Two weeks ago, Gary Milner wrote a lucid prediction of what advertising might become. He rightly stated that advertising has been in a 40-year period of disruption. Bingo. He went on to say that he sees a consolidation of media buying into a centralized hub. Again, I don’t question the clarity of Milner’s crystal ball. It makes sense to me.
What is missing from Milner’s column, however, is the truly disruptive iceberg that is threatening to founder advertising as we know it: the total disruption of the relationship between the advertiser and the marketplace. Milner deals primarily with the media-buying aspect of advertising, but there’s a much bigger question to tackle. He touched on it in one sentence, noting “the fact is that a vast majority of advertising is increasingly being ignored.”
Yes! Exactly. But why?
I’ll tell you why. It’s because of a disagreement about what advertising should be. We (the buyers) believe advertising’s sole purpose is to inform. But the sellers believe advertising is there to influence buyers. And increasingly, we’re rejecting that definition.
I know. That’s a tough pill to swallow. But let’s apply a little logic to the premise. Bear with me.
Advertising was built on a premise of scarcity. Marketplaces can’t exist without scarcity. There needs to be an imbalance to make an exchange of value worthwhile. Advertising exists because there once was a scarcity of information. We (the buyers) lacked information about products and services.
This was primarily because of the inefficiencies inherent in a physical market. So, in return for the information, we traded something of value: our attention. We allowed ourselves to be influenced. We tolerated advertising because we needed it. It was the primary way we gained information about the marketplace.
Milner’s column talks about Peter Diamandis’ six stages that drive the destruction of industries: digitalization, deception, disruption, demonetization, dematerialization, and democratization. Milner applied them to the digitization of media. But these same forces are also being applied to information -- and, rather than driving advertising from disruption to a renaissance period, as Milner predicts, I believe we’ve barely scratched the surface of disruption. The ride will only get bumpier from here on.
The digitization of information enables completely new types of marketplaces. Consider the emergence of the two-sided markets that both Airbnb and Uber exemplify. Thanks to the digitization of information, entirely new markets have emerged that allow the flow of information between buyers and suppliers. Because Airbnb and Uber have built their business models astride these flows, they can get a cut of the action.
But the premise of the model is important to understand. Airbnb and Uber are built on the twin platforms of information and enablement. There is no attempt to persuade by the providers of the platforms -- because they know those attempts will erode the value of the market they’re enabling. We are not receptive to persuasion (in the form of advertising) because we have access to information that we believe to be more reliable: user reviews and ratings.
The basic premise of advertising has changed. Information is no longer scarce. In fact, through digitization, we have the opposite problem. We have too much information and too little attention to allocate to it. We now need to filter information -- and increasingly, the filters we apply are objectivity and reliability. That turns the historical value exchange of advertising on its head. This has allowed participatory information marketplaces such as Uber, Airbnb and Google to flourish. In these markets, where information flows freely, advertising that attempts to influence feels awkward, forced and disingenuous. Rather than building trust, advertising erodes it.
This disruption has also driven another trend with dire consequences for advertising as we know it: the “Maker” revolution and the atomization of industries. There are some industries where any of us could participate as producers and vendors. The hospitality industry is one of these.
Travelers' needs are pretty minimal: a bed, a roof, a bathroom. Most of us could provide these if we were so inclined. We don’t need to be Conrad Hilton. These are industries susceptible to atomization, breaking the market down to the individual unit. And it’s in these industries where disruptive information marketplaces will emerge first.
But I can’t build a refrigerator. Or a car (yet). In these industries, scale is still required. And these will be the last strongholds of mass advertising.
Milner talked about the digitization of media and the impact on advertising. But there’s a bigger change afoot: the digitization of information in marketplaces that previously relied on scarcity of information to prop up business models. As information goes from scarcity to abundance, these business models will inevitably fall.