The biggest lies that the martech and adtech worlds tell themselves
This is an edited version of a talk that marketing keynote speaker and The Drum’s Promotion Fix columnist, Samuel Scott, gave last week at the Synergy Digital Forum in Moscow. The deck with related links and source material is here.
Sam Scott speaking at the Synergy Digital Forum in Moscow / Picture courtesy Synergy Digital Forum in Moscow
I do not remember PPC ads, display ads, social media ads, programmatic ads, or anything else created by adtech that I saw yesterday. But even 20 years after seeing this advertisement, I still want to shave my legs whenever I hear the song Venus. And in case you have not noticed, I’m a guy.
In this talk, I will go through six myths in the martech world today: that consumers want personalised ads, mediums do not matter, short-term results are the most important, targeting solves the problem of waste, adtech saves money by cutting out the middlemen and brand building can be ignored.
Martech presentations sometimes start with the martech landscape by Scott Brinker that shows the more than 5,000 martech platforms that we can use or not use.
It would take too long to discuss the myths and realities of all of these different types of platforms. So I will instead focus on some of the types that are used in marcom – specifically, in direct response marketing and sales activation.
Over the past 20 years, digital marketing has gone all-in on direct marketing. It’s why I see online marketers imprecisely using the word “advertising” to refer to “direct marketing” campaigns – too many do not understand the subtle but important differences.
We had direct mail; now, we have email marketing. We had infomercials; now, we have online videos that want us to click. We had advertorials; now, we have blog spam or “content marketing.” We had fliers that would appear on walls and posts; now, we have pop-up ads. Today, we have direct response ads that interrupt our conversations with friends and family on social media as well as others that follow us around the Internet.
The ultimate goal of direct marketing is to deliver the “right ad to the right person at the right time.” It’s really not anything new. We have always been able to track direct ROI for direct marketing campaigns over many offline channels such as telemarketing or direct mail.
Today, martech is all the rage, but it’s just another way to execute that direct marketing idea. Take this clip from the 2002 film Minority Report that probably is a depiction of what most martech platforms would love to become.
Now, a lot of people who work for martech companies probably watched that and thought, “Wow! When can we do that?” But remember: The 99.9% of people who are not marketers saw Tom Cruise getting scanned for ads and were horrified. Remember, the world in Minority Report is a dystopia. It is a reflection of everything in the world going to hell – including the marketing.
And, sadly, we are actually moving closer to that reality. Here is a clip from a Spanish TV news report that featured Bismart's Magic Mirror at this year’s Mobile World Congress in Barcelona.
Again, it looks cool. But we see that this martech platform uses facial recognition, stores and displays personal data, and even analyses his emotional state. My question: why do we think people actually want this? That leads to the first myth in martech that I will discuss today: that consumers want personalised advertising.
People do not want personalised ads
The martech world thinks so much about if it can do something that it forgets about whether consumers actually want it. To quote Jurassic Park, we are so preoccupied with whether or not we could that we don’t stop to think if we should.
It’s important to start with personalisation because the entire concept of this category of martech in the marcom world is based on the collection and use of private and personal consumer data. Personalisation cannot happen without personal data.
Now, even for decades before the internet, we have always had “information”. We have had focus groups and surveys and whatnot to see what people think. But today we have “data” – which is nothing but platforms like Facebook taking a vacuum to the internet and sucking up every single piece of personal information that they can find. Sometimes people give it willingly, but all to often companies collect the data through disingenuous and nefarious methods. And then they they sell it.
And we marketers buy into it. Every day, I see dozens of articles by marketers who advocate for personalisation and claim that it is important in marcom campaigns. But spoiler alert: many of them work for martech platforms and are selling something. And yet, I never see anyone asking for evidence of whether personalisation is actually a good thing or if consumers actually want it. Well, ladies and gentlemen, I have found it.
Direct marketers love using martech because it is trackable. But people hate it for the exact same reason. Starting way back in 2009, a University of Pennsylvania study in the US found that 66% of Americans do not want direct marketing that is tailored to their interests. When told how marketers collect their data to tailor the ads, the percentage increases to 86%.
This month, a Harvard study found that if you track people and then tell them about it, then that admission “poisons” the ads. Obviously, Facebook and other martech platforms will never disclose what they do completely and fully.
Doc Searls, the editor of Linux Journal, used Google Trends data to show in the Harvard Business Review that the rise of ad blocking has specifically correlated with the appearance of retargeted advertising. If anyone here uses retargeting, then it is your fault that people are blocking online ads.
Retargeting was the straw the broke the web's back. People hate it. Retargeting has turned the marketing industry into drug addicts on the path to suicide. We like the constant highs of the purchases and conversions, but all of those hits are eventually going to kill us once consumers have had enough and block ads altogether.
People do not want to be tracked. The more that marketing tracks people, the more that it will annoy people. Imagine how you would feel if the exact same piece of junk mail appeared in your mailboxes at home and work every single day. Now, do you still think retargeting is a good idea?
Digital marketers forget the principle of negative externalities. As Searls wrote elsewhere:
“Annoying people personally with calls to action, especially when only a tiny percentage will actually respond, creates no brand value and has other negative externalities, such as associating the brand with annoyance.”
Here’s an example: you constantly target the same people with direct-response ads or or other martech. Say that you get 3% to respond, buy, or 'convert'. You will annoy the other 97% – and they will never buy in the future as a result. Is that truly a good way to build a brand over the long term?
According to Page Fair’s 2017 Adblock Report, 12% of people in central Europe, eastern Europe, and Russia are using ad blockers. In Russia specifically, it is 6% on average and 3% specifically on mobile devices. In terms of future trends, 63% of millennials use ad blockers on at least one device. 14% use them on both mobile and desktop.
So why are we marketers still so comfortable with harvesting people's personal and private data? The more that people are learning how their personal data is being collected and used, the more they are opting out.
Collecting data on people, tracking them, and hitting them with cheap, individualised messages en masse is not advertising – it is direct response marketing. And people hate it.
But the problem with martech is far greater than that. When I visited TechCrunch recently, I saw that the website attempted to load 22 different martech trackers that were all trying to collect my personal data. My script blockers rendered all of those platforms useless. Good for me, bad for them.
Good ad blockers stop not only advertising but also most martech platforms. Adblock Plus stops almost all advertising and social media tracking by default. Google Analytics and other martech can be blocked with just a few quick customisations.
Ghostery blocks all of these martech platforms by default. So does uBlock Origin. When you run the numbers and look at it the opposite way, you’ll see in one example that more than 220 million people in western Europe and North America are blocking Google Analytics. And the more technical your audience, the more likely it is that they are using blockers.
It doesn’t stop with adtech and martech blocking. GlobalWebIndex found that 25% of people in the world are using VPNs to create impostor data because they do not want to be tracked by martech. In Russia, it is 24%. SimilarWeb found that visits to DuckDuckGo, the search engine that does not track people or collect any data, have increased to 200m per month. Apple’s new Safari 11 browser last year uses what it calls Intelligent Tracking Prevention, which deletes tracking cookies after 24 hours.
The European Union’s GDPR regulation has come into effect. That means that companies will no longer be able to collect and use the personal data of anyone in the EU without their explicit, opt-in consent. And PageFair found that only 5% of people will opt-in to the same level of unrestrained tracking that exists today. 5%. So much for people wanting tracking and personalisation.
Now, why are the numbers so low? Again, people do not want to be tracked. In the UK, a Guardian reporter used privacy laws and a lawyer to obtain all of the data that Tinder had on her. What did she receive? 800 pages of data. 800 pages from a silly dating app. I can think of no better example of how people do not want to be tracked and targeted by martech platforms. Because this is what they get.
The medium always matters
Now, onto the next myth in this type of martech: the medium does not matter.
Of course, the traditional model of advertising is that marketers develop a list of the publications and websites that their target audiences are reading. You contact the publication, send the creative, and the ad appears.
Now, this type of martech aims to cut out the publication to save money and target people directly.
When I was studying journalism in America in the late 1990s, my first internship was at a weekly Boston newspaper, The Beacon Hill Times, that serves an affluent part of the city. Former US secretary of state John Kerry lives there.
The Beacon Hill Times, the local residents, and the businesses that serve them all have an interdependent, symbiotic relationship. The newspaper covers the residents’ pressing concerns such as the opening of a new luxury jewelry store and the need for a greater presence of taxis. Businesses such as the jewelry store place advertisements.
The business owners are proud to appear in a recognised and quality-controlled publication with a deep community presence. They clip the articles and advertisements and hang them on their walls. The publication itself is central to the brand of the advertisers – and vice versa – in a way that makes them partners and two sides of the same marketing coin.
Now, imagine how business owners felt when their ads appeared next to this in last year’s brand safety scandal. If the medium is not important and the brand does not matter, then why did companies pull millions of dollars in ad spend from Google and YouTube last year until their concerns were met?
As Faris Yakob put it this month, “we judge brands, like people, by the company they keep”. The mediums in which we choose to advertise our products themselves reflect on our products. The medium affects the brand in an important way.
After all, if you want to brand and sell a premium, luxury product, where are you going to put it? Some martech ad network that fills the internet with crap? Or luxury, print magazines that cater to your audience? Adtech platforms always proclaim that they cut out the middleman, but the middleman is what builds the brand.
And in my least favorite example of martech, we have so-called “marketing automation” and “inbound marketing” – which are often just prettier words for email spam. Again, the goal of this type of martech is to hit people with targeted direct marketing as cheaply and efficiently as possible.
But not all advertising impressions are created equal. I would take one real person looking at my ad in a quality print magazine like these over 1,000 impressions on a martech ad network.
Adtech doesn’t really cut out out the middlemen
Now, onto the next myth, which is related to the previous one: that adtech also saves money by cutting out the middlemen.
Let’s go back to the traditional model. You contact a publication. Someone there takes and processes your order. Someone else creates the ad. Someone else puts it in the newspaper or website. Someone else prints the newspaper and uploads the website. Someone else sells the newspaper. Then, maybe, someone else who buys the newspaper will see your ad. That is a lot of people in the middle who, of course, cost a lot of money.
Adtech uses automated platforms to remove all of those middle men. You write an ad, pick a target audience, and push a button. The ads – in theory – are then directly sent to websites and mobile devices for display in front of anyone who fits that profile regardless of where they go online. This should save a lot of money. In theory.
Digital marketers have always assumed that reaching perfect individuals returns a better ROI than reaching broad marketing segments. But that has never been proven. Adtech did not cut out the middlemen. Adtech merely replaced one set of middlemen with another. And those new middlemen cost money.
Bob Hoffman, the retired CEO of two independent US advertising agencies, now writes The Ad Contrarian blog. He deserves full credit for this breakdown because he was one of the first people to uncover digital advertising fraud over the past several years.
Say you start with $1. According to Hoffman’s analysis from data from the World Federation of Advertisers (WFA) here's what happens next.
First, your media agency takes about 5¢ in service fees. Then their trading desk takes about 15¢. Then their demand-side platform (DSP) takes about 10¢. Next, some other adtech middlemen take about 25¢ for targeting, data, and verification. Then an ad exchange takes about 5¢.
In other words, you have lost more than half of your investment before the ad even appears on the website. You have 40 cents left of your $1. But only 50% of that spend is on ads that are “viewable”. That leads us with 20 cents. After accounting for ad fraud such as bot activity and deceptive publishers, we have 16 cents.
But only two-thirds of resulting “viewable” impressions are actually seen by someone, leaving us with 11 cents. And among those ads that are actually seen by human eyeballs, 75% of the time, people do not look at them for more then a second – rendering those “impressions” useless.
So, after we account for all of these new middlemen in this type of martech, we get three cents of real value for every dollar that we spend. So, please, keep telling the world that adtech is saving the world money.
Of course, that is a hypothetical example based on average data. Here’s a real world example, in a related context, of how much publishers lose from using ad networks. In 2016 in the UK, the Guardian newspaper bought it own online advertising space in a test. And what did the newspaper determine? That only 30% of ad spend actually goes to the publisher.
According to the finding, “a host of adtech businesses operating within the supply chain are extracting up to 70% of advertisers' money without being able to quantify the value they provide to the brand”.
Short-term results are not everything
Now, onto the fourth myth in martech: that short-term results are all that matter.
The five different marketing tactics within the promotion mix are done for different purposes and are measured in different ways.
Some examples: direct sales and sales promotions can be measured by sales revenue. Advertising can be measured by brand lift. PR can be measured by brand sentiment. These are only a few examples. Now, direct marketing is measured by direct ROI.
Look at the martech world of mobile. When was the last time that you saw a good, creative brand advertising campaign on mobile? I don’t remember the last time I saw one. Everything is direct response – push notifications, banner ads that want me to click, and nudges to make in-app purchases.
What happens is that too many marketers, especially in the digital world, get hooked on short-term, direct response metrics. People assign direct response metrics to all promotional activities, even though that is completely wrong. It is why I get questions from marketers and even CFOs such as “What is the direct ROI of PR?” Well, direct ROI is not the goal of PR. Those who ask such questions do not understand traditional marketing theory. Not everything important in marketing can or should result in an immediate, trackable response in an analytics platform.
Direct response is picking the fruit – those people have grown, are ripe, are down in the funnel, and ready to buy. Brand advertising is watering the tree so that more fruit will grow in the future. If you focus too much on direct response, you will sell a lot today but go bankrupt tomorrow when no more fruit has grown. If you focus too much on brand advertising, you will go broke today because are not selling any fruit.
Short-term direct response campaigns lead to limited short-term returns. But long-term profit growth comes mainly from long-term brand advertising. More on that in a bit.
“Waste” is actually a good thing
Now, onto the fifth myth in martech: that targeting solves the problem of waste.
People in the martech world frequently cite this quote as proof that traditional advertising is a waste because it is spent on a mass audience that includes people who will not immediately make a purchase. But that idea of waste is completely wrong.
When I was in sixth grade in the midwestern United States in 1992, every kid wanted a pair of Umbro shorts. It was the big fad because football – and the associated clothing – had flooded suburban America from the UK in the eighties and nineties. However, I grew up in a modest household that could rarely afford the latest, expensive fashions.
My cool mother, seeing how much I wanted them, eventually put aside enough money to buy a pair. The next morning, I put them on and walked to school. I was nervous because I had never worn such a stylish brand and was wondering what was going to happen.
After I arrived on the basketball court where everyone hung out in the mornings before first period, all of my classmates turned to look at me. The boys from wealthy families walked over, looked at my neon, nylon shorts, and gave me high-fives. “Niiiiiiice, dude!” they said.
In sixth grade, everyone was impressed by my Umbro shorts because everyone had developed the same brand association. Each of us subconsciously knew that everyone else had all seen the same marketing and had internalised the same brand messages. That is how brands are built for the long-term. If I had seen a random, individually targeted online direct response ad for Umbro clothing in 1992, I would not have given it a second thought.
The so-called “waste” is what makes the campaigns effective because of the principle of signaling. What brands you choose to buy is in part due to what you want people to think about you. Only brand advertising, not martech, can influence that
Brand is always important
And now, ladies and gentlemen, the final martech myth of the day: that brand advertising can be ignored because it is not directly measurable in the short-term. This is the big-picture message that I hope everyone will remember.
Not everything that is important in marketing can be measured and not everything that can be measured is important. Not every activity in marketing can or should aim to receive an immediate, trackable response. This is why promotion consists of many different types of marketing activities.
According to BBH in London, 84% of the value of S&P 500 companies in the US comes from “intangible assets” – which is in part another term for the brand.
And how do you both build a brand in the long term and generate sales and revenue in the short term? Classic theory states that 60% of your spend should be on long-term brand advertising and 40% on short-term direct response and sales activation. Of course, the best percentages for every company will be a little higher or lower, but the general rule remains.
The reason is that sales activation brings quick but small results while brand advertising brings slow but large results.
Here is another way to look at it. Every time that you do a direct response or sales activation campaign, you will see a spike in revenue. But that spike will never grow past that upper limit unless you grow the brand as well. When you add the two together, you will see how both brand and direct response lead to the best long-term results.
Most importantly, companies with strong brands can charge up to a 13% price premium – which leads to the greatest revenue for the long term.
Now, you might think that tech companies might focus more on direct response and marketing technology. But tech is actually the sector that spends the most on brand advertising on television. In the US, Apple and Netflix, for example, grew in the beginning mainly through television ads.
And on average across all industries, brand value represents 20% of total market capitalisation.
Martech platforms and the marketers who use them focus so much on how to transmit and target ads that they never think anymore about how to create good ones.
Communication channels may change, but human beings do not. The best method to reach inside peoples’ minds and maximise long-term sales is through creative, emotional brand campaigns. And where are the good ideas in the martech world?
And now, I will leave you with one question: what is the best way to sell more razor blades in the long term? Tracking, targeting, and hitting people with cheap, martech-created direct response? Or, to bring this talk full circle, the Venus of today?
The Promotion Fix is an exclusive biweekly column for The Drum contributed by global marketing and technology keynote speaker Samuel Scott, a former journalist, consultant and director of marketing in the high-tech industry. Follow him on Twitter and Facebook. Scott is based out of Tel Aviv, Israel.