A post-advertising age?

For decades Bob Garfield has written ad reviews for the US industry’s leading trade journal, Ad Age. From Jerry Seinfeld’s 1995 appearance in an American Express spot to the flawless design and strategy of Levi’s most recent campaign, he has analysed the efficacy and broader merit of thousands of advertisements. In recent times, however, Garfield has devoted considerable energy to elucidating an argument that, sooner or later, digital technology will destroy advertising as we know it. Hence, the recent release of The Chaos Scenario provocatively subtitled “Amid the Ruins of Mass Media, the Choice for Business is Stark: Listen or Perish”.

The scenario of the title is one in which the centuries-old symbiosis between media and marketing - in which content attracts audiences who are in turn sold to advertisers - is torn asunder. This relationship, as American Professor, Clay Shirky, succinctly puts it, was one “where Walmart was willing to subsidise the Baghdad bureau”. Advertisers increased sales, content provision was profitable and audiences were happy. But here, according to Garfield, is the rub. As the net takes over, a marketing subsidised media is no longer feasible. Without that mutually beneficial relationship, marketing needs a new way of communicating with customers just as media has to generate a new revenue model.

The move of audiences and advertisers online and the accompanying challenges to old media are, of course, in an advanced stage. The dire straits faced by US - and other - newspaper industries are partly attributable to declines in circulation: but only partly. In fact, including their digital platforms, many newspapers, like The New York Times, have larger audiences than ever before. In addition they have reduced production and distribution costs online. The problem for the content makers is that the virtually infinite supply of ad inventory on the net severely depresses price and therefore revenue. The reason that many of them are going broke - or are musing about erecting pay-walls - is that competition has crippled their capacity to generate ad revenue.

For the marketing side of the equation, the death of its erstwhile host is a long term problem but cheaper ad rates in the short term clearly aren’t. Nor are the niche sites from All Homes to Craig’s List that deliver precisely the right audience without requiring marketers to fund the proverbial Baghdad bureau. However, it turns out that advertising nested in new media content is struggling for several other key reasons. Audiences use personal video recorders like Tivo to skip ads and, online, employ ad-avoidance technologies like spam filters and pop-up blockers. Even more problematically, audiences just ignore digital advertising. Click-through rates on banner ads hover between 1 and 2 per cent and research indicates people tend to trust online advertising significantly less than its old media equivalent.

Additionally, as a result of the net’s reduced production and distribution costs, paying for content has become a lot more attractive. Based on its current rate of growth, consumer spending on TV and movie downloads is projected to significantly outstrip advertising spending on internet video streams by 2011. That is, pay-per-view is overtaking advertising as the revenue model for video content. It’s a big problem for the marketing status quo when consumers are increasingly showing a willingness to pay for content directly and get it ad-free.

The efficacy of traditional advertising is further undermined by the profusion of easily accessible product information on the net. Garfield describes how the internet functions as a word-of-mouth engine that is increasingly rendering null and void the self-interested marketing messages of manufacturers. In the digital era, the release of a new product is met with thousands of consumer reactions publicised on blogs, message boards and websites. These horizontally connected consumers can materially affect sales. Witness, says Garfield, the success of the iPhone compared to the failure of the Segway PT. Add to the word-of-mouth effect the rise of professional content rating sites like Digital Photography Review and community content rating sites from Amazon and Trip Advisor to Ratebeer.com and advertising has dangerous competition. Unsurprisingly enough, research indicates that most consumers accord more weight to the word of peers and experts than to advertising.

So what might marketing look like if the old symbiosis with media breaks down and it’s left out on its own?

The media economist Bruce Owen suggests marketing will have to become more than merely something people are willing to put up with but something people have a positive willingness to take.

Garfield outlines an ambitious response to Owen’s challenge, one which blurs the lines between manufacturing and marketing. In 2006, Lego achieved record sales with its programmable robotics kit, Mindstorm, by radically departing from its standard practice. Mindstorm was designed and tested not only by Lego employees but by some of its most enthusiastic fans - physically at their plant in Bilund, Denmark and later through online forums. The major “marketing” then took the form of the buzz built up online by the enthusiasts who had helped make the product.

In Wikinomics, Don Tapscott and Anthony Williams call this phenomenon “prosumption” and discuss its application by businesses ranging from shoe stores to BMW. The pay-off for such firms comes in two forms. First, firms get access to the best information on what their customers want. Second, in the process consumers become invested in the firm and its products and therefore, of their own volition, actively promote them.

Like all predictions, the chaos scenario and Garfield’s vision of post-chaos marketing are subject to a thousand and one contingencies. Regardless of its ultimate accuracy, Garfield has illuminated our understanding by emphasising the centrality of the advertising-content symbiosis to our present media matrix - and raising the possibility of its demise. The Chaos Scenario reminds us that the trade-off for free television and radio, cheap newspapers and magazines, is an interrupt-and-dictate model of marketing. It shows how consumers equipped with alternatives provided by new technology tend to avoid these uninvited interruptions and seek out product information on their own terms. It also shows how the most innovative businesses are using new media and harnessing rather than resisting their customers’ opinions and insights.

The momentous events of 2009 provoked much excellent analysis of and speculation on the future of quality journalism. The less exalted matter of marketing’s future has not received the same general attention. This is a significant deficiency not least because the two issues are intricately linked by virtue of one’s financial dependence, historically, on the other. The Chaos Scenario is a useful corrective.