Roundtable: What's a Brand Advertiser to Do?

Peter:

Welcome to unpacking the digital shelf, where we explore brand manufacturing in the digital age. Peter Crosby coming to you from the digital shelf institutes, San Juan office. Believe it or not. Uh, Rob's on from the Berkshires.

Rob:

Hey Peter, you're in a warmer place than I am. I am working remotely.

Peter:

A sunnier place, which is I feel very lucky, um,

Rob:

hashtag zoom life, man.

Peter:

Exactly. It almost doesn't matter these days, um,

Rob:

Started with, Hey, this is Peter Crosby. I'm coming at you from a nondescript location somewhere in the Caribbean.

Peter:

So no one can track me down. People are following me everywhere. Um, so Rob, a couple of weeks ago, you know, we are Benedict Evan fanboys. And so we did a little bit on his, uh, his recent article about how much e-commerce is, is changing the game. And the second half of that newsletter was about, um, just how the ad game is changing these days. You know that brand spending on brands is plummeting. Like it's things right now are shifting towards performance marketing and he spent some time talking through, you know, what we're seeing across like 70 years of us advertising. I thought it'd be fun to kind of zoom in on that a little bit and, and prognosticate.

Rob:

Yeah. Yeah. He's got a few stats which are interesting, like US household penetration of television subscriptions. This is paid TV. Uh, it's, it's defined as satellite and cable peaked 10 years ago, and now it's below 70% or 70% or so and dropping it's the lowest it's been in decades. It doesn't look like it's going to recover and people are there, you know, cord cutting and replacing it with Netflix and Hulu and whatnot because they don't want to see ads. And because the ability to watch anything that you want, anytime you want, as opposed to being subject to what happens to be on, there's a real consumer benefit. So, the cable TV is declining and therefore where brand manufacturers traditionally spend their large brand dollars and measure themselves on impressions and reach and things like that, um, is also declining as well.

Rob:

You know, in the last few weeks we've had several bits of news, which are huge Procter and Gamble's CMO has said we are done signing annual upfront, uh, mind deletes, Liza CMOs said something similar. Uh, just this week, the WPP agency V M L Y and R merged with a geometry and created V M L Y and R commerce because, you know, all the media agencies know that they can't make money just doing TV media anymore. They've got to transition and spend more time in this commerce space. And so there's this major disruption that's happening in 2020, which is like, kind of in some ways, the beginning of the end of television as the mass market branding mechanism. Um, and, and Ben has a lot of really interesting data points and charts in the article that go into this.

Rob:

And the question is, you know, really what's next, right? Like TV people still have the market mixed models that still show that TV is effective in some segments, you know, boomers, boomers still are all watching Fox or CNN. And, you know, there's advertising there that can be relatively effective, but it's pretty ineffective for millennials. It's pretty ineffective for millennials. So how do you, how do you build a brand on a go-forward basis? And, uh, nobody seems to know the answer. And one way that you can tell that nobody knows the answer is another chart that he's got you look at us advertising, um, as a percentage of GDP, since about 1930, us advertising has been about a point in a quarter of GDP. So GDP goes up, advertising goes up in lockstep around 2000 and, uh, five, six, seven, eight. That relationship broke for the first time in basically a hundred years. And now the total US advertising spend is about 2.9% of GDP. Sit down absolutely significantly as a percentage of GDP from, from its peak and actually still declining. And the growth of internet advertising is not enough to make up for the relative decline to the size of the economy of overall advertising. What this tells you is that traditional brand advertisers that would spend on TV and print are not spending as much relative to GDP, and they don't know where to put the money instead. They just don't.

Peter:

Yeah, just a double clicking into kind of the upfront story, which I think is kind of the sign of the uncertainty and the wanting the flexibility. Um, advanced average ties and commitments, according to Ben spry and Stein assigned and variety for the next year of TV could be down as much as 15 to 20%, uh, CPM rates Rose just three to 4% for top inventories. And, uh, and so you can just see where they're, they're willing to, you know, they're not willing to raise the rates much and they're not committing up front the way that they used to. And, um, some of these drops, you know, one media buying executive said, things we thought would happen in 18 months or two years are happening in real time.

Rob:

Yeah. I got to tell you one of the, one of the interesting stories here and Matthew Ball BC, who has a bunch of long form essays with a lot of data on media and advertising spend, what are the points that he makes, um, talking about the life and death in television is television. If you look at household penetration, it's gone down precipitously over the last 10 years. And I think a lot of brand advertisers miss just how much share TV has lost in the general population the last 10 years. Uh, and yet they've been able to make up a lot of the decline in household penetration by increasing CPMs. So the cost to advertise and TV has gone up while the utility and reach of TV has gone down at the same time. So this is just, this is obviously like a pattern that cannot go forever, right? Like TV, it can't get worse every single year as an advertising mechanism. And while prices still charge advertising mechanisms, something's going to break there. And, and so that, that, uh, that quote is basically, yeah, something is breaking right now. Um,

Peter:

And one of the things that they're trying to do to stop it from breaking as fast as it has been is, you know, this whole idea that targeted ads could be done through network TV. And, um, in 2019, you know, mostly local pay TV providers are selling, you know, a percentage, uh, and doing, you know, the, my next door neighbors, seeing a different ad in this, in this TV ad slot than I am, even though we're watching the same program, but it's always been, it's not been able to go truly national because there was no measurement of it. But just a couple of weeks ago, Nielsen announced that they are going to be able to start measuring that targeted advertising on a national basis. And so we could see more of that, which might help provide a little bit more data and confidence, your ads reaching the right people on TV, which would be new. I don't, I don't think it's enough to, to shift the downward trend, but it might STEM it a little bit.

Rob:

I mean, it could, what, what I think that that could do is it could, uh, improve CPMs. Yeah. So personalization and targeting raises CPM prices. Right. Um, I think, you know, we could go from 75% us household penetration at 50% in a couple of years. I mean, I think, you know, it's, it's possible that we see a decline that precipitous with Disney plus with peacock, with a lot of these other streaming services, you can spend 40, 50 bucks a month on content and have access to far more stuff than any cable package really gives you. And a lot of the premium channels, the showtimes and HBO's are all going OTT too. So, so it's like

Peter:

The only thing holding up the pay TV

Rob:

Bundle, that's it. And so it may decline and become a sports bundle and people might still subscribe for sports, but you know, how long, how long is that gonna hold? Um, so yeah, I think it's, yeah, I think that the Nielsen stuff will, will help increase the prices or maybe keep maybe at least keep prices stable while the general overall shift is that, you know, there's just a decline in people watching pay. They're watching other things.

Peter:

I mean, Michael Ball writes a lot about gaming. Do you feel like the gaming, um, ecosystem has the opportunity to be an advertisement?

Rob:

Totally look by the numbers. Video games are bigger than Hollywood by the numbers. More people play fortnight every single day and interact with just about any other thing on the planet, right? It's an absolutely astounding societal force folks that are typically running brand budgets and that are running media agencies, um, are, are of a generation that didn't really play these large multi multi-player video game systems, right? I mean, even me I'm middle aged. And when, uh, when I was in high school, the only multiplayer game that you could play online was a mud, you know, a text-based adventure game where you literally type into the keyboard, go North, go West.

Peter:

I remember that, Oh my God, it took forever.

Rob:

And if there were like a hundred people playing at the same time, there were lags. So you'd say, go North. And then you'd wait 20 seconds for a paragraph to come back and say, you went through a fair clearing where there's a hobgoblin. We didn't, you know, and, and like, that was what multiplayer video games were. And then, you know, so they're not, it wasn't that great. So not that many people played it. And these days, these things are hugely popular with everybody. You put on your headset, you, you go, you go into Fortnite with five-year buddies, you're talking live, you're giving each other crap about how they're performing. You're talking about the day you're talking about school and, uh, you know, people into their thirties and forties, or that's, they're doing this thing way more time doing that than, than interacting with any mechanism with branding.

Rob:

So I like, I think, you know, you look at, by the numbers, it's bigger than Hollywood. Video games are bigger than Hollywood. And they have been for a few years and they're growing substantially faster. So people that are looking at where there are, where's their attention that I can, I can use it to get my brand out there. Video people are looking at video games. Uh, no, one's figured out exactly how to do it though. That's the, that's the question, right? I'll do things on product placement, experiments. No, one's figured out how to do it. So, this is just one of those things. People I think would like to spend more money on branding. They just don't know where to do it. And there's no mechanism. Um, I think what you start, what you're, what you're actually seeing is instead of spending money on a brand marketing national brand marketing primetime campaign, these companies are putting money behind consumer experience. Like post-purchase experience cost centers. They're putting money on experience, uh, during the, during the shopping process. So L'Oreal's, um, you know, uh, AR and ability to try on makeup that they've got within their site, um, now is, is like an excellent example of that

Peter:

Virtual makeup saying, which is super cool. Super cool. Yeah. I think there's, they're

Rob:

Spending, they're spending money on experience instead of brand, but it's not, I don't think it's because necessarily they, they feel strongly about that. Trade-off I think it's more because they feel like something's gotta be done and experience it has to happen. Yeah. It also, they're not really quite sure how to deploy the dollars anyway, right.

Peter:

When Melissa Burdick was on with the, uh, with us recently talking about, uh, the sort of Amazon corner or, you know, quarterly earnings results. One of the things she talked about was that Amazon advertising revenue was up 49% to $5.3 billion. So there's clearly money going there. Do you feel like part of that is, uh, you know, partially a brand play like that's where I've heard. They just like, no, let's just spend the money on a performance marketing set. Are people understanding the brand opportunity there?

Rob:

No, they're not. I mean, I was just on with a, uh, global leading CPG, um, C-suite yesterday. And one of the things that came up was the Amazon brand pages. Right. And, you know, Amazon's got to, there were sort of those, uh, those branded store experiences that a brand can invest in. And, you know, they were talking about that as a branding experience for the brand. And they were in branding for, for these folks means top of funnel. It means awareness. It means reach. It means impression. Um, it's just get, get your name out there. It's the old, you've got to hear a brand's name several seven times before you can recognize it on the shelf and the wave to make sure that they hear the brand's name seven times is to just be ubiquitous. Um, and what I told them is that they're looking at it all wrong.

Rob:

Think about how you, how you shop on Amazon search bar, product detail page from the product detail page. If you're intrigued about the brand and you want to learn more about the brand, then you click on the brand, blink on the product detail page and you go to the brand storefront. So I said, you're thinking about this all wrong. The product detail page is actually higher up on the funnel than the brand page. The brand page is lower down the brand page as part of the consideration of most purchase flows. It's not part of the branding

Peter:

Because that's the mindset of the Amazon consumer, right. If they're coming there for a reason. They've them from whatever search engine, if it's Amazon's or from some other place they end up on that page and there's your opportunity to tell them a broader story.

Rob:

Exactly. Yeah. And, and there's, um, and, and it's funny because they all nod their head and like, Oh yeah, that is how it works. But you know, it just sort of shows what desperation is. I'm trying to understand exactly where the branding happens online, you know, is it Instagram? And I don't, you know, it is kind of for your thousand true fans. People are only following one Instagram if they love your brand, but the mass market isn't right. And, and so like my, my strong view here is that winning the algorithm on Amazon, Google Instacart, uh, Granger home Depot, right. That, that is actually what reaches. So sharing a voice and share of search on those sites is equivalent to prime time TV, where people will see your Amazon product detail page. Then we'll see your TV ad. If you've re if you're winning search on Amazon, it's just that much traffic.

Rob:

And so the way to invest in branding almost is to invest in winning search on Amazon and to invest in a brand experience on the product detail pages. So you win the search, they click on you, you know, most of the top spot of Amazon search is about a third of people click on. It's just a huge percentage of the, of the click click through rate. So you get to the product detail page, and then on that product detail page, you do the branding, you know, instead of treating the product detail page as a transactional endpoint, like the bottom of the funnel, you treat it more as a branding experience. Yes. There's also a buy button, but first and foremost, it's where you tell your story, right?

Peter:

That means forcing and forcing or incenting or encouraging brand and trade teams to really work together on that, that product detail page experience. Right?

Rob:

Yeah, I think it's, I think it's a mindset difference, right? The people that are generally working on e-commerce don't know, don't know the first thing about branding, to be honest with you, right? They're not that, you know, their, their sales folks they're, they've been working in digital sales for a while. They've been working at Amazon for awhile. They might be really good at the tactics of selling through the platforms, but, they're not storytellers that wasn't what they were trained to do. It's not the experience that most of them have. And so injecting the branding team into the process, and as a company, understanding that the Amazon product detail page is the Walmart product detail pages. Those are, those are your number one branding assets. That's the place where you could move brand investment. But then, you know, the interesting thing is it won't count as brand investment from an advertising perspective, you know, percent percentage of your, of GDP that's advertising is still going to go down.

Rob:

You're just reinvesting in the, in the experience instead of the advertising in that, in that way. Uh, so, so yeah, I think you can do alignment there, but it doesn't, you know, it doesn't buck the overall trend that we're talking about. And in fact, let me, let me just give a shout out. One of our first couple of podcast episodes was with, uh, Sony Shaw, who at the time ran, um, Bosch power tools in North America. He ran e-commerce and the branding. And so he actually combined branding and e-commerce, and he, he talked about what that experience was like and how the teams work together. And it was a great podcast episode. Sony now runs Dremel worldwide. So has gotten, you know, his, his success has led to career growth, which is, which is outstanding. So I, I recommend people interested in this particular topic, checking that episode out. Yeah.

Peter:

And in any, we'll put the link to that episode in the show notes. And, and, and that, that goes to one of my pet theories, which the leaders that we talk to and work with, uh, every day in brands that are the digital leaders, they are the next presidents and CEOs. I'm, I'm like, I'm sure of it. Cause I, I feel like the facility with how this world works and being able to bring that to the omni-channel business. I think I'm excited about the career prospects of the folks that, uh, that we work with every day. It's really,

Rob:

Yeah. I mean, Russ, over at Cleveland research gave a talk at, um, our digital self summit a few years ago where he said the future CEO is coming out of these teams because the, the way that you think about branding and performance marketing and spending ad dollars and winning market share in this new world is, is just different, right? So traditionally you would have the CMO enter the CEO gig and the COO is a brand guy, uh, or you'd have the head of sales enter the CEO gig and the head of sales as a trade guy. And I think that the next generation of CEOs are going to be these folks that came up through digital and had somehow internalized digital as branding and transactional at the same time and merged those concepts in their head and figured out how to make the operations work.

Rob:

And that's the big challenge here. So we look at the, we look at the Ben Evans data. We look at the just absolutely plummeting decline of TB household penetration. We look at the unsustainable rise of CPMs in space. We look at the plummeting decline of advertising as a percentage of GDP, despite the fact that Aaron advertising growth has been so strong. I mean, I, the folks that understand where to put these dollars next to do branding are the ones that are going to maintain high margins and market share over the next 10 years.

Peter:

I mean, so many questions going into 2021, but no matter what all of this will be fascinating to watch unfold and we will do podcasts on it for the foreseeable future. So, I mean, Rob, just to close out, we're talking about where we're coming up on December 5th at 1:00 PM Eastern, we're actually going to be talking about this with an expert. So, uh, we'll be doing a live webinar conversation with Jared Zogby global consumer goods and services lead for Accenture interactive. He's got a new consumer study on the impact of online consumer shopping across a number of merchandising categories. And he's got takeaways there for rethinking content and ad strategies on the digital shelf. It is perfectly aligned to this conversation that we've had. Like, how do you, how do you take input from how consumers are behaving and rethink the experience on, on these retailer platforms? So, uh, any, we'll have a link in the show notes. So, um, Rob great coverage here. Um, enjoy Thanksgiving. Um, we won't be actually recording, uh, for Monday, the 30th. We did an interview with Julie Bernard, uh, longtime executive at Macy's and, and uh, and other brands. And we're going to run an interview on the 30th, um, as we give thanks with our family and loved ones either by zoom or in person, uh, if it's safe. So thanks, Rob, have a wonderful holiday.

Rob:

Yeah. Thanks Peter. And enjoy, enjoy the fair climbs.

Peter:

I will. I'll let you know how it all goes. Uh, and to all of you have a wonderful, wonderful Thanksgiving. It's been, say, say interesting times this year, but I think we all can give thanks for, um, for being with the people we love and being able to work on things that are fascinating and interesting. Thanks as always for being part of our community.