Commentary

Gary Vaynerchuk Says The Entire Digital Ad Space Is 'Broken'

Gary Vaynerchuk, CEO of VaynerMedia, is on a roll. He acquired women’s lifestyle site PureWow earlier this month, and launched The Gallery, an umbrella unit to house PureWow and other media properties. It sounds like a media empire in the making.

So why is the digital agency founder and serial entrepreneur so interested in media properties? Well, why not? Plus, the tagline of his personal brand is: “I day trade attention & build businesses.” Consumer attention is -- or should be -- the currency of media, he says. We've heard that before. It stands to reason that VaynerMedia is looking to pick up more media businesses and maybe some brand marketers with the help of private equity, Vaynerchuk hinted.

At AdExchanger’s Industry Preview on Wednesday, Vaynerchuk shared his provocative views with an audience of digital industry professionals who he clearly wanted to shake up: “I believe this entire space is broken not in a bad way, but from the way I see the world.” And what is that? He believes that brand marketers, agencies, and tech suppliers, see everything based on a short-term vision. “Everyone talks about return on ad spend, click-throughs… everything is math and metrics but meanwhile, the business is in the tank,” he said. “There’s a disconnect,” he says -- and he blames short-term thinking, and the industry’s obsession with “math” and metrics.

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“Common sense needs to enter ad tech,” he said, rating the common-sense element at “zero.” He also blamed much of the existing dysfunction on programmatic and “behavior that is so predicated in the moment or in the machine.” And he boldly stated to the audience: “You don’t believe in what you’re selling.” He said everyone in the room is concerned about short-term returns, and brand managers worry about making the numbers quarter by quarter, instead of taking a longer view.

All of this is taking place within the context of extreme channel conflict, where marketers are increasingly going direct consumer.

Vaynerchuk made another bold observation: “The most underpriced product in the world right now is Facebook advertising. You should put your money there. Google search is great, but you should understand that Facebook can do both sales and marketing,” he said, adding that "we need to reverse engineer the consumer’s actual attention."

"At a macro level, I want more debate about ‘math’ [data] being just one part of the equation," Vaynerchuk said. "We should ask, ‘was the product actually consumed?’"

He went to say that nothing is more important than time — outside of health and money. “Click-through rates and math suck… brands steal your time. We trade on math and metrics and that pisses off consumers,” he said. Instead, the industry should care about "whether stuff is selling or not."

The bottom line? Companies should ask itself whether their products or services work so that someone’s life depends on it.

The problem — internally at agencies, brand marketers, and ad tech companies — is that people are rated and evaluated based on the “math and metrics.” Vaynerchuk noted that among the biggest brands in the world, for example, 95% to 97% of consumer packaged goods lost market share last year.

“We’re trading on metrics that are not practical," he said, adding that last-touch attribution has challenges to overcome. "We’ve become so transactional. Math is used as a proxy for what’s happening, but it doesn’t tell the whole story. CPMs may look great but the business is down, so the math is not actually matching the reality of what’s actually happening.”

Vaynerchuk maintains that there is a better way, and argues that brands should do more A/B testing over a longer period of time. For example, CPG brands should start doing more “calculated bakeoffs” between TV ads, digital banners, and social media, and allow each form of media to get same amount of money at different times of the year over a two-year period.

7 comments about "Gary Vaynerchuk Says The Entire Digital Ad Space Is 'Broken'".
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  1. Ed Papazian from Media Dynamics Inc, January 19, 2017 at 9:13 a.m.

    Tobi, while I agree with most of Gary's critique of digital advertising and too much reliance on the math, metrics, etc. One thing puzzels me. How can it be that "95-95% of consumer packaged goods lost market share last year"? Perhaps, he meant that 35% lost share, 45% maintained levels while 20% gained share? That's a statistical possibility, but it's impossible for virtually all brands to lose market share to rival brands---isn't it?

  2. Ed Papazian from Media Dynamics Inc, January 19, 2017 at 9:31 a.m.

    Make that "95-97%", not "95-95%". Sigh!

  3. Henry Blaufox from Dragon360, January 19, 2017 at 10:57 a.m.

    The complaint about short term thinking and apparent demand for quick results has been around for years now. Is it unrealistic for us to expect this to change? I recall a conversation about this very problem with Gary at a UBS sponsored conference three years ago.

  4. Jack Wakshlag from Media Strategy, Research & Analytics replied, January 19, 2017 at 11:13 a.m.

    Ed, while I share your skepticism that 95-97% of packaged goods lost share ( a mathematical impossibility), he said 95-97% "among the biggest brands" which is possible. But we also know that measurement error generates "regression to the mean" so -- all things being equal -- we should expect to see larger brands lose share. Sometimes larger brands have more money to spend less wisely. How else do you explain how the largest brands spend the largest share of their ad budgets to generate incredibly expensive reach in exchange for wastefully high frequency levels. Erwin Ephron, who once said frequency is "the crabgrass of media planning", is still laughing. We miss him so.

  5. Dean Fox from ScreenTwo LLC, January 19, 2017 at 11:24 a.m.

    This argument reminds me of the old saying: "Figures don't lie, but liars figure."

  6. Ed Papazian from Media Dynamics Inc, January 19, 2017 at 1:21 p.m.

    Jack, thanks for that clarification. He was, indeed, referring to the biggest brands. My mistake. However, as regards the relative spending of large versus small brands, I have done quite a few investigations correlating share of market with ad spending and, where possible, with GRPs. In most, though not all cases, the category leaders---brands with SOMs of 25-35%, or more---spend considerably less per sale than the small fry----brands with SOMs under 5%. As a result, the larger brands operate more efficiently media-wise as they are taking advantage of the inherent economies of scale and consumer familiarity----many users who are not buying the larger brand at a given moment in time know of it or are former users, hence it's an acceptable second choice if their current brand is out of stock or the right size or formulatuion isn't readily available. So, as you noted, their SOM losses, when they ocurr, tend to be rather small, just as gains are relatively small when viewed on a percentage basis. In contrast, a small fry brand, which is forced by its size---so many consumers are unfamiliar with the brand---to over spend, uses up more GRPs per sale but can score seemingly huge gains percentage-wise following a flight of advertising. Still, we must note that a category leader with a 33% SOM, that loses two points in its SOM, is actually losing a .66% share; for a small brand with a 3% SOM to capture these consumers all for itself---an unlikely event---- it's SOM would have to increase by 22%.

  7. Seth Ulinski from TBR, January 19, 2017 at 1:32 p.m.

    The convergence of marketing and sales fuctions via technology is in the works- as stated above, attribution is key. I think it will take a forward-thinking CEO (or empowered CMO) to set new KPIs to "fix" today's broken advertising/marketing models. The legacy agency business model will be forced to adjust- IT consultancies like Accenture with outcome-based models (e.g. sales) are helping fuel this transition. 

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