From time to time I get phone calls from financial analysts who cover the broad advertising and marketing industry. Their questions tend to focus on uncovering “what’s hot” and whether and where companies are putting money into new growth areas such as digital, mobile, and social media. Last week I read a Forrester report that reminded me of something I said to an analyst more than two years ago—that the rise of digital and better advertising ROI might actually decrease total advertising spending in the economy. He didn’t care to pursue this opinion much further, choosing instead to focus on go-go growth. But now that Forrester is similarly predicting a fall in total spending, I feel vindicated and actually excited about what this means for the future of our advertising industry.
Forrester’s new five-year spending forecast by Shar VanBoskirk is based on extensive interviews with marketers. Its focus is on digital, and shows that various forms of digital advertising will rise from 12% of overall advertising spending in 2009 to 21% in five years. One main reason for this shift is that digital is increasingly the go-to medium for consumers, and brands that don’t follow their consumers are doomed to fail. But another key reason for the move is that digital marketing is much more efficient. Instead of spraying billions of eyeballs with a standard message, digital allows both better targeting of the right people as well personalized marketing services that forge a much stronger bond. In other words, digital marketing is much more meaningful to consumers. In his blog post about this forecast, Josh Bernoff at Forrester proclaimed that “we are all digital marketers now”:
Pundits have been declaring the end of mass media and advertising for years now. From my 14 years of experience analyzing this stuff, I’ve learned that things die very slowly, but there are real trends you can see. If you’re in advertising, you’d better learn to speak digital, because that’s the way the world is going.”
When I spoke to that financial analyst two years ago, my argument that total advertising spending could decline was twofold: First, I mentioned the fact that there was a rising “bubble” in the pricing of advertising on mass media such as television. The television networks, among other old media, have been increasing ad prices on 30-second spots despite the drop in actual viewership. “Media inflation” has been far ahead of actual inflation, which has created a house of cards destined to collapse.
Second, in a world where marketing choices and measurement tools are more targeted, we increasingly see which “half of the marketing budget is wasted.” When you eliminate the part of your marketing budget that’s wasted, you don’t necessarily spend the savings on ads somewhere else. Increasingly in this economy, you take it to the bottom line or invest it in product development.
Some in the industry choose to fight the shifting forces with words. Jeff Zucker, President of NBC-Universal, famously complained that Apple and others in the industry were “trading analog dollars for digital dimes.” And I’ll never forget being at a closed summit of CMOs where one top-30 advertiser berated us all for using DVRs to skip ads in our homes, thus destroying the marketing model we hold dear.
Sorry, guys, but the push of global competition, fundamental change in consumer media habits, and the catalyst of the current recession will terminate advertising inefficiency with extreme prejudice. If your advertising agency, media company, or brand marketing doesn’t add value to consumers’ lives and the business bottom line, now is the time to move on.
