Commentary

Is This The End Of Advertising As We Know It?

Research reports can be dull affairs—tons of data, a lot of charts, and analysis—but they don’t have to be. A case in point: Last week Forrester released a report called:“The End of Advertising As We Know It.”

Apart from the catchy title, a riff on the REM song “It's The End of The World" if you remember it, the report prognosticates that advertising, as we know it, may be on the way out. Non-interruptive relationships will replace it, including relationships with a new crop of digital assistants.

Among the provocative findings of the report: CMOs will “unravel the threads of advertising,” taking as much as $2.9 billion away from display advertising in the next year.

The author of the report, James McQuivey, a principal analyst at Forrester, offered additional insights to RTBlog.

RTBlog:What do you mean by suggesting that CMOs will “unravel the final threads of advertising as we know it”? How, specifically?

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McQuivey: We simply took the amount of money the top 10 U.S. CMOs are spending on digital advertising and asked what would happen if they took just 10% of that budget and invested it in relationships.

It was a pleasant surprise to us that at that exact moment P&G was already scaling back its digital ad spend by nearly that much over the next few years, something the company announced just before we published our report.

But we don't just want cost savings or even just saber-rattling to force Google and Facebook to the table. We want advertisers to see this as an opportunity to invest in relationships.  

RTBlog:Is digital display advertising dead? If so, what killed it? Or, is it just interruptive advertising experiences that are dead because consumers will no longer tolerate them?

McQuivey: Interruptions are slowing dying the way reading the newspaper slowly died from 1995 to 2010. Reading the newspaper was a ritual, a part of family culture and business culture. And then suddenly it wasn't. Nobody killed newspaper reading, they just replaced it with something better.

The same is happening to advertising -- not because anybody wants to kill it (though some people do), but more because people just won't make room for advertising in their lives the way they used to.

And not because they're angry -- they've always been angry at advertising for decades the research has shown that -- but because they will have other ways to do what they want to do. And those ways won't involve interruptions.

In truth, this doesn't mean advertising dies, it means advertising as we know it dies: interruption-based, impersonal, and distracting.

RTBlog:How will the ad industry come up with new, non-interruptive formats that "engage" consumers in a new way? Is artificial intelligence (AI) helping that process? How?

McQuivey: AI isn't involved yet. But it will be in a big way. Once companies have enough data about you -- including data on your current context, which includes emotional state, by the way, despite all the anger directed at Facebook right now for pointing this out so poorly -- companies will be able to figure out what you want, when you want it, and how to offer it to you. You'll get an advertisement that’s entirely appropriate to your background, your interests, and your aspirations.

But it takes massive data to do that, and very few companies have that data today or would know how to use it appropriately if they did.

And AI will be crucial to using the data once it's in place. When those ads are finally presented to us, they will feel more like smart recommendations from a trusted friend than they will a commercial message. Is that an advertisement? I guess so. But it won't feel like an ad.

RTBlog:In the report, you coin the phrase "intelligent agents." What are they? Would social influencers count as "intelligent agents"?

McQuivey: Intelligent agents are the current crop of digital assistants, ranging from personal assistants like Amazon's Alexa to the chatbot conversation you have on the Patagonia website. Not all intelligent agents are created equal—and not all of them know you as well as they will soon.

The more these intelligent agents know about you, the more they can answer your questions today. But tomorrow they will anticipate your questions before you ask them. It's like having the smartest friend in the world available to you 24/7. They have your back, they know what they want, and they can connect you to other resources -- a branded agent from Starbucks or Marriott, for example -- as you need them.

RTBlog:What are the most dramatic points in this report? And specifically, if you're ad-tech company what should you take away?

McQuivey: Interruptions are disappearing because people are doing fewer things on interruptable devices. It will take some time for this shift to occur, but like the shift from Web to digital, it's inescapable.

Data is becoming critical to effective marketing. You have to have permission to know your customer, and you have to use that permission to figure out how to serve them well -- even anticipating what they want before they want it.

Big intelligent agent creators like Amazon, Google, and Apple will hold the keys to the future of advertising (the way Google already does, so kudos to them for making this transition). All other brands and marketers will have to negotiate their relationship with these companies, asking whether or not they can compete with them, partner with them, or support them, to reach the brand's customers. 

Ad -ech companies still have a lot of runway to improve the production, delivery, and measurement of digital advertising. Because even if marketers take the few billion away from digital advertising that we recommend, there will still be tens of billions spent.

But the sooner the ad-tech companies realize that they can't just deliver a technical solution -- they have to be a part of a strategic solution aimed at helping marketers build relationships with customers instead of merely putting an ad interruption in front of them -- the more likely it is that they will be alive five years from now.

2 comments about "Is This The End Of Advertising As We Know It?".
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  1. Ed Papazian from Media Dynamics, May 8, 2017 at 9:17 a.m.

    The comments seem to wander all over the place, Tobi. First, the headline intrigues us with the dire suggestion about all of advertising being doomed. Then, we are talking about some digital ad dollars possibly being reallocated, then back to people becoming no longer willing to suffer through advertising "interruptions"---I assume that this refers mainly to TV and radio. Then it's off we go with AI---sort of. And all of these changes will evolve gradually. Color me confused---not by you but by the Forrester analyst.

  2. Billy Tarter from Leads Dynamo replied, May 8, 2017 at 6:41 p.m.

    Agreed, this is confusing.  So... advertising is going away... but not really, it's just going to get better.

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