model. Advertisers and advertising companies must change their content models, too.
And we’re not just talking “digital media,” either.
“In 2017, we are SO post-selling.”
The Ai genie is out of the bottle.
Channeling Alicia Silverstone’s fashion-tech from¬†Clueless, Amazon is introducing a camera for Echo that, well, will help you tighten up that sloppy appearance. What does this have to do with the future of advertising?¬†Everything.¬†If Alexa tells you that your clothing selection for any given Wednesday is 50% outdated, it’s not that much of a leap to understand how Alexa can then suggest purchasing something more in-style from a featured fashion line. It fact, it’s not a leap at all. It’s likely the driving force behind the feature itself. How valuable it is to Ralph Lauren or DKNY or Adidas to be able to engage with their potential customers¬†in their own closets???¬†Let me answer:¬†UBER VALUABLE.¬†The same dynamic works with food, hygiene products, electronics, cars….you name it. It is a whole new marketing doorway with Ai holding the golden key.
But again, simply porting over existing advertising executions to an Ai’s¬†voice platform won’t work. That is¬†selling. And in 2017, we as SO post-selling. Whatever engagement brands have through Ai platforms has to be just that – engaging. A resource for users. The construct isn’t a brand selling to a consumer anymore. It is a “consumer” (I hate that moniker) partnering with a brand, and vice versa. In first example from Echo, the partnership isn’t about selling a new jacket, it is about a brand partnering in a way that helps you look your best vis a vis your personal style and sensibility.
WHOA. That’s a seachange. We’re so very¬†comfortable with the¬†concept of “mass marketing.” You can largely throw that out the window¬†as Ai becomes more prevalent and engrained in culture and commerce.
Which¬†a¬†part of other trends leading to a decrease in traditional “advertising.”
Consumers aren’t really consumers, anymore.¬†They are marketing partners. To remain viable, the advertising industry must treat them as such.
Death of an advertising salesman
The WPP Group is to the advertising industry what ESPN is to sports media. It is the largest conglomerate of advertising companies in the world, counting the likes of J. Walter Thompson and Mindshare among its holdings. In it’s most recent earnings call, the company revised it’s annual revenue forecast downward. The reason is that clients just aren’t spending as much as they used to.
Why? See¬†previous two stories above. Chord-cutting and on-demand platforms have put the squeeze¬†on two of¬†the main pillars of ad agency revenue: making ads and placing media. Traditional ads don’t function well on new platforms and jive with media consumption habits. Paid media placement hasn’t, and probably won’t be, totally supplanted by social media messaging, but digital ad buys are typically cheaper and thus the commission-model most agencies work on isn’t as lucrative. Plus digital media is highly accountable. Advertisers are able to review campaign performance by direct metrics – something that wasn’t possible in the age of newspapers and television. Therefore ineffective campaigns can be pulled more quickly, and effective spending levels can be more accurately determined. No over-spending means less revenue for ad agencies¬†operating¬†under a¬†traditional model.
The train has left the station, and its not coming back. This is the new “advertising” paradigm. So what is the advertising industry to do?
Content, Daniel-son
First thing, stop thinking about “advertising.” “Advertising” is useful¬†in a brand-selling-to-consumer construct. We are now in a brand-partnering-with-user construct. What are the kinds of executions that will solidify relationships between¬†brands and users? I think the answer is creating useful content. Let’s face it, traditional advertising really isn’t that useful. Content that helps a user, or can be used as a resource, can also promote a product or brand. ¬†The Echo fashion camera is a great example of this.
I believe the most successful “advertising” companies of the near future will be those who morph into branded content creation studios. And “content” can’t be confined to video, either. Augmented and virtual reality are advancing at a breakneck pace.¬†It appears¬†that no less than Facebook¬†is¬†betting the farm that future ad revenue will be tied to augmented reality. The companies that figure out how to seamlessly yet effectively meld branded content into this augmented world of proliferated media platforms will be the winners.
Stop thinking about “advertising.” ¬†Partnership over salesmanship.