Clickable
What's ailing the advertising business? Structural default. (Oh no; not again....)
Why should we care? Because advertising is part of a commercial fulfillment chain that feeds the US economy with billions of dollars each year. If you take ads away from commerce, you'll stop making sense. Your sales productivity will be crippled. And, you'll destroy an incredible amount of commercial value, the replacement of which will be painful, with long and costly development cycles, and over-arching effects on other industries, jobs and our quality of life. As consumers, even though it's tempting to wish ads away, we're invested in their success. It's their form that challenges us because of its intrusion on other media. Sadly, advertising's repetitive form factors are suffering from a lack of imagination.
The advertising business assembles three parts: media (distribution,) creative (content) and marketing. Media pays the bills. Creative makes the brand. Marketing is an ancillary revenue-enabler for ad agencies when media placement revenue gets soft. Today, media rates are very soft. Marketing as an art and a science has to carry its weight and this most subjective of agency services in terms of campaign measurement can get carved out of clients' purchases entirely. The structure needs a new structure.
Media rates--what advertisers pay to reach units of 1,000 potential customers-- have fallen in the aggregate, although money-makers that can deliver big audience numbers, like national and international sports and TV entertainment series, can still set a high water mark. Media experts blame the decline of classified advertising and the auto business for falling media values, but the fault also sits inside an advertising business that failed to see the declines coming and failed to secure revenue alternatives while things fell apart.
Advertising agencies didn't see their obsolescence coming in a new virtual media universe because they didn't understand the universe. The alternative competitive structure for advertising today has become search. And because technological efficiency eats up its own atmosphere almost as quickly as it grows, even the search businesses are starting to get soft, leading Google, Microsoft/Yahoo and AOL to attempt colonial outposts in display advertising, as well as a new passion for product development.
In some ways, the new universe already seems old and familiar: it's a handful of companies driving the online search business, alongside the TV network distribution and syndication model that drives broadcast and cable advertising. What's new-ish is advertising's re-consolidation around marketing sciences and distribution without clear, winning product and content models. Beyond ratings systems, advertising's most successful product is becoming search algorithms and its currency is search numbers, eclipsing and threatening to close out creative as the heart-and-soul of the ad business. Without a soul, can advertising survive?
With the ingenious passion of a wartime General, online search has taken the creative hill. Its forces are organic, redefining the landscape through ingenious media cell-division. Impressively, Google, the most efficient network search engine, runs the advertising tables. But is search really advertising with so little ad content? Google lays claim to much of advertising's blood-supply--media rates as distribution currency--but what does its soul look like? It probably looks like the soul of a mostly-well-intentioned highly-efficient direct response advertiser. While some ads use a rare alchemy that transforms imagination into gold when public attitudes are changed, most ads are less ambitious, staying close to the consumer by giving people what they want--clear direction, basic products, money-saving offers, retail therapy. Google excels at creating these ads through a content formula as efficient as its distribution but far more basic.
Google's tremendous respect for distribution, marketing sciences and stripped-down ad content have been rewarded with financial success and market dominance. Even so, it can't last forever because what ails American advertisers ails Google. If the advertising business that now includes Google doesn't take on a new way of thinking about markets with fertile soil for future products, an entirely re-invented industry will grab the opportunity. Interactive commerce--direct retail--is already on the march.
Amazon, eBay and Apple are reinventing advertising as shopping. By collapsing the marketing-to-sales fulfillment cycle into a single experience online and on mobile devices, these three companies are profiting from the next big thing. And, their success is replicable. Many companies and industries can play a role, giving this new advertising form a chance to change, replace and expand media revenue streams. As basic as commerce is, these three brands have done new work to differentiate themselves in difficult businesses--book-selling, the used-product marketplace and music--before expanding into everything else. Their brand definitions are their ad content--they've changed our attitudes about online products, marketing and sales--and, like Google, their respect for distribution is profound.
Amazon, eBay and Apple distribute themselves as online retail destinations. They've pulled in the friction-filled apparatus of fulfillment--shipping us the things we buy so we don't have to leave home; letting us send things to the people we love; putting us in touch with new products through communities of area sellers (the new classifieds); and, perfecting elegant design by letting us download IP for a price almost wherever we are. Because these businesses were costly to build--in terms of operating capital, engineering advances and brainy lawyers guarding IP--they now enjoy a few helpful moats around their concepts that will make it hard to be completely overtaken by imitators.
But the best news for the advertising business is that there's expansion opportunity beyond the online world. Online search and online retail both require work on the part of the consumer: you have to point before you click. You have to have an idea of what you're looking for. You don't open a search page without knowing roughly what you want to find. The browsing part of the equation requires pre-meditation. It's time-consuming and asks that we come to search or shopping in an active frame of mind. How in this highly transactional environment that rewards the hunter/shopper for the energy put into the hunt will we introduce new products that excite the consumer imagination and create new appetites?
TV advertising is one of the most effective ways to sell an idea as a story that opens the imagination. If powerful TV campaigns can include spots that are themselves retail destinations--that let you buy new branded merchandise from the programs or games you're watching as well as a new iPod or Kindle or Playstation or Wii or DVD with the click of your TV remote--the advertising business will reinvent itself. It will create a new set of media forms that can introduce and sell new products at the same time and with greater power than conventional advertising, leveraging immediate gratification like Apple's iTunes and Kindle's book-selling for people who already know they want music or books.
Will people buy new products on impulse? It depends on the product, the quality of the ad and the quality of the fulfillment experience. As an unexplored area, direct retail TV needs to be thought through by companies that are passionate about TV content and advertising who can also effect the means of distribution, making it a likely future success for cable or possibly a satellite partnership.
Direct retail TV will also require retail minds that know how to operationalize fulfillment. The difficulty will be getting these three sensibilities into one execution. The advertising business should become the catalyst for this new media form, but it's unlikely to be its sole creator for at least two reasons: the efficiency that direct retail TV will create will replace value for traditional TV ads, eating some of the agencies' and old media's lunch while setting a new table. Also, agencies lack significant strategic and operating competencies beyond their core business. Strategic thinking based on competitive alternatives and a passion for understanding why and how things work are the two core elements of product development. They have not yet been integrated into the content or distribution sides of advertising thought.
Still, many companies from all over the media landscape, including some agency thinkers, are talking about direct retail TV or "clickable" retail. Some of the planned benefits of green merchandising that can reduce our dependence on big box retailing can be factored into a long-term ROI, but only if benefits to the retailer are included in the financial model. New operating models that focus on fulfillment that conserves energy and money will be another benefit. Only through an advertising and retail partnership can this benefit be realized.
In the near-term, before these benefits can be realized and we can shop from our armchairs as well as from our desks, advertising agencies and their media content and distribution partners have to start thinking like VC-funded start-ups, looking to leverage and exploit partnerships with other companies. The advertising business must find ways to see its world as a broader, more interconnected and more vulnerable place. In order to generate the right level of passionate support for clickable retail, along with other new advertising forms, a few new schools of thought and a lot of new media integration have to be brought together. Think of Madison Avenue in Palo Alto; or, Madison Avenue sitting inside the sales-and-distribution chain for GM's new line of battery-operated cars. By participating in the reconstruction of its biggest clients--auto and retail--advertising might lead the media landscape into a new prosperity. Until, of course, the next big thing.
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