Finally: Making Advertising Relevant

I never thought I'd say this, and I'm not sure how I feel about myself for saying it, but it's an exciting time to be in advertising.

There's a famous quote attributed to John Wanamaker, a pioneer in marketing from the late 1800's that goes:

"Half the money I spend on advertising is wasted; the trouble is I don't know which half."

Indeed, it's almost certainly way more than half. But the lack of quantifiability has always been the elephant in the room, even now, 150 years later.

As a startup product guy, my attitude has always been that advertising is a tax on a brand for having an unremarkable product. Or to put it another way, why put money into advertising when you could plow those funds into being innovative instead?

But the reality is that there's something about the human psyche that really responds to advertising, especially when it's done right -- which it often isn't. Consumers want to identify with brands they care about, and advertising is an effective way to craft and strengthen those connections. So although I'd still recommend that a fast-moving startup focus on creating a world-class product, I've come to believe that larger brands, which simply can't move as fast as startups, are indeed effectively counteracting this slower pace of innovation via effective advertising. A good analogy is that while a startup is building its castle by creating superior products, a large brand is defending its existing castle with effective advertising. And to those who would say "the answer is actually for the brand to innovate faster" I would counter that while in a vacuum that may be true, in the real world that is effectively impossible. Larger companies cannot innovate as fast as small companies because they have the "baggage" of a successful product that's bringing in revenue, which they don't want to cannibalize. It's human nature: When you have something that's working, you're going to put your effort into optimizing that thing. You're not going to throw it away to find something new. It's the classic Innovator's Dilemma.

And sometimes, brands are able to create experiences that really resonate, and if I'm being honest with myself, it absolutely influences my perception and affinity to the brand. That's the thing: I, like most consumers, have an aversion to most advertising. But I've realized it's actually not advertising I dislike -- it's non-relevant advertising. When a brand connects with me in a relevant way, it's very powerful and I welcome it.

One of the first brands to really connect with me in a relevant way was BMW via a series of ads from 2001 called "The Hire," starring Clive Owen and a host of well known directors. Here's one of the ads, called Hostage, directed by Jon Woo:

I was in my mid 20's at the time and a huge fan of BMW cars already. These ads really cemented my relationship with the brand.

The problem is that that's been the exception, not the rule. I don't find most advertising to be relevant, and so I generally find it distracting, annoying and non-value add to my day.

But this is where the power of social media comes in, and specifically, mobile as the channel. I'm not referring to social in the traditional sense, like FB posts. Rather, I'm talking about the power of brands tapping into our digital identities.

A mobile phone isn't really a phone so much as it's the container that holds my digital identity. It's the vehicle with which I interact with the world, largely via social media channels (and especially, "dark social" which is a more intimate & meaningful form of social interaction).

And now, for the very first time, all of this data from my phone is allowing brands to craft their interactions with me in more meaningful ways.

Now, this is a very exciting and very scary thing. There was a powerful 60 Minutes piece that slammed data brokers, and it's worth watching, because these are very real issues. But as a consumer, I'm willing to pony up for a value exchange: I'll let brands know more about me -- especially if my identity is anonymized -- in exchange for having a more relevant, personalized experience. I'm willing to make that trade, and I think most of us are as well, because advertising isn't going away, and the alternative is a world full of noise and annoyance.

The advertising world is full of jargon. PII. DSP. SSP. RTB. RTM. DMP. XDevice. Native ads. Programmatic. Private Exchanges. The list goes on. And while these terms are meaningless to consumers, what they signify is a seismic shift in the structural foundation around how advertising reaches us. And it's all focused on one core metric: To solve the problem that John Wanamaker identified 150 years ago -- to make advertising the most relevant to each of us, individually.

This won't happen overnight, but the next decade of advertising will be very transformational. If you're an entrepreneur interested in this space, here are a few specific areas of opportunity:

• At large media brands, linear advertising (i.e., TV ads) typically compromise 90% of revenue, with digital pegged at 10%. But audience engagement patterns are shifting, and we are now largely accessing content on mobile & other digital devices instead of TVs. There is already a huge shift underway to capitalize on this shift and a lot of dollars will be flowing into digital over the next decade.
• Connecting brands to consumers' digital identities via their interests, in a personalized, relevant way, at scale, and via a privacy-friendly approach, is a huge opportunity -- one that's just now really getting significant traction. People do want to interact with brands they care about, in ways that are meaningful to them. The challenge, typically, is that brands want scale. Helping a brand re-think an individualized approach with a level of scale that moves the needle in a meaningful way is still a problem that needs solving.
• Brands are starting to create content in an attempt to craft meaningful experiences for their customer bases. A leading example is Red Bull Media House, which produces viral and engaging videos like this one. But not every brand is ready to create its own production house. Helping a brand achieve this level of relevance with an audience, say, as a SaaS service, is a huge opportunity.

There are already many, many startups tackling these problems. But then again, AltaVista was the search engine to beat when Google came on the scene. We're in a similar environment now, with huge problems that still need to be solved, and a gigantic brand market awaiting to shower the victor(s) with advertising dollars.

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The picture above is a shot of Aaron Magness at the Digiday conference talking about the brand he evangelizes for, Betabrand, which is what got me thinking about this post -- because their branding is awesome.