Valley guy: Fall ’06
by JAMES H. MORRIS
August 20, 2006
You hate to wait through an advertisement on television. But you enjoy the look and feel of an ad in your favorite magazine. You hate pop-ups on the internet, yet you like what you need on Google. Our likes, dislikes, and habits in this changing world are becoming critically important to companies that want to understand the latest revolution in the ancient industry known as advertising.
Advertising’s old? Yes. It’s as old as sex! A bird’s song, a lightning bug’s light, a stink bug’s stink, and a peacock’s tail are all advertisements. The lightning bug’s light is like a classified ad; it says, “I’m here and available.” The peacock’s tail, on the other hand, is like a very expensive brand ad; it says, “I am so healthy I can afford to waste energy on this amazing, but useless display.” It’s the Super Bowl ads that cost $5 million per minute. A company spending all that money on an ad must have a good product. Brand ads make even useless things attractive and fashionable. When humans advertise themselves, it’s called flirting, “a universal and essential aspect of human interaction,” according to Oxford’s Social Issues Research Centre (SIRC). Flirting may be the most important of all human product lines. If you have a business, though, you are most likely interested in advertising something else. The question is, how best to do it.
Our communications infrastructure is changing rapidly and will be different in twenty years. Traditional broadcasting will have declined, replaced by internet services that make information—text, audio, or video—available on demand. With the exception of things you insist on seeing as they happen, such as a Steelers’ game, you will never need to schedule a broadcast viewing. You will never have to watch a commercial. The advertising business is going to change as the internet displaces other media; Google is only the beginning. If you want to prosper, follow these principles:
· Use two-way communication to target and tailor messages to customers.
· Don’t force messages on the viewers. They have the power now.
· Sell a wider selection of things to an increasingly fragmented audience.
· Choose the right target.
Oxford’s SIRC suggests the obvious: “Don’t flirt with people unlikely to return your interest.” Broadcast advertisers are relatively blind and so can’t apply such a rule effectively. John Wanamaker, the father of modern advertising, famously said, “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.” That needn’t be true anymore because the internet is a two-way medium. This allows ads to be targeted more effectively because viewers can signal what they might be interested in. When you type in a search term such as “sore heel” to Google, it guesses that you might be interested in arch supports. Actually, Google itself doesn’t have to guess; its advertisers do. A seller of arch supports contacts Google and says, “Whenever someone inquires about sore heels, arch supports, running, podiatry, or plantar fasciitis, please show them my ad. In the past, the seller could only advertise in magazines for runners and podiatrists and hope sore heel sufferers read those magazines. Someday your TiVo might say, “Since you’re watching Law and Order, you might like CSI — 72 percent of Law and Order viewers also watch CSI.” It might say, “Consider going to Duquesne law school.”
The targeting of ads can be more effective if advertisers know more about you, for example, whether you’ve already bought some arch supports, but this raises the privacy issue. People don’t seem to mind when Amazon.com suggests books to them, but Google’s efforts to collect information about its clients seem to raise alarms. While I look forward to receiving an online newspaper titled, “The Jim Morris Gazette,” containing precisely the news and information I need and don’t already know, others reading a copy of it may learn more about me than I want them to know. We were anonymous in the broadcast media; now we’re not.
The exploitation of two-way communication can be taken much further. A great deal more of the sales process can be done automatically, limited only by programmers’ ability to service the customer.
Don’t overdo it
The SIRC advises flirters not to make eye contact for more than a second. That is about how long I want to look at most ads, and I’m not alone. Recent surveys show: 54 percent “avoid buying products that overwhelm them with advertising and marketing.” 65 percent “are constantly bombarded with too much advertising.” 33 percent “would be willing to have a slightly lower standard of living to live in a society without marketing and advertising.” The boorishness of advertisers is partly due to the difficulty they have in targeting. They’re shouting into a void. The old school, however, believes that aggressive advertising works, whatever people say about it. “Making you sick, then selling you the cure, is what advertising does,” said Marshall McLuhan.
Things have been just as bad on the internet. Many websites devote large portions of their pages to ads, forcing them on computer users whose screen space is precious. These ads are hard to ignore; they are overcolored and animated. To make matters worse, some advertisers deploy pop-up ads: little windows that jump onto to your computer screen obscuring the pages you are trying to view. We don’t have comparable data on how annoying these ads are, but anecdotes suggest the ads are not effective. And everyone hates spam.
The internet user, unlike the TV viewer, can fight back. They can write programs to process incoming web pages and emails to block pop-ads or strip out ads entirely. The same kinds of tricks are available to TiVo users. The day of viewer control of content is at hand!
Internet advertisers should emulate magazine advertisers, not broadcasters. (See Television vs. Magazines, this page.) Magazines have never been able to force-feed ads, and they are better for it. An average magazine devotes 60 percent of its space to advertising, while television ads take up only 25 percent of the broadcast time. Yet 83 percent of adults find magazine ads appealing, while only 69 percent find television ads appealing. Also, 44 percent of magazine readers report shopping for things advertised in a magazine while 36 percent of television ad viewers do so.
Better advertiser behavior is induced by pay-per-click, an ad pricing policy in which advertisers pay only when someone clicks on their ad. This simple change revolutionized internet ads and led to the emergence of Google. Now the advertisers are spared Wanamaker’s problem: every item they pay for represents an interested customer. Advertisers are no longer motivated to force their ads on viewers because they want the clicks they pay for to represent genuine interest. Everyone’s motivations are aligned. If I search for information about a problem, I’ll be happy to see ads for solutions. The ads are unobtrusive and brief because Google wants me to click on them to get further information.
The mass-produced Model T was a one-size-fits-all car. One ad was sufficient for all too. In the mass market days, one applied an eighty-twenty rule: If 80 percent of the sales are concentrated in 20 percent of the product line, stop selling everything but the 20 percent. Now things are different. Manufacturing techniques have improved and spread worldwide, making popular products so cheap that exotic things produce more profit. Markets are dividing into hundreds, even thousands of niches. We spread our demands over many different products. Chris Anderson, editor of Wired, calls the part of a market with great diversity “The long tail.” If you rank all the song titles in the world by popularity and draw a graph of the results, there will be a long tail on the graph where the less popular ones are found. The longer and higher the tail, the more diverse are the tastes of the population. Generally, the tails are getting longer for everything because people desire more diversity, and it is getting easier to deliver.
For instance, Rhapsody, an online music seller, offers twenty times the number of titles that Walmart does. Similarly, bookseller Amazon and DVD renter Netflix offer twenty times the titles of their conventional competitors. Over 20 percent of the sales of these online companies are of things you can’t find at the competitors.
Anderson believes, furthermore, that diversity is growing, and there’s money to be made from the 80 percent of customers left out by the 80-20 rule—those people seeking things ranked in the long tail. He argues that the supply of increased diversity will stimulate demand for even more diversity so that the curves will get fatter.
Just as the needs of mass production encouraged broadcasting the same ads to everyone, the current marketing needs of business will drive diversity. Sellers want qualified buyers—ones who are interested and able to buy their products. Therefore, they like niche magazines or other outlets that prequalify the buyers.
Just as a Google reader is searching for the answer to a problem, the Google advertiser is searching for people needing his solution. Therefore, he wants the material attracting the reader to be as specific as possible. In other words, we’re getting more diversity not just because we might like it, but also because sellers use it as a tool to sort through the population in search of buyers. Our media are becoming bigger and far more diverse. Magazines, already very diverse, represent a glimpse of the future. Viewers are going to gain more control over what they watch and when they watch it. Advertisers had better learn to flirt.