Andrew Frank

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Andrew Frank
Research VP
5 years at Gartner
30 years IT industry

Andrew Frank specializes in best practices for data-driven marketing, including how organizations can use data to drive sales, loyalty, innovation and other business goals. Andrew also specializes in marketing and advertising technology and business trends …Read Full Bio

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News of the Death of Paid Media is Greatly Exaggerated

by Andrew Frank  |  May 7, 2013  |  Comments Off

Last week’s Customer 360 conference in San Diego provided a good opportunity to sample what’s on the minds of marketers, and one question I heard a few times was, do you anticipate companies (like ours) shifting their ad budgets to big data initiatives in marketing? In fact, there is plenty of evidence of a long-term value shift from media to data, and earned media is emerging as a disrupter of paid media (see, for instance, VivaKi’s launch of Contagion with Visible Measures). Yet, a number of savvy marketers I spoke with also expressed skepticism that marketing was about to raid the media budget in a big way.

A good deal of ink has been devoted to writing advertising’s obituary of late. One such book project (currently in Kickstarter) comes from Joseph Jaffe and Maarten Albarda and is titled “Z.E.R.O. Zero paid media as the new marketing model” (see MediaPost coverage here). Jaffe’s earlier book, Life after the 30-second spot, took aim in 2005 at TV advertising, which has since stubbornly refused to die, although its future can still launch a healthy debate. But setting the goal post at zero for all paid media is a much more radical proposal. Even Jaffe seems to hedge a bit:

“Z.E.R.O. is proof positive that you don’t need to ‘pay’ for customers or media if you have enough to start off with and/or a core of passionate advocates who would go to bat for you.”

For most companies today that’s a pretty big if. Gartner’s recent marketing spending survey shows that, looking only at digital marketing budgets (which average about 25% of overall marketing budgets), digital advertising still claims the biggest share of spending at 12.5% (followed by content creation and management at 11.6%). (Results are based on a survey of 253 marketers from U.S.-based companies with more than $500 million in annual revenue.)

But predictions are about the future, and at Gartner we’ve often wondered about the future of paid media. Last year, I wrote in our Hype Cycle for Advertising about, “the ‘dark cloud on the horizon’ for ad-supported media as marketers beginning to openly question whether alternatives to paid advertising — earned media and advocacy in social networks, direct data-driven targeting, one-to-one conversational tactics, and branded content and applications, to name a few — might soon lead to substantial secular cuts in media spending across the board.”

Yes, there are plenty of reasons to imagine that paid media faces a rocky future, so lest we all assume its demise is a foregone conclusion, I’d like to offer five counterarguments that suggest otherwise.

  1. Scarcity of attention. Although always-on access to a glut of media options (including social) is fragmenting audiences and driving down digital ad prices, reaching the right person at the right time in the right context is still both difficult and essential to marketers, which is all that’s really needed to create demand. Media is about the cultivation of attention so, although its form will change, its basic model of aggregating and selling eyeballs will not. New competition from companies like Google and Facebook will raise the bar on just how attention is cultivated, and refined with data (to select the right eyeballs), but these companies depend on advertising for revenue, so they’re in the media business. Just ask Sir Martin Sorrell.
  2. Scale and Risk. Earned media enthusiasts like to point out how viral content can exceed the reach of paid media across all channels, while generating much more buzz and engagement. This is certainly true, but it fails to account for the fact that virality is rare and highly unpredictable. The industry’s tendency to focus on exceptional success stories can skew perception on this point, but most mature marketing organizations recognize this and still prefer to pay for predictable results rather than gamble against long odds with pure viral content.
  3. Lack of Perfect Information. An oft-repeated fallacy is that “today’s consumer exists in a world of perfect information.” (Jaffe) There’s no doubt that consumers have access to a lot more information than they used to, but perfect? Gartner estimates that 2-6% of existing ratings are fake or deceptive (subscription content), and an entire industry has sprung up around gaming ratings and recommendations. Most consumers understand that information in social networks is not necessarily dependable, and that advertising, while not the most trustworthy source of information, at least has some public accountability for truthfulness.
  4. The Ad Tech Revolution. Paid media is hardly standing still. A great deal of monetary and intellectual investment is going into measuring and optimizing the effectiveness and efficiency of advertising, and making it real-time. A comparable market for earned and paid media doesn’t exist. This observation is sometimes used to support the straw man argument that it’s not media but “old media” that’s doomed. And this is surely true, so media companies better figure out ways to be new. It won’t be by tossing out the idea of selling ads.
  5. Even the revolutionaries wind up buying TV. Not only are Google and Facebook dependent on paid media for revenue, but both of them, along with Apple and Microsoft, have seen fit to heavy-up on old-fashioned TV (see Facebook’s first TV commercial for Home at AdAge). These are companies with more data and high-tech analytic skills than anyone else. ‘Nuff said.

So, yes, media is in for a bumpy ride as big data pushes its way into the marketing picture, but marketers will need to think twice before they raid the ad coffers. And media companies need to find their role in the data picture, which is a plug for upcoming research.

What do you think?

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Category: Advertising Data-Driven Marketing digital marketing Disruption Media     Tags: , ,