Publicis' Tobaccowala: Advertising Will Decline 30% In Next 5 Years
- by Joe Mandese @mp_joemandese, February 2, 2018
At a time when it seems there are more opportunities to advertise than ever before, one of Madison Avenue’s most visionary futurists predicts the ability of advertising to actually reach consumers will decline “20% to 30%” over the next five years.
“We will increasingly have less and less advertising,” Publicis Groupe’s Rishad Tobaccowala said during the opening session of CIMM’s Cross-Platform Media Measurement & Data Summit in New York City Thursday afternoon.
That’s an ironic prediction for an ad executive whose title is chief growth officer, but Tobaccowala predicted it’s inevitable that the ability to reach people with ads will drop precipitously over the next several years because of a variety of factors, but especially because it’s simply not a good experience for most people.
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“We are so disrespecting people’s time that they are spending more and more time in advertising-free environments,” he asserted, citing the rapid adoption of ad-free content platforms such as Netflix as proof.
“We don’t value their time,” Tobaccowala said, estimating that the value the ad industry places on consumer time is “less than minimum wage.”
As a result, he said the decline in consumer exposure to advertising could decline “30% or more” in the next five years.
“You’re asking me to give you my time for less than minimum wages, which is not worth my time,” he explained as the basis of his prediction.
As a result, Tobaccowala said he doesn’t believe Netflix will adopt an “advertising model,” because it is antithetical to the reason consumers are adopting it in the first place.
During the interview with the Wall Street Journal’s Suzanne Vranica, Tobaccowala also took a swipe at the big digital platforms -- Google and Facebook, as well as Amazon -- for devaluing the role of marketers and he predicted that smart marketers would increasingly begin marketing “direct” to consumers as a way of regaining control over their relationship.
“More and more of them are selling directly,” he said, adding, “Once you start selling directly, you begin to understand what the real power of the data is.”
By data, Tobaccowala was referring to the behavioral and transactional data that is generated via digital commerce, which currently is being accrued mostly to the big digital platforms that have so far insinuated themselves as middlemen in that process.
But Tobaccowala noted that “major CPG companies” already have “goals of having 25% of their sales direct” in the next few years.
“Once you have that, you begin to have some very interesting leverage,” Tobaccowala predicted, concluding, “The single most important thing that someone has is the relationship they have with their customer or the consumer.”
Interesting but rather vague---in my opinion. As for the amount of media time that people are devoting to ad-free content, if you count radio, magazines, newspapers as well as TV/video and digital media, the ad-free portion is probably only around 5%; if you only do the estimate for TV, its probably around 10%. And the latter is growing, no doubt about that. By 2025 it may go up to 15% or even 18%.
I'm not so sure that this will justify the whopping cut back in ad spending that is cited as a possibility. However, going direct to the consumer is, without doubt, much more on the agenda of many national advertisers, mainly via digital DR campaigns. That, said, such dollars generally do not come from branding budgets but from sales promotion funding so, again, we may be mixing apples and oranges here.
Despite all of this speculation the one trend that should be worrying advertisers who are dependent on TV as their primary communications platform is that the TV networks and cable channels are, increasingly focused on being less reliant on ad dollars and much more interested in retransmission fees, streaming platform subscriber fees, profit-sharing deals with producers, etc. If this takes its logical course and the ad component becomes a loss leader while most of the profits come from non-ad sources, I can see the TV time sellers steadily raising their CPMs to compensate. Advertisers, who don't plan ahead for this eventuality may find themselves stuck in a take it or leave it situation, competing for time in the slowly declining TV GRP pool but at much higher costs than before.
Neflix surprised analysst with much better subscription numbers in the last quater, I think that is a barometer of things to come over the next 5 years. Netflix though can change their stance on ads and start putting ads into the content. Is this whole thing a surpise here? More advetisers are taking their budget in house also, how do you measure inacrease or deacrese in those spending? You can measure revenue in advertising holding companies, you can see what is gogin up and down. Ad spend direct by the brand itself if not so easy to track.
@Ed Papazian: I guess it depends on how you define ad-supported and ad-free media. While I respect Media Dynamics estimates, I've been tracking this from other sources -- Veronis Suhler Stevenson and more recently PQ Media -- and the numbers are much higher. Currently, PQ estimates that on a global basis, about 62% of consumer time spent with media that is ad-supported. They project that will fall to 59% by 2020. That's a global number. I suspect that the U.S. indexes much higher in terms of non-ad-supported media. Lastly, the time spent with ad-supported media is just opportunites to see or hear it, not necessarily actual exposure, much less "engagement." It makes sense to me that as the number of possible ad impressions continues to increase, the percentage of time people spend with any one of them will go down over time. I have no way of knowing if Rishad's projection is accurate, but he's a pretty smart guy.
Would it possibly mean that the costs will increase for lesser amounts ?
Joe, taking the U.S. only as a basis for comparison, I would count most of radio as ad-supported along with print media and digital, that gets us up to about 5.5 hours per day per adult. Then, we come to "TV" where only about 12% of usage is to OTT sources some of which carry ads, I believe.. Of course we should delete "ad-free" PBS, but that's a rather small percentage--1-2%. When you get all through you've got maybe half an hour per day of ad-free viewing per adult and about 4- 4.5 hours per day of ad supported viewing, including those delayed viewings where the ads aren't zapped. These are rough figures for the total adult population, not those who use each medium, as I'm responding from home and memory. So half an hour of ad -free on a base of ten hours would give you my 5% figure. And, as I noted, the percentage for TV only is considerably higher---which I believe was what Rashad was referring to. If not, then I'm at a loss to come up with an estimate that matches what was being said. In any event, I think it's unfair to focus only on TV/video when talking about advertising. A lot of ad dollars still are spent for non-TV/video ads on radio and print media as well as banner ads , search "ads" etc. in digital media.