What the Future Will NOT Be

NOTE: Mark Suster added a comment below pointing out that I advocate no alternatives.  Which is correct.  We design solutions for the problem.  Our use of digital tactics is limited by how weak the tools are, in effectiveness and integrity.  Which is the point of this post.  But since he asks for a direct marketer's alternative and its numbers to compare to his $22.00 acquisition cost, I have provided one with better quality and integrity that is $5.71.  Since I could not insert a jpeg of a chart into the comment, I'm inserting it here to make the comparison easier to see (albeit not as pretty as Mark's), but please see my reply to his comment for the rationale for the numbers estimated here:

DAILY PERFORMANCE

NOTE: Have not included the cost to create, customize and traffic "integrated advertising" in the 1.600 websites (multiplied by the number of days of the program) or developing conversation playbook, casting, costuming/equipment and rehearsing 22 Ambassadors (one time for the whole program)

Here's the post:

Mark Suster writes a guest post for Techcrunch: The Future of Advertising Will Be Integrated.  Kudos to this VC for admitting the truth - that his customers are wasting 99.9% of their digital advertising, in general, or that social media advertising wastes even more. There must be a reason he is sharing this shocking information. But when you consider his info in the context of other news stories about brands shifting marketing dollars to proven high ROI alternatives, his recommendation to improve such low Click Through Rates by integrating advertising into editorial content seems irrelevant at best or just plain desperate.

Other news stories to consider are Unilever and Pepsi (#2 to P&G and Coke, respectively, so must do more with less) emphasizing marketing return on investment.  Digital advertising's .09% response rate couldn't meet the minimums for any ROI analysis, could they?  Not even if Mr. Suster's recommendation doubled its response rate to .18%  - which is doubtful since "clicking" on an ad is so fundamentally contrary to what the customer wants to do: "They Don't Want to Be Diverted From Their Current Online Activity"

Then there are the two stories in the last month about Pepsico which suggest that better marketing ROI is outside the US, especially in emerging nations.  Brand Pepsi-Cola lost its #2 position to Diet Coke in the US.  But Pepsico beat street expectations due to rising food sales oversees, following a year of increasing marketing spending in emerging markets, but not in the US.

When you think about it, it makes sense that marketing ROI for US brands is higher in emerging nations.  First, US brand penetration is lower, so there is an opportunity to find new customers. Second, US brands are reliable.  If a new customer likes the performance, they will get the same each time they buy it again.  Since US brands have had a long lead time to develop processes to assure customers they will get the same thing everytime time they buy, they may have an advantage over local, newer competitors.  So US brands are more differentiated vs competitors in emerging countries.

With better results from increasing marketing spending in emerging nations and the lack of new marketing tools to improve success in the much more competitive US market, it is more than likely that marketing dollars will continue to flow to emerging markets. 

The only way marketing dollars will remain and increase in the US is if new marketing tools emerge which do more with less. 

Unfortunately, digital advertising performance does less with more.  And tactics like integrated advertising into content lowers integrity of the medium.  Following Mark Suster's advice to "integrate" advertising is not only futile, it creates a potential for conflict of interest.  Which is the tragic flaw to new media's business model to sell low cost content.  For example, AOL's Arianna Huffington is allowing Michael Arrington of TechCrunch to invest in the companies he writes about.  As we comment to the Atlantic article, "Arianna Huffington's Legitimacy Problem":

Follow the Money.

Managers get paid more for getting content for less and selling advertising for more. One way is to be in denial about the potential for conflict of interest when editorial and commercial interests are not separate. An objective analysis would probably find a correlation between a decision that risks conflict of interest with unhealthy company financials - in other words a desperate act.

Warren Buffet apologized to shareholders for waffling when his heir apparent lapsed, reminding us that conflict of interest should be a black and white issue for any company with integrity.

 

 

 

 

Comments

[msuster]

I don't mind being challenged; in fact, I normally appreciate it as a way to further the debate & learn. The trouble is - you add no arguments, no facts and no logic to the debate.

So let's start with basics:
- I asserted that online advertising is mostly a direct response medium and branded advertising is not online. I provided a graph. So your talking about Coke & Pepsi is irrelevant. I even specifically showed that a brand like Hershey spends only 0.1% of its budget online. I already asserted that.
- Quoting CTRs out of context is irrelevant. You need to focus on eCPMs. As a direct response marketer all I care about is "customer acquisition costs" and if I spend $22 dollars to get a customer at a 0.1% CTR or $22 to buy a customer through a TV or print ad - all I care about is the $22. Not mentioned in your post.
- You make no mention of alternatives that you're advocating for.
- You make no mention of SEO/SEM - the two largest components of online advertising.
- You assert that digital marketing is "wasted" - you give no evidence.
- I have directly discussed why integrated marketing is more effective than banner advertising and I have data. You haven't discussed this at all.
- Finally, you throw in a Red Herring about HuffPo & Arrington, which has zero to do with my post and zero to do with your alleged argument about advertising. And my case for "integrated marketing" did not say "don't disclose it's marketing," I argue for the opposite.

This is a very lazy post. Frankly, I'm not sure what point you're trying to make at all. Boo.

[Katherine Warman Kern]

Hi Mark.

Mine is a Forest vs. the Trees argument. If we want to keep marketing jobs and media going in this country we need to come up with exponentially better tools. Improving a .08% CTR by doubling it, is a waste of time. But if you want me to get into the Trees, I will.

You say "integrated advertising" delivered a .04% CTR on a network of websites of 100,000,000 monthly uniques. In your comment above you say your clients will pay a $22 acquisition cost but you don't tell me what the conversion rate from CTR is to acquisition. Let's give you the benefit of the doubt and say it is 25% (a number I've achieved online).

Here's an alternative to compare. The old expression is that door-to-door sales is the most persuasive direct marketing. Ambassador marketing at "high receptivity" locations and events is a way to do more for less.

Since speed of acquisition is important, I've taken your numbers and estimated a daily rate to compare to a day of Ambassador marketing.

Since I can't figure out how to put a jpeg in the typepad comment box, I don't have a chart. But here's the result.

In a day - "integrated digital direct marketing (IDDM)" (I assume must be customized to be integrated) on 1,600 different websites, the Ambassador Marketing (AM) has 22 Ambassadors to train.

IDDM sites average 2500 uniques in a day, AM ambassadors average 400 "meet 'n greets".

IDDM generates 4 million impressions (at 30 days a month that's about 1 Million) and AM generates 8,800 "meet 'n greets".

IDDM .04% CTR is 1,600 clicks and about 1/2 of the AM "meet 'n greets" turn into conversations.

I'm estimating an IDDM can do a 25% conversion to acquisition for 400. The AM conversion rate can be very high since we target highly receptive locations, but I'll be conservative at 35% for 1,540.

At $22 per IDDM costs $8,800. To make the comparison, I budgeted the AM cost at $8,800, but the acquisition cost is only $5.71.

I'm just saying there is a lot of room for improvement in digital marketing and it isn't tinkering. It's really stepping back to look at the forest and asking how digital technology can exponentially improve the way business and customers interact.

I don't think you are lazy certainly. I just think you are spinning wheels.

Good luck
K---