Commentary

Advertisers Are People Too

Many industry observers claim that the time consumers spend with a given medium relates to the money advertisers will spend, because (it is claimed) "dollars follow eyeballs". On this basis, analyses of advertising are often made through the lens of consumer behaviors. 

But while consumer trends are worth assessing in a general and very long-term sense, they are often irrelevant in assessing flows of advertising spending. The reason is because the actual consumer in the advertising business is not a person, per se, but a corporation.

Former Presidential candidate Mitt Romney famously highlighted a legal fact when he remarked that "corporations are people". Perhaps he could have been as successful in ad sales as he was in private equity, because he likely would have understood that characterizations of corporations as people--and therefore consumers--are paramount in explaining how ad budgets are allocated. Indeed, advertisers are essentially people, too, each with behaviors and personalities that are a function of their organizational design (biology, of a sort), their corporate history (equivalent to early childhood?) their broader industry relationships (who they socialize with?) as well as their industry conventions (perhaps akin to behaviors which are learned by mirroring peer-group activities).

For these reasons, our analyses of the industry have focused on understanding the behaviors of different segments of advertisers, such as large brands, e-commerce-centric marketers and small businesses. Each segment has different preferences with respect to how they spend their advertising budgets, and these preferences go a long way towards explaining the durability of TV (and resilience of revenues for certain TV networks in the face of audience declines), the dynamics around digital advertising and the decline of print far better than analyses of consumer behaviors may suggest.

On this point, we were struck by a recent comment that Yahoo's CEO, Marissa Mayer made earlier this month at a conference. As she said about Microsoft in context of that company's search for its new CEO, "I see a lot of strength (at Microsoft) in the enterprise area. I've come to appreciate...consumer executives and enterprise executives have different traits and different instincts...I would hope that they are looking for people who are really strong on the enterprise side...building on their core strengths and competencies." This characterization of Microsoft's skills in working with consumers of the corporate variety was presumably provided as a contrast with Yahoo's focus on consumers of the human variety, her primary area of focus in her first year at the company.

Perhaps there is some irony, then, in pointing out that ad sales--still the core base of revenue for most of the world's leading web publishers including Yahoo--is much more similar to enterprise sales than it is to consumer sales. This is an important point to consider when assessing where a management team's attention should be placed, how it allocates its corporate resources and who it hires to execute against financial goals.

Enterprise sales--whether of advertising as Yahoo (or Microsoft) sells it, or of technology as Microsoft sells it--requires a narrow focus on a relatively small number of potential customers and is relatively high-touch. Further, enterprise sales often require socialization of ideas over an extended time-frame to many different direct and indirect influencers across multiple geographies before a sale may be closed. Intermediaries such as agents and procurement officers may be involved in the process too. They also can make seemingly bad decisions with frequency, although this can be because making alternative choices might actually be worse, or because outside observers misunderstand the motivations behind the "person's" decisions.

By contrast, consumer sales can involve marketing to masses of potential paying consumers with relatively low-touch sales efforts. Buyer decision-making processes are much simpler, too, often involving few individuals and shorter time-frames for making decisions. Households are unlikely to have procurement departments, and few that we know of require quarterly business reviews of the companies they do business with. Consumers also make bad decisions or buy products that aren't good for them, but there is usually some underlying reason that leads them to believe that making a decision is better than alternatives when they choose to do so repeatedly.

Events such as this past week's annual Advertising Week should be viewed for the actual activities that occur over the week, including the socialization of ideas (reinforcing norms) and the deepening of professional relationships (useful in establishing confidence between buyers and sellers about working together to accomplish corporate goals). On our read, these activities are certainly better characterized as enterprise sales and not consumer sales...that is, unless we consider advertisers as the consumers that they truly are.

Courtesy of Pivotal Research Group

Recommend (4) Print RSS
1 comment about "Advertisers Are People Too".
  1. Claudio Marcus from Visible World , September 27, 2013 at 1:30 p.m.
    The flip side of the position presented by Brian is that marketers responsible for media budgets are heavily biased by their own media usage experiences. We must recognize that while technology changes rapidly, consumer habits are slower to change. As such, it is important to take into consideration the time consumers spend with a given medium, while recognizing that our own behaviors may be far more atypical than we think.