Advertising is Dead. Long Live Advertising.

greg@gregstuart.com Twitter.com/gregstuart1

Advertising is Dead! Long Live

Advertising!IESE / IME Advanced Digital Media Strategies

May 12, 2010New York City

Double-Think

…the test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.

F Scott Fitzgerald

First Step: Know your Audience – Are you?

Buy Side(Ad Buyer, Marketer,

Sell Side(Ad Seller, Publisher,

Enabler(Content Creator, technology, etc.)

Investor(M&A, Venture, etc.)

First Step: Your Reaction to Digital Media

Love It• Best thing that’s

ever happened• Can’t get enough

Hate It• Over hyped• Who needs it• Like to turn off

1. Why Advertising is Failing2. What is Advertising’s Exciting Future3. Where to Look in the Future

3 Areas To Cover Today

Items I Could Speak To:Digital Media – SalesDigital Media – BuyingAdvertisingSocial MediaMobile MediaStart upsVenture Capital

IT’S TOO BAD ADVERTISERS ARE NOT GOOD AT ADVERTISING.

slide title37% of Ad Spending is

Wasted

In the U.S., an estimated $112 Billion is Wasted

Researched $1 Billion in Ad Spend

1.1 Million Consumers Surveyed

Note: Of the 30 studies, 25 in U.S., 5 in EU

What Did Learn From the Research?

Motivations

Messaging Media

ING’s 4 Year Campaign: Fresh Thinking

Today’s Ads For INGSimplifies A Complicated Financial World

Messaging MediaMotivations

More, What Do We Know?

How Big A Difference Can Creative Make?

Source: IAB Cross Media Study

0% 5% 10% 15% 20% 25%

Creative Makes A BIG Difference

And Just to See It Again

Messaging Media

Yes, It’s That Bad, and Worse

Motivations

36% 31% 83%

The Truth Is…Marketing is Hard

Suppose you have 5 options:• 5 Brand Positionings • 5 Customer Segmentations• 5 Ad Creative Approaches• 5 Magazine Schedules/Plans• 5 Online Plans

3,125 Combinations

10 to 10th = 1 billion combinations

What Sticks was Written to Be…

A Clarion Call* to Marketers for Change

Clarion Call * A clarion call is a powerful request for action or an irresistible mandate. Frequently used in a religious context, or in a political context, in that a politician issues a challenge for action from the public.

slide titleWhat If They Don’t

Take the Call?

Donny Deutsch Quote

“We did a wonderful spot…on the Superbowl… for Mitsubishi Gallant...that stops at the end and [says] go to “seewhathappens.com.”

We got about 600,000 clicks.

Was that great or that not great?

We told the client it was great, so it was great.”

[nervous laughter]

− Donny Deutsch speaking to 500 Marketers…Deutsch is the 14 largest agency in the US

slide titleSo What Do We Do?

What Did Google Do So Right$20 Billion in Revenue Right!

Google’s Revenue Per Page

$68.00 eCPM$0.54 CPC x 17% click thru x 74% sell thru

What is That Worth to Google?

Source: Jordan Rohan, Analyst at RBC

slide titleHow Can We Drive

Effectiveness?

1 2 3 4 5 6 7 8 9 100%

Frequency or Budget

Respect Diminishing Returns:It’s a Law of Physics in Media

Diminishing Returns

Heaviest Online Quintile GarnersHalf the Ad Imps

5% 6%11%

Avg.Freq: 1.0 2.1 3.2 5.5 25.0

LightUsers

All other quintiles

HeavyUsers

Putting in Frequency Caps Greatly Improves PerformanceIncreased

reach by 72%

+50% to 70% in Ad

Effectiveness

Series1-10%

10% 12%21%

29% 29%

LightUsers

All other quintiles

HeavyUsers

Frequency Cap of 3

implemented

Even Bigger Came from Adjusting the Marketing Mix

Introducing New Menu Item: Grilled Chicken Flatbread Sandwich

Ad Frequency (or Budget or Time)

5pt Gain!

TV & Radio

Point of Diminished

Returns

20% ofBroadcast Budget

Reinvested 13.6%

in Online

Cut6.4%

Online + Broadcast

Optimizing Each Campaign Is High Value

Same Media Budget 310% IncreaseSource: Insight Express

Imps (M)Brand

PerformanceContri-bution

Creative 1 10.0 -15.9% (1.59) Creative 2 10.0 13.8% 1.38 Creative 3 10.0 11.3% 1.13

Total 30.0 0.92

Imps (M)Brand

PerformanceContri-bution

Creative 1 -- -- --Creative 2 15.0 13.8% 2.07 Creative 3 15.0 11.3% 1.70

Total 30.0 3.77

We CAN Really Impact Ad Effectiveness

Low High1. Cut out International impressions 18% to 43%2. Manage Frequency 50% to 70%3. Capitalize on Time of Day/DoW 10% to 15%4. Ad Size matters 20% to 54%5. Page Placement really matters 6% to 350%6. Creative is “mission critical” 0% to 400%

Total Gain Possible: 0% 2910%

+0% to INFINITY

increase in Ad Effectiveness

+0% to INFINITY

increase in Ad EffectivenessInsights from the What Sticks’ Research

WHAT IF WE GOT ADVERTISING RIGHT?

“Most Important Car Launch in Ford’s History.” Bill Ford

slide titleFord F-150 Case Study

The F-150 Online Ads

How Big a Difference Can Little Changes Make?

Online = 10X Value

Interpretation: If it cost Roadblock $1 (indexed at 100) to increase purchase consideration, then it cost $1.35 for Online, $4.56 for magazine and $11.04 to TV to achieve the same increase.

Brand Metric: Purchase

Consideration (top 2 box)

Relative Cost Index Relative Cost

TV 1104 $11.04Magazine 456 $4.56Roadblock 100 $1.00Online 135 $1.35

Does “Getting It Right”, Impact Sales

Before: Cost of Portal Home Page Take-Over ad in study: $500,000

Today: Cost of Portal Home Page Take-Over ad:

$2,500,000

Ford Media Mix *

* Approx. $200 Million Budget

Base Plan

2.5% Onlin

6% Onlin

100% New Mix Added +$1,350,000,000 in U.S. Truck sales $$$

New Mix garnered

$750,000,000 in

U.S. Truck sales $Tr

Online

What Sticks’ Three Steps

1. Universal Agreement to Goals

2. Have a Back Up Plan (Plan B)

3. Know the Value of each Dollar

70-20-1070% budget to what you know works20% to innovating off of what works10% to brand new ideas

1. Effectiveness2. Efficiency

SNEAK PEEK AT THE FUTURE

slide titleThe Change is Seismic

“The country’s third-largest advertiser, General Motors is getting ready to shift fully half of its

$3 billion budget into digital and one-to-one

marketing within the next 3 years.” Advertising AgeMarch 17, 2008

slide titleBut What to Do?

slide titleAnd How to Do It?

slide titleThe State of Advertisers?

1.Fragmentation2.Frugality3.Fast(er)

3 Broad Media Trends Today

20061. Newspapers2. Magazines3. Email4. Broadcast TV5. Radio6. CD Player7. Cable TV8. Personal Computer9. Satellite Television10. Internet11. Cellphone12. DVD Players13. Satellite Radio14. MP3 Players15. TivoDVR16. Slingbox17. iPod18. Blogs19. Online Video20. Mobile Internet21. Console Video Games22. PC Video Games23. MMORP Games24. Mobile Games25. Text Messaging26. Mobile Video27. Download Movies28. Podcasts29. Instant Messaging30. Social Networks

More Options Than Ever

19661. Newspapers2. Broadcast TV3. Magazines4. Broadcast Radio5. Eight Track

19961. Newspapers2. Magazines3. Cable TV4. Broadcast TV5. Radio6. Cassette Tapes7. Walkman8. VCR9. Personal Computer10. Console Video Games11. PC Video Games

Fragmented

People Spend 9 Hours a Day with Media

FragmentedSource: http://www.researchexcellence.com/

Most is Networked Digital Media

Fragmented

digital advertising more complex than ever and the options more diverse

Display

Outbound communication iPhone apps

Influentials

Microblogging

Online WOM

Video - YouTube

SEO Widgets

Online advertising

Email marketing

SMS/MMS marketing

Microsite development

Seeding

RSSCRM

applicationApp

DevelopmentSearch engine

Streaming

Podcasting

Website Development

Branded entertainment

Viral INTERACTIVE AD CHANNEL

Fragmented

slide titleIntense Focus on Adding New Value

Frugal

And the Adoption is Faster than Ever

Facebook

Internet

0 10 20 30 40

Source: United Nations Cyber Document, Apple, Facebook

Years to Reach 50 Million Users

60 million new Facebook user inthe last two months of 2009

Faster

Mobile Internet Outpaces Computer InternetiPhone + iTouch Users = 8x AOL Users 8 Quarters After Launch

Quarters Since Launch

Mobile Internet

iPhone + iTouchLaunched 6/07

Desktop Internet

Netscape*Launched 12/94

Mobile Internet

NTT docomo i-modeLaunched 6/99

Desktop Internet

AOL*V2.0 Launched 9/94

Q1 Q3 Q5 Q7 Q9 Q11 Q13 Q15 Q17 Q19

Source: Morgan StanleyFaster

The Twitter Phenomena

2006 2007 2008 2009 20100.0

Registered Users

‘Mill

• Adding 300,000 registered a day

• 180 million uniques a mo.

• 55 million tweets a day

106 million

Source: Twitter April 2010Faster

Maybe, Someday?

1. Ad Avoidance2. Social3. Mobile

3 Digital Trends for Tomorrow

Ad Blocking

Ad Blocking estimated at 7-8%*• up from 2-3% in 2003• eBay reports closer to 10-15%.

Search is lower at 5-6%3 of the top 10 most popular software downloads are ad blockers

Source: DCLK Analysis in 2005

Avoidance

Ad Blocking: Before and After

Before After

Avoidance

Cross Site User Breakdown

63% 66%57%

69%51%

74% 68%

19% 14% 26%17%

13% 18%

20% 17% 13% 20% 13% 14%18%

Site A (8-27-05thru 4-20-06)

Site B (11-17-05thru 4-19-06)

Site C (9-1-05thru 1-31-06)

Site D (2-14-06thru 4-20-06)

Site E (2-22-06thru 4-01-06)

Site F (2-01-06thru 4-20-06)

Site G (2-01-06thru 4-20-06)

RejectorsInconsistentAcceptors

Cookie Deletion Rates by (anonymous) Site

Avoidance

People Want Relationships More than Content

Share of Global Online Time Spent, 6/06 – 6/09

6/06 9/06 12/06 3/07 6/07 9/07 12/07 3/08 6/08 9/08 12/08 3/09 6/09

Yahoo.com Msn.com Google.com YouTube.com Facebook.om

Facebook – Largest Share Gainer of Online Usage Over Past 3 Years

Source: Morgan Stanley

Facebook

YouTube

Yahoo!

Social

• 76% of consumers visit a social network in a month *

• 17% of time is Social Media **

–Social now represents 22% of display impressions *

Explosion of Social* comScore July 2009** Nielsen 2009

Social

Social Media is Evan Overtaking Email

Number of Global Users (MM)11/06 – 12/09

Global Minutes Spent per Month (B)11/06 – 12/09

Social Networking Email

Social Networking UsageSurpassed Email = 11/07

30011/06 7/07 3/08 11/08 7/09 11/06 7/07 3/08 11/08 7/09

Social Networking UsersSurpassed Email = 7/09

Source: Morgan StanleySocial

slide title2010 Year of Mobile

4.6B Mobile Users WW

17% Smartphone's in U.S.

projected @ 46% WW in 2013

Mobile

Global Web Access is Going Mobile

20092013

0200400600800

10001200140016001800

Mobile Web

Total Internet

Mobile WebTotal Internet

Forrester 2009Mobile

What Does the Future Hold for Social Media?

Welcome to Double Think

In the novel 1984, doublethink is simultaneously accepting as correct, two mutually contradictory beliefs.

It is related to, but distinct from, hypocrisy and neutrality. Its opposite is Cognitive Dissonance, where the two beliefs cause conflict in one's mind.

What Will Historians Say Regarding Advertising?

It was the best of the times, it was the worst of times

What Sticks’ Three Steps

1. Universal Agreement to Goals

2. Have a Back Up Plan (Plan B)

3. Know the Value of each Dollar

70-20-1070% budget to what you know works20% to innovating off of what works10% to brand new ideas

Industry On Brink of Change

I cannot say whether things will get better if we change; what I can say is they must change if they are to get better.

− Georg Christoph Lichtenberg18th-century German scientist,

satirist and Anglophile

greg@gregstuart.com+1 631 702 0682

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Advertising is Dead. Long Live Advertising.

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