“Whatever the business problem, advertising is unlikely to be the answer”

While many have predicted the death of the advertising business – particularly traditional broadcast advertising – the data now shows the predictions coming true.

In a talk for the L2 Digital Leadership Academy this summer, Professor Scott Galloway of NYU Stern University and research organisation L2 presented the case for the prosecution.

In summary, here are Prof Galloway’s key arguments:

Media costs in traditional channels are rising – in a sector that as a share of GDP is flat.

Innovation in traditional advertising is non-existent – indicating a business that’s either unaware of, or deliberately ignoring its audience.

Many high profile companies either haven’t used advertising as a growth tool, or they’re moving away from it. Apple, for example,  has shifted advertising spend to offline investment in retail stores.

Even the biggest advertisers (generally consumer packaged goods companies) who have historically spent the most, attract the best talent and have the deepest understanding of the medium – are losing revenue and market share.

Furthermore, even in categories of consumer packaged goods that are growing, big advertising spenders are being usurped by smaller, leaner, more agile brands that are focused on digital channels to attract customers and improve their experience wth the product.

And the final nail in the coffin: due to dwindling revenues from online advertising, content-driven companies are starting to see the success of paywalls and subscription-funded content. In other words, people are paying not to see advertising.

Advertising is becoming a tax on the poor and digitally illiterate who either can’t afford avoid it, or don’t know how to.

What’s replacing advertising?

Fundamentally, advertising is a lazy growth tool. Modern brands that have a deep understanding of their customers and the customer experience have better opportunities to innovate. They can adapt the product, the service, the packaging, and the communication to fit with customer needs

They avoid traditional media, instead focussing on digital channels to grow huge audiences and benefit from network effects. Digital channels (especially social) benefit from lower  media costs, laser-guided targeting and expect to be measured on value rather than reach.

So if you’re looking to solve an important business problem for your business, it’s unlikely that advertising is the answer.

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