Exec Summary: Yes, advertising is still a valuable discipline, but what it needs is a higher purpose. Advertising needs to inspire more than mass consumption, it needs to communicate ideas that inspire action, and participation. The good news is the internet is one of the best mediums ever for the propagation of remarkable ideas, and at their best ad agencies create great ideas that inspire above and beyond the act of passive consumption…
Advertising, as an industry is going to get hit very hard in 2009 as it’s caught in a perfect storm. A combination of the economic downturn combined the massive shift in how people, formerly known as consumers, interact with and experience media, is going to put enormous pressure on an industry already in trouble. Look at the industries that support traditional advertising, retail, auto industry, financial services, you see where I’m going with this. WPP is rumored to be cutting ‘several thousand’ jobs and Omnicom is letting 3,500 people go.
Now the problem advertising has is very similar to the challenges of the record companies have had over the last few years, not so much that people are stealing their content, but the shift in culture is disrupting their business model. The music business thought it was in the distribution and promotion business, and a large part of it’s business model was built around that. Suddenly distribution and promotion was solved by peer to peer and the music business had to change how it ‘added value’ and it’s slowly figuring that out.
A large part of the advertising industry is IMHO in the awareness building business, and if you think about it the internet is very quickly solving the awareness problem much faster than advertisers can. Right now with my personal network I hear about products I might want even before they are built. Not only that, if it’s a really interesting product I might even get connected with the founders of the company and give them immediate feedback via twitter, facebook, or their blog. Now, as Renny Gleeson of W+K points out one of the problems ad agencies have is the investment they have in current ways of doing things:
“it irked me recently at the DLX Summit to hear interactive media agencies and publishers focused on teasing efficiencies out of their systems – “oh, we need a streamlined IO process”, “oh, we need a streamlined RFP process”, “oh, we need a GRP equivalent”.
Bullpuckey.
That’s navelgazing incrementalism.
…
But it’s hard for media and creative agencies to imagine a landscape that doesn’t look like the one they just spent all this time and money building. Frankly, they aren’t incented to. They’ve invested as heavily in the communication delivery systems and techniques as brands are in the pseudo-science of “brand management” perched precariously atop reams of best guesstimates about media effectiveness.”
So the question is if advertising needs to reinvent it’s business and business model, what is the business it should be in?
I think the answer to that question depends on where you think the future of business is going. IMHO I believe the future of all business will be based on what Lawrence Lessig calls a Hybrid Economy, where a business co-creates value with it’s customers, and the businesses that win in that case will be the ones that not only have a system to capture and share that value, but inspire their customers to create more and more valuable things and ideas. Sounds quite utopian I know, but look at Yelp, Threadless, Etsy, Amazon, Ikea, South West, Dell and TechCrunch; these are organizations that engage their customers in co-creating value, these are the pioneers of this hybrid economy. Now, I don’t just believe that’s the future of business because the internet is allowing it, I believe that people are ready to step up, ready to be led toward something more valuable and more meaningful. As Clay Shirky says there is a cognitive surplus ready to be used, in one weekend Americans watch enough commercials to build a complete wikipedia. So I believe that’s the future of business, so what is the role of advertising in that?
First of all I think advertising has a massive role in the future of business but, as the best agencies do, it needs to get back to the job of inspiring people, inspiring them to be part of something bigger, helping them understand how they can participate in increasingly valuable ways with companies and organizations. This also has nothing to do with the medium, they can use TV, the web, facebook, twitter, whatever, but the important thing is ‘what’ they are doing, as opposed to ‘how’ they are doing it. Now, one important dependency here is the businesses themselves, they have to shift their strategy from just shipping products, to stand for something bigger, something more important, something that customers can believe in. They should look at companies like Patagonia who get 36,000 resumes for every open position, that’s a company that is inspiring action above and beyond the act of consumption.
UPDATE:
Just found this great post from Garick Schmit at Razorfish’s Digital Design Blog that also calls for brands to stand up for more and do more.
Related to this post is a couple of others I put together recently so if you want some background:
The Future of Business and Social Media inspired by Lawrence Lessig interview on Charlie Rose
Advice about Social Media for CEO/CMO and other Senior Executives
My 2009 Prediction on Social Media and Beyond – The Flight from Growth to Value
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Thanks for the pull!
I, for one, am inspired by the violent death throes of bad advertising.
It used to be enough to inspire, and not many folks did even that well.
Interactivity allows us not only to inspire but also to ENABLE. And if we (marketers, communicators, e-brandgelists, App-ostles, etc.) f–k it up, it’s not because the medium wasn’t capable – its because we didn’t imagine big enough. And execute brilliantly.
The companies that are ok — genuinely OK, not half-ass OK – with the understanding that the consumers define them (not the other way around) are the ones that will make the impact in advertising / marketing / communications / this blogosphere-tastic world in ’09.
I’m not sure I agree that consumers define companies Kate, is patagonia ‘defined’ by it’s customer? hell no, patagonia leads it’s customers and customers ‘join’ patagonia. I think social media is a tremendous lever for leadership, I think the companies that lead are the ones that will dominate in the future. The most successful companies in the future will be the ones that provide leadership and provide tools and inspiration for their customers to create value.
I’m using the word ‘define’ more as the most concrete guidance that a corp follows as to what their audience wants. Our experience this past year and currently is much more heavily based on UX then I’ve ever seen before — it has genuine **valued** weight in the overall marketing and advertising production process.
You’re completely spot on that there has to be some solidification of actual leadership in the relationship between the two parties even if it seems like its a Wag the Dog situation at times.
I totally dig what you’re saying from a UX standpoint, that is one discipline that is part of my heritage and I think there is great value in that. I recently read “Truth, Lies and Advertising : The Art of Account Planning” and was amazed to learn about the parallels between the role of the Planner and the UX researcher/designer. Planners also start with the customer and dig deep using ethnographics, interviews, contextual research etc. really fascinating, and I don’t think it’s any coincidence that planning helped advertising become strategic again.
Interesting post Karl.
As an industry advertising was built on doing what clients ask you to do – answering the brief.
It will always be this way. Although this focus will be less and less in the future.
Advertising needs to shift its focus to getting clients to do what you want them to do. Which means agency pro-activity needs stronger focus.
However this focus has to be about how to get consumers involved. Not how to get consumers to buy.
Great topic/post Karl. This whole current advertising business model – both defined by organization process and execution, is being curated for the Smithsonian. Prediction: Ad agencies will streamline given the loss media commission revenue, and make it up (or try to) on the “fee side” with planners, UX designers, research, etc. as mentioned above. Agencies will try to become more holistic experience creators of “invite to participate” advertising to “pull thru” fulfillment. However, agencies will be most challenged to deliver beyond the creative. To survive, the value of agencies will be measured on how effective their creative threads across all customer touchpoints. Agencies will also have to give up territorial rights and work with those vendor partners well established in “pull thru” tactics: customer service fulfillment, brand/consumer collaboration environments, continuous measurement consumer advisory panels, etc. In the future, agencies will play in a smaller area of the sandbox for sure. Those who survive will do so on the strength of their creative and how it maps to the new world order.
Goodvertising vs. Badvertising – http://tinyurl.com/7fastn
Hi Karl -
Great points, which bring to mind two questions for me:
1. What % of today’s companies can/will actually attain the level of “great, inspirational products” that this kind evolving consumer-brand transparency rewards (demands)? If it’s only 25%, or even 50%… what will happen to all the companies that can’t get past “mediocre, boring products”… will they really go away?
2. As advertising evolves to leverage and embrace “co-creation” – what will that new advertising look like next to its predecessor? Will it be more like “Indie Music” or more like “Reality TV” (please, no!)?
Not sure what the answers are, but it feels like the economic climate is going to accelerate the timelines for sure.
@kevin – great questions, and ones that could spawn a couple more posts.
Question 1 is difficult, as companies are all so different in how they create value. I’ve been noodling on this idea for a while and that is:
“The future of business is to create products and services that people can believe in & provide ways for people to take responsibility & help”
I think using that definition Apple would be a good model, no they’re not transparent but they provide a kind of leadership, it’s authoritarian, and they believe they know better, and people buy into it, that’s working well for them. Apple is very different from Etsy of course, which provides a different kind of leadership to their customers base.
As for the future of advertising, I don’t believe it’s going to ‘look’ like any one thing, the best advertising is so deeply contextual to the response you are trying to elicit it will all be different. But in the end it will help connect with something core within people and inspire change.
There is good advertising happening now, what will go away will be the mindless broadcast homogeneous formulaic ideas like ‘bite and smile’ for burgers that dominates the American broadcast and cable system.
As Renny points out there is goodvertising http://tinyurl.com/7fastn
I do agree with and I am myself part of the system working at media agency. We definitely need to reinvent business model, but it is not the only issue – people are. business models don’t exist in abstract models they do exist inside social networks. the change has to start within ourselves and the way we do perceive advertising and our role in building it and delivering. First of all we need to learn being responsible cause this is the fatal disease we suffer – lack of responsibility for the client’s business and we overdose GRPs, effective frequencies and click through rates to appear as healthy. Secondly, we need to re-discover the curiosity and engagement into our work. Advertising isn’t 9am-5pm job.
The future for us in advertising are meaningful strategies and ideas deeply rooted in the context of social networks. If we fail at delivering it we may get choked with the GRPs equivalents.
We need to as you say work towards creating advertising that inspires to something more meaningful than mass consumption.
Love your idea that “Advertising needs to inspire more than mass consumption, it needs to communicate ideas that inspire action, and participation.”
What’s tough though is that many companies are still stuck in the mode where they’re only looking for mass consumption, and aren’t paying attention to action and/or participation. Part of the reason is that it’s much harder to put an ROI on action and participation, and also that that’s they way they’ve always done it, so they’re resistant to change.
Thankfully, many companies are finally coming around (or perhaps they’re being forced around by a dropping bottom line) to see that action and participation does lead to consumption, but I think it’s both the agencies and the companies that need to make a mindset change before we see an overall shift in the way advertising is done. Smart agencies have already made that change, and are working hard to show their clients why it’s the right change to make, but I don’t think it’s going to be as easy as agencies simply changing their focus and then bringing their clients along for the ride.
Cory, the problem you point out is important, it’s not just ad agencies that need to change, but companies need to change their fundamental market orientation. Most companies have no framework to capture value from user participation. Until more companies start providing valuable ways for users to interact, advertising is going to be relegated to promoting ‘benefits’ etc.
Coca Cola may have the right to define their brand, but only recently did they admit it is consumers that OWN the brand:
http://tinyurl.com/5w63hy
(re: mentos Youtube videos)
Where was Diet Coke’s Ad Agency on this? Whatever an agency does become in the future, at its core it should always be an expert on the “communication culture” of the customer. Their job is to tell the client how to fit into that culture.
Great post, Karl, and a topic worth blowing out further. While Renny points out some negatives from the DLX conference, I was there as well, and found that at least a vocal minority of folks there pointed out that a big change in advertising is needed. Clark Kokich, Razorfish President, made a call for us to actually “do something positive” with our marketing efforts. His team has a good post up here: http://www.digitaldesignblog.com/2009/01/08/brands-do
At Bridge Worldwide, we’re trying to spread the word a concept called Marketing With Meaning. In a nutshell, the concept is that “in a world where people have the power to avoid advertising altogether, we must create marketing that they actually choose to engage with – marketing that itself improves people’s lives.” Check it out, and I’d love your feedback.
http://www.marketingwithmeaning.com
Like you said, advertising needs to change. However, I think there are a lot of great adverts out there. But most advertisements are crap!
Definitely on the same wavelength, Karl. Particularly like your bit on “inspire action and participation” but would take it further and think about business (or products) that are built around participation.
There are signposts: CNN now incorporates news from citizen journalists via iReports, Zappos eschews advertising for great customer service, etc.
One quibble: I don’t think the ad agency, record industry analogy holds water. It’s much more macroeconomic than that, for sure, and when so many industries are hurting advertising gets hurt.
For Fortune 500 marketers you still need to have tonnage and scale. You have to reach those indifferent consumers (people). There’s still a big role for this, though maybe not the 30-second spot
@Bob, thanks for pointing me to that Razorfish article, I connected with Garrick from there after reading it, really good stuff.
@Garrick – I hear you about the tonnage and scale that comes along with advertising, the reach of traditional broadcast advertising is huge. I think what all companies need to understand is that there are always a small number of users who are willing to do more for your brand than others. Whether it’s the 1% rule or 10% rule there is some sub-set of users that are passionate enough to help your company create value. The combination of traditional advertising reach, with increasingly more important and valuable ways for customers to participate is a blend that more advertising agencies need to understand.
Interesting theory, still mulling over whether it’s “scalable” as the kids say.
It’s easy to participate with brands who do things I feel strongly about. But if every brand demands that I participate, I may well wind up feeling overwhelmed. Right now we’re talking about a handful of brands doing very special things. And those brands will grow and thrive for all the reasons you mention. But I keep wondering what happens in all those low-interest categories, to all the non “Prom King” brands.
On a similar note, what happens when we’ve got a market full of Prom King brands? Right now, Threadless and Etsy and Zappos and the like stand out because they’re the only ones doing it. But soon enough there will be competition. And they will all be engaging and empowering and storytelling and all those other buzzwords.
So then how do we distinguish one from the other? I “know” the difference between Coke and Pepsi because advertising tells me that one cola flavored sugar water is for the young and hip and the other is warm and fuzzy.
As the market you describe matures, companies will fill different niches in the same space. How we distinguish between them– what form their brand image advertising takes — is anyone’s guess and it will be interesting to see it develop. Will it take the form of old-fashioned brand advertising, the high-level Cadbury Gorilla/1984 type stuff that still seems to have emotional resonance? Or is that model last century’s news?
It will be fascinating to see how it all develops.
A couple of things Karl:
I’m not sure your article actually answered the question. “Is Advertising Worth Saving?” You defined a new marketing reality that could be loosely akin to the purpose of advertising now. i.e. using the power of the web to promote trial of products and services and loyalty to the brand that offers them. But what of advertising as it exists now? Is there a place for the SuperBowl Spectacular? Will there be enough demand in future for this kind of content to make it worth agencies assembling and retaining teams of content producers ready to spring into action?
If you look at what the more innovative agencies are doing, they are getting involved in ‘brand applications’ on behalf of their clients. i.e. Crispin’s Domino’s “BFD Pizza Builder” or RGA’s Nike ID Online Running Management tool. They are also handling a lot more of the production tasks for these kind of marketing assets that when they simply brought a director and their production team into to handle it.
That surely is the ‘future’ of advertising. Build applications and get your customers to use them to improve the products and service they get from your company.
On another note, the Patagonia example of 36,000 resumes per job opening sounds impressive, but what does that fanaticism really do for Patagonia? Apple and Facebook have vast communities of people building applications for free that make their products so much better. How many iPhone apps will be launched this year? How much more loyal will they make the iPhone customer who begins to execute many life tasks through the apps that live on their phone? You see Apple’s advertising moving in that direction too… simple handheld pieces that no only show how beautiful and elegant the device is, but also how cool and functional the interface is, usually through the demo of a particular iPhone app.
how cool and functional the interface is, usually through the demo of a particular iPhone app.
Karl, thanks for recommending this post to me in a comment on a blog post of mine over at RMM London.
I agree that brands need to increasingly co-create value and that it is this activity which will “inspire more than mass consumption [and instead] communicate ideas that inspire action, and participation”. I disagree however that advertising is the primary vehicle by which this should (or indeed will) happen. Rather I beleive it will be a number of business functions which can propoerly harness the opportunity of social media.
As you’ve read in my ‘Bonfires and Fireworks’ blog post (http://www.rmmlondon.com/archive/social-media-is-the-bonfire-to-advertising-fireworks/) I argue that advertising deals in what I term “Fireworks”: big shiny campaigns that raise awareness of a product or service. They may be brilliant commercials but even the best commercial burns bright and short (like a firework…). They have no longevity and have limited ability to co-create value with an audience.
In contrast “Bonfires” are in for the long haul, they are activitites a brand or business run for a long time and can work across a number of different business functions. Moreover, these bonfires are achieved through the effective use of social technologies (otherwise referred to as “social media”). See more on this here: http://www.rmmlondon.com/wp-content/uploads/2009/12/social_objectives_activities_metrics_091211.pdf. It is these bonfires that I believe hold the key to enabling a brand or business to co-create value with an audience. Marketing (and advertising) can play a part in a bonfire but are in no way the only kind of bonfire a brand or business can cultivate.
For example: a brand can co-create value via an online R&D group which helps create a better product. This has a benefit for the brand as they have a better product to sell (which should, hopefully, make them more money) and has a benefit for the audience as they can purchase a product that better meets their needs. Of course the brand might choose to market the product as “by the people for the people” but this is an example of a firework springing forth from an existing bonfire. A good real-world example of this in action is the PR hype around the Dell Outlet Twitter feed which has made Dell $6million+ The activity was designed to help the audience better identify Dell deals and thus shift more Dell PCs (win-win for both sides). The activity can hardly be called a marketing activity however, it’s success turned it in to a PR story which further fuelled the popularity and thus success fo the Dell outlet Twitter feed via marketing functions (namely PR).
All this doesn’t mean that advertising is redundant, brands still need to create mass awareness and advertising still does this best of all. However, I think it’s a fallacy to beleieve that advertising is the vehicle by which brands and business can begin to co-create value. Instead I beleieve the route to the co-creation of value is through existing business functions realising the power of social technologies.