Nobody clicks on banner ads. Those pre-rolls on YouTube - everyone skips them after 5 seconds. Facebook ads and sponsored Tweets do not drive sales. Online advertising does not work.
The inherent value of digital lies in its ability to make people’s lives better. The egalitarian principles that guided Tim Berners-Lee’s design of the Internet have empowered people to do amazing things, from guiding response teams in humanitarian disasters to driving revolutions.
The same principles have empowered consumers: they now have access to a vast network of information, reviews, comparison sites, search engines, expert analysis and social connections. They are able to find the best products at the cheapest prices and use online reviews to assess quality and suitability before they buy.
This increasing ability to make rational and informed decisions has in turn changed customers’ buying behaviour. Emotional brand connections are being replaced by functional relationships based on price, quality and service, diminishing the ability of advertising to influence customers. Brands still play an important role in name recognition, trust and confidence, but less so when it comes to assessing quality.
The common agency approach to this change in customer behaviour has been to shift spend from offline to online advertising, primarily in the form of display ads, applying traditional structures and processes to this evolved environment. Increasingly, the evidence is pointing to the fact that online ads are having little or no impact on sales.
A business which has truly adapted to digital understands the dynamics of customer decision-making and the role played by technology. This requires a deep consideration of how platforms, systems, devices and communications all work cohesively to best serve the customer. The structure of an agency that supports businesses on this journey is very different to one that creates advertising.
Bill Bernbach recognised a need to “Adapt your techniques to an idea, not an idea to your techniques”, but agencies are independently and collectively failing clients by not adapting to changes in customer behaviour, and they are doing so because it is a threat to their own growth. Creative agencies need their clients to keep creating adverts, media agencies need their clients to keep buying media: they consistently — and erroneously — base their survival on a self-defence of their own antiquated business models.
Client dissatisfaction is palpable across the board, with Business Insider reporting in May 2015 that an unprecedented $25bn of media spend has been put under review in the last six months alone. A different creative layer or better media buying strategy is not the answer — the problem is more fundamental.
The early adopters of digital marketing were able to drive significant business growth with a simple formula of buying customers’ attention on Google and selling their products on their website. Success stories flooded the marketing ecosystem and businesses increasingly moved advertising budgets into digital.
This was a BIG problem for creative agencies. And a BIG problem for creative agencies is a BIG problem for media agencies.
A successful digital marketing strategy is built on the understanding that it is part of the fabric of our everyday lives. It is in our pockets, on our desktops, in our cars, even part of our clothes. It is the connected way we live our lives, and how we make decisions based on an aggregation of other people’s experiences. For businesses this means they are more accountable: they must make better products, they must treat their staff ethically and they have to provide exceptional levels of customer service. They are open, in short, to scrutiny and exposure.
Agencies that have failed to adapt have become vocal advocates in the support of display and social media, as these provide opportunities to place more adverts and protect budgets that have been diverted to digital. This has been entirely supported by the media owners who, where print circulation figures have dropped and few have cracked online subscriptions, have survived by selling ad space on their website and convincing the paying client that the ads are working.
But they are not working.
The creative agency knows this. The media agency knows this. The media owner knows this. Why? For the same reason people make a cup of tea when the adverts come on TV. Except they don’t have to make a cup of tea, the web is a cognitive medium, so the brain just ignores them.
Click-through rates are at an all-time low: Smart Insights reports them at less than 0.06%. The agency will tell you that they drive brand awareness or search, but they can’t show you any direct link to sales. As Jeremy Sinclair famously wrote in Saatchi & Saatchi’s 1970 advertising manifesto, placing any aim above that of increasing sales is “a familiar management failing — putting the means before the end.” This is a flaw that will prove fatal to any advertising strategy.
Sinclair also noted that “Wasted ads are the ones which nobody sees, reads or notes.” He was alluding to ads being unseen if they are created without considering the prime purpose of advertising; the same problem exists online but is compounded by the fact that the majority of ads can’t even be seen. Research by moz.com shows that just 8% of adverts have a chance of being viewed by an actual person: the other 92% consist of broken ads, bot traffic (non-humans) and fraudulent visits.
So not only are the ads not working, but the clients are paying for ads that nobody sees. The problem is perpetuated by media kick- backs, where media owners are rewarding media buyers for buying the ads that nobody sees. Businesses are taking notice: Advertising Age reported in the US that spend on display by the top 200 advertisers has fallen by 13.3%.
Enter retargeting, the saviour of display. The faithful have been able to show how these ads drive sales without daring to question if perhaps they were going to buy it anyway. The same issue arises with search agencies that claim you must buy brand terms (insert random agency reason here), only for those brand conversions to be part of the return on investment calculation. In the real world this would be the same as showing someone an ad for a BMW as they walk into a dealership, only to claim credit when they drive away in their shiny new 3 Series.
The problem is equally visible within social media. The colossal valuations placed on social networks by their investors and Silicon Valley insiders require a significant and accelerating revenue stream. The wild swings in share prices reflect the whack-a-mole narrative of what social media can do for your business.
Where Google has been able to carve out success for clients converting lower down the funnel, these channels lack the same expressed demand. In their simplest form they are media platforms similar in function to that of TV, exposing users to ads with the hope of disrupting their attention.
Social media experts continue to use ever more ridiculous measurement criteria to counter the fact that for many businesses these social ads are unable to drive sales — Forbes reports that only 9% of marketeers can directly link Facebook activity to revenue.
When Facebook saw that the ads weren’t getting many clicks, it measured itself on Likes and engagement instead; now that this isn’t working, it has reduced itself to reach (the largest number available).
Nowhere is the problem with the performance of online advertising better exemplified than in the dreaded all-agency meeting, where each expert from their respective channel reports on the roaring success of their part of the campaign, based on whichever version of the truth works. Usually whichever number is the biggest.
Digital grew quickly in part because it was able to show the direct link between marketing spend and income through sales. However, as agencies have become more digitalised, they have supported their own growth by selling shiny new things that don’t work. And there have been many. Remember QR codes? How about augmented reality? All have come and gone when they have proven not to drive sales. Agencies are like drug dealers pumping their clients with the latest fix.
Just consider those trading meetings where the sales team have told the marketing team that ‘they are missing forecast’. How many people leave those meetings and think they will solve the problem with more display, more social or more content. It is invariably solved through paid search, affiliates and emails to loyal customers. For the simple reason that they work.
The objectives of businesses tend to always be based on the same two things: find new customers to buy your product(s) and then convince those customers to buy more of your product(s). It doesn’t matter if you are an international airline or a local bakery. This therefore splits your strategy into two key areas:
customers to buy
customers to buy more
of your product(s)
As all digital activity ties back to total sales made, its impact needs to be measured accordingly: the sales numbers. The principles of successful communications have not changed. The role of advertising is to raise awareness by selling their true benefits, but the medium is dependent upon where the customer is in the funnel. Offline advertising still plays an important role at the top of the funnel, but businesses need to understand that online money is best spent lower down the funnel, attracting those who already have an expressed interest.
The types of advertising that work will depend on the market you operate in and how customers make decisions. There is no one-answer-fits-all. What works for a coffee retailer will be different for a hotel. What is consistent is that successful businesses operate a solid understanding of analytics and measure money spent against sales made.
Online reviews have put the onus on businesses to ensure they have a great product and with a great product, great service and an easy way to buy, the customers will actively support your strategy. They will tell their friends on Facebook, they will write good reviews on aggregator sites and they will keep buying from you; by the same token, if you fail them the reverse is true.
There is a need for a fundamental shift in the relationship between agencies and clients. A much closer partnership must be formed, one that better serves the interests of both parties and respects each other's business models in a mutually supportive way.
Agencies — the experts that clients spend so much money with — must stand tall and be brave enough to change the way they work with their clients. There is a need to avoid those people David Ogilvy was referring to when he said that “Our business is infested by idiots who try to impress by using pretentious jargon”. Agencies should be giving their clients the best advice and providing accurate reporting — not just numbers, but true insights into what is happening. Anything else is just lying.
Agencies harbour a constant anxiety of losing clients: we all know about the threat of those 3 phone calls... a fear that does not serve the best interests of the client. Agencies subsequently do everything they can to keep them, only exacerbating the problem of this evolving narrative.
Clients need to consider how they work with agencies too. Practices such as pitch deposits, 120-day payment terms and margin squeeze serve only to create tension. Agency staff are some of the hardest working you will find and place their best people on the best client accounts: it follows that by ensuring a solid relationship with the agency, the client will see much better work.
For the sake of transparency, reporting and insights must be separated from execution: agencies reporting on their own campaigns is tantamount to marking their own homework and merely serves to perpetuate the problem.
Big integrated deals should be considered carefully: handing all work to a single agency / network under the premise of cost-efficiency is a false economy. There are very few agencies that are brilliant at creative, digital, PR, media buying, CRM etc... but there are many brilliant specialist agencies capable of delivering work that performs at a much higher level.
The world has changed significantly with digital, and this has in turn changed customer behaviour. The problem is that agencies haven’t changed — either because they don’t know how to, or because to do so would erode their margins. Applying the same old advertising methods to this new world just doesn’t work, nor does jumping from innovation to innovation. The proven tactics of digital marketing do already exist, they are just not wrapped in adverts. Successful digital marketing will be driven by those who are neither slaves to their past nor victims of fashion.
Some won’t accept change, and the voice of opposition will match the size of the agency or network it threatens. But it will happen regardless, led by those who take a stand against the ingrained negative practices of an industry which is capable of so much good.