Media Buying Just Tip Of Advertising's Disruptive Iceberg

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.

3 comments about "Media Buying Just Tip Of Advertising's Disruptive Iceberg".
Check to receive email when comments are posted.
  1. Ed Papazian from Media Dynamics, August 9, 2016 at 10:34 a.m.

    Gord, some interesting pints, however I believe that in the totality of things Milner's claim that consumers are increasingly ignoring the ad 'barrage" that supposedly engulfs them is rather overstated. Take TV for example. Your typical consumer devotes around five hours per day to the tube and, contrary to what one reads in the trade press and hears on the chicken luncheon speakers' circuit. actively avoids only a small portion of the commercials by electronic zapping measures or dial switching. Of course, many TV ads are not heeded even when on the screen due to irrelevance, poor execution or excess clutter----but this is nothing new. Moreover, TV ad recall levels are not plummetting----they are fairly stable. The same goes for magazines which are drawing even higher recall scores than before as the publiocations get thinner.

    Now digital media is something else, with the rise of ad blockers, viewability issues, excess ad clutter, etc. however a typical branding advertiser spends perhaps, 5-10% of its total media budget on digital so for such marketers this is not a disastrous problem that threatens their basic business model. In fact, media buying,is not the tip of the iceberg where business models are concerned. Rather, it is simply one executional element in a much broader and more strategic effort to position a brand and drive sales.

    As for Milner's notion that media buying will consolidate into a "centralized hub" what, exactly is he dreaming up here?

  2. Maarten Albarda from Flock Associates (USA), August 9, 2016 at 11:38 a.m.

    I like a lot of the thinking here, but agree with Ed that I don't see a centralized hub. I do see several centralized hubs, which may or may not include current media agencies.

    What I disagree with is this: "We now need to filter information -- and increasingly, the filters we apply are objectivity and reliability."

    I would say that both in information and advertising, we DO filter, but those filters are subjective and perceived reliability. They are subjective because they are spoonfed based on what the FB/Google filters feed me based on what they perceive I will like. And they are perceived reliable driven by my own biases and preferences ON TOP OF the algorithms. Some people trust Fox News, some people trust MSNBC. 

  3. Gordon Hotchkiss from Out of My Gord Consulting, August 10, 2016 at 12:10 p.m.

    Thanks Ed and Maarten...great points. Regarding the "Hub" concept, I probably didn't add enough of my own thoughts on this topic, as it wasn't the main point of my column. Rather than a hub, I would place my bets on an aggregated media marketplace that is more democratized than our current models. I think audience identification and customization based on multiple (and smarter) segmentation criteria will move media buying to "audience" acquisition. These thoughts are admittedly off the top of my head. Perhaps I'll fully bake them in a future column.

    Regarding Maarten's comments on filtering - we essentially agree. I meant "objectivity" and "reliability" in terms of what the consumer perceives those things to be. There are all kinds of biases and personal preferences still in place, but I do contend that we are looking for information sources that we perceive as objective and reliable.

Next story loading loading..