A few insights on the development of this fascinating field, and our take on its various pillars.
Digital Marketing channels are losing steam. Can we rethink customer acquisition?
We could simplify things a whole lot by remarking that 85% of digital ad spend ends in the hands of an oligopoly, while the remaining 15% has little hope to survive in light of recent legal changes in the privacy space (GDPR, ePrivacy, etc.)
- Google/YouTube and Facebook/Instagram can raise prices as they please, following a bidding model of their own making, and making it extremely hard for advertisers to properly ponder the real value of their investments in the short/medium term (for all the talk of measurability and ROI).
- Digital media, no matter how disruptive or unique, can barely rely on tracking-based advertising for a living, as a myriad of ad tech brokers will not only need to make a profit, but also impose end user consent-gathering requirements on the former. Given the conditions demanded for such consent to be valid, it is only logical that the system will either lose accuracy (as not all cookies make the cut), or risk non-compliance. Not to mention the fact that zero distribution costs and the commoditization of “content” (in favor of audience profiles) results in a pool of infinite inventory with prices in a death spiral.
I do not think we need to wait much for #1: Are we not already witnessing a vicious cycle of new entrants in a particular category pushing prices up while money is abundant and traction matters most, while more established players with available metrics across the entire funnel retreat in full appreciation of the money-losing schema? Has demand-generation (or “discovery”) ever taken such a large slice of the economy?
I am certainly not accusing Google and Facebook of bad faith (bidding, pricing, placements… could pretty much run on their own at this point), but simply pointing at the perverse and well-known effects of just another monopolistic scenario.
As for how hard #2 will hit, there is still some room for speculation: Although it is now evident that the vast majority of cookie consent mechanisms run counter to the GDPR, supervisory authorities have only recently started to take action. Either way, the very acceptance of a potential risk, as well as the manner in which consent management widgets further erode the user experience, can only play in favor of marketing channels that enjoy a direct relationship with consumers. That would be Google and Facebook — further reinforcing consequence #1.
Not such a parallel reality
Putting such thoughts aside for a minute, I believe it is worth paying attention to two specific trends currently disrupting traditional approaches to branding and retail:
- Direct to Consumer (D2C) brands are taking over from Consumer Packaged Goods (CPG) and fashion retailers by benefiting from the manner in which digitization has done away with distribution, manufacturing, and communication bottlenecks.
- From household supplies to clothing, entire product categories -surely the least emotional ones- are shifting from event-based purchases (“let’s go shopping”) to subscription-based supplies (“refill on its way”). Amazon Dash buttons are a good example of this.
Early success stories for either one of them would apparently support the case that there is plenty of room for niche or local newcomers to disrupt established brands in multiple categories. But this is where the competitive landscape for demand-generation (or discovery) must be brought back into the picture.
Is it possible that fully democratized acquisition channels (the essential nature of digital platforms) have already reached a saturation point (with prices reaching levels beyond the reach of small businesses unable to place massive bets on customer lifetime value)? Is it a coincidence that many well-funded startups resort to TV advertising and other mass media as a means to build their own brands?
How about large, established brands? They too have a right to protect and grow their own businesses. Whatever remains of TV advertising or high street dominance is surely not enough to generate awareness or boost sales in a social climate affected by attention deficit disorder, unique individual priorities, and instant gratification. Large brands need Facebook/ Instagram much more than Facebook needs them — for there is little alternative when you have no prior relationship with your potential audience.
Revisiting the marketing mix
Bottom line, I believe that current marketing channels are in bad need of a thorough review and upgrade. Or perhaps they will be replaced by pure, open discovery, as we approach a truly transparent, demand-driven world.
There must however be some sort of intermediary step. And I would like to explore five essential traits of each specific channel/medium/category to analyze the options at hand:
- Measurability: Referring to our ability to evaluate the performance of a given campaign or investment through first-party (our own) data
- Intermediation: Is there a chain of custody for the brand’s money and the customer’s data or do advertisers deal with the platform directly?
- Competitiveness: Does this medium count on enough real alternatives to guarantee healthy competition and fair prices?
- Democratization: Is this medium available to companies of any size or origin, or is it primarily reserved for top, global brands with a large budget?
- Privacy compliance: Will this medium survive recent legal changes (EU, California) with regards to the protection of personal data while maintaining its primary features or advantages?
What about the channels themselves? How should they be clustered or categorized?
I believe we can mostly stick to what we have grown accustomed to, if only slightly adapting some of the labels to accommodate the most recent trends. I would propose to keep them in four buckets:
- Mass media: Grouping TV, radio, press, etc. Facilitating brand awareness with plenty of room for emotional impact at scale
- Digital-open: Referring to online advertising under open standards as deployed by every online media outlet, mostly focused on programmatic-display
- Aggregators: Proprietary models taking a cut against discovery of third-party products or services (on platform-owned media) through bids against intent (PPC) or the pursuit of micro-targeted audiences
- Email: As the last bastion of an open communication standard available to everyone and untaxed by a single, private entity (if only restricted to those counting on a prior relationship with the addressee).
A combination of channels and traits can now be represented as follows:
I believe this is a clear indication that none of the current options can fully accommodate the needs of an advertiser (regardless of its size) in our current times.
A Privacy by Design, future-proof alternative
While fully appreciating that doing and listening will be more important than talking in a world of abundance (of offerings, players, actors, content, etc.), I believe the very essence of the advertising model — subsidizing our entertainment, education, etc.- can still find its way into the said services-based society.
After all, a failure of the tracking+advertising model is pushing traditional media towards paywalls — which consumers need to pile up on top many other subscriptions (movies, music, shared cars, etc.).
Consumers are in bad need of subscription bundles, but cross-service deals will not suffice to sustain the underlying businesses. And it is here that we should be able to find a sweet spot.
What if individuals where to decide which brands or suppliers can enter their inner circle (as a real, consented 1:1 relationship), allowing some of them to sponsor their everyday needs in exchange for a better understanding of such needs? Is such understanding not the (unattained) holy grail of digital marketing today?
*WeRule (currently available in selected markets) enables a trusted relationship between brands and consumers that not only provides a self-contained activation channel, but also paves the way for increased measurability, compliance, and competitiveness across other channels.