(Note: I can deliver a keynote speech on this topic — see my marketing speaker page.)

This is a speech on marketing myths that I debuted in Mumbai. I would be happy to give this talk in person or virtually at your company, event, or conference. Learn more here.

Summary

Example deck: https://www.slideshare.net/secret/uncxtavgXiuTIp

I explore six of the myths in the marketing world today: that consumers want personalized and targeted ads, channels do not matter, short-term results are the most important, targeting solves the problem of waste, ad tech saves money, and brand building is less important. I then show exclusive research on how marketers should think instead.

Full Text

In regards to the video that you just saw combining Venus the Bananarama song and Venus the brand of razor blades, I will introduce this talk with one observation. I do not remember any online ads that I saw yesterday. But 20 years after seeing that TV advertisement, I still want to shave my legs whenever I hear the song Venus. And in case you have not noticed, I’m a guy.

Now, before I discuss the biggest myths in online advertising today, a short introduction. After careers in both journalism and marketing, today I write The Promotion Fix column on marketing and media for The Drum and travel around the world to speak about what I report. I use my dual experiences to discuss the marketing industry with the mindset of a neutral journalist with nothing to sell except his ideas.

So, here, I will go through six myths in the online ad world today: that consumers want targeted ads, mediums do not matter, short-term results are the most important, targeting solves the problem of waste, ad tech saves money, and brand building is less important. I will argue that these six statements are patently false and only hurting our marketing efforts.

I will begin with a little theory. There have always been two main advertising tactics: brand advertising and direct response. Brand advertising builds brands among all category buyers for long-term benefit. Direct marketing gets immediate, trackable responses from targeted people.

The benefits of brand advertising are that it is creative and memorable. It’s subtle and not too annoying. People tolerate brand advertising because it is sometimes even entertaining. Again, I remember ads that I saw thirty years ago. I do not remember any blog posts or PPC ads that I saw yesterday. But the negatives are that it can be expensive and not easily measurable. And that rubs a lot of digital marketers the wrong way because they are used to immediate, measurable results.

One benefit of direct marketing is that it can be cheaper. Just think about how often we see digital marketers wondering how to do “quick, cheap hacks” for something. Direct marketing is also trackable in a way that is impossible to do in brand advertising or public relations. The most important negative aspect of direct marketing is that it is annoying. When a campaign is cheap, the ads will also be cheap. People tolerate brand advertising but hate direct marketing. And that negative impression, so to speak, is part of the negative aspects of ad tech.

Now, over the past 20 years, digital marketing has gone all-in on direct marketing. Most online ads today are actually direct response and not advertising.

Today, ad tech is all the rage, but it’s just another way to do direct marketing.

Now, take this clip from the film Minority Report. It depicts what most ad tech platforms want to be.

Now, a lot of marketers watch that and think, “Wow! When can we do that?” But remember: The 99.9% of people who are not marketers saw Tom Cruise getting scanned for ads and were horrified. Remember, the world in Minority Report is a dystopia. It is a reflection of everything in the world going to hell — including the marcom.

Now, a lot of marketers watch that and think, “Wow! When can we do that?” But remember: The 99.9% of people who are not marketers saw Tom Cruise getting scanned for ads and were horrified. Remember, the world in Minority Report is a dystopia. It is a reflection of everything in the world going to hell — including the marcom.

Again, it looks cool. But take a look at this specific image from the clip. We see that this martech platform uses facial recognition, stores and displays personal data, and even analyzes his emotional state. My question: Why do we think people actually want this? And that leads to the first myth in ad tech that I will discuss today: That consumers want targeted advertising. And that myth underpins all the others.

You see, the ad tech world thinks so much about if it can do something that it forgets about whether consumers actually want it. It’s important to start with personalization and targeting because most ad tech is based on the collection and use of private and personal consumer data. Personalization and tracking cannot happen without personal data.

And we marketers just assume people want to be tracked. Every day, I see dozens of articles by marketers who advocate for personalization and tracking. But spoiler alert: many of them work for adtech platforms and are selling something. And yet, I never see anyone asking for evidence of whether consumers actually want personalization and tracking. Well, ladies and gentlemen, I have found it.

Direct marketers love ad tech because it is trackable. But people hate it for the exact same reason. Even starting way back in 2009, a US study found that 66% of Americans did not want direct marketing that is tailored to their interests. When told how marketers collect their data to tailor the ads, the percentage increased to 86%. And that was 10 years ago.

Today, a Harvard study found that if you track people and then tell them about it, then that admission now even “poisons” the ads and ruins their effects.

And in data from a MarketingSherpa survey, online direct marketing of all types is the category of marcom that people like the least on a scale of 1-13.

Doc Searls used Google Trends data to show in the Harvard Business Review that the rise of ad blocking has specifically correlated with the appearance of retargeted advertising. Retargeting was the straw the broke the web’s back. People hate it. Retargeting has turned the marketing industry into drug addicts on the path to suicide. We like the constant highs of the purchases and conversions, but all of those hits are eventually going to kill us all once consumers have had enough and block all ads altogether. People do not want to be tracked. The more that marcom tracks people, the more that it will annoy people.

As Searls wrote:

“…annoying people personally with calls to action when only a tiny percentage will respond creates no brand value and has negative externalities such as associating the brand with annoyance.”

An example: you target the same people with direct-response ads or other martech. Say that you get 3% to respond, buy, or ‘convert’. You will annoy the other 97% — and they may never buy in the future as a result. Is that truly a good way to build a brand over the long term?

Because according to PageFair’s Adblock Report, this is how many people are now using ad blockers.

In the US, the number will grow to 80 million — or almost 30% — next year.

But the problem is far greater. When I recently visited TechCrunch, I saw that the website attempted to load 22 different martech trackers to collect my personal data. See the column in purple. My ad blockers rendered all of those platforms useless. Good for me, bad for them.

When you run the numbers and look at it the opposite way, you’ll see that more than 220m people in western Europe and North America are now blocking even just Google Analytics. And the more technical your audience, the more likely it is that they are using blockers. All of these numbers you see in your dashboards are probably very wrong.

Again, people do not want to be tracked. In the UK, a Guardian reporter obtained all of the data that Tinder had on her. What did she receive? 800 pages of personal information.

And what does this mean for marketers? Here is data I compiled from the UK. Until the mid-1990s, people thought the quality of ads was as good as the TV programs. But ever since, consumers think ad quality has become worse and worse. Remember, we marketers distinguish between brand advertising and direct response. But consumers do not. They just call it all “advertising.” And the more that marketers prioritize direct response to collect data and target people with spam, the more that makes consumers hate all advertising.

Today, in 2019, favorable consumer sentiment towards ads in the UK has fallen to an all-time low of 25%.

So, is tracking and personalization a good thing? I’ll let you be the judge.

Now, onto the next myth in ad tech: The channel does not matter.

Of course, the traditional model of advertising is that marketers develop a list of the publications and websites their target audiences are reading. You contact the publication, send the ad, and the ad appears.

Now, one type of adtech aims to cut out the publication to save money and target people individually wherever they go online.

But my point here is to show how mediums themselves play a role in advertising effectiveness.

When I was studying journalism in the late 90s, my first internship was at a weekly Boston newspaper. The paper, the local residents, and the businesses that serve them all had an interdependent, symbiotic relationship.

The business owners were proud to appear in a recognised and quality-controlled publication with a deep community presence. They clipped the articles and ads and hung them on their walls. The publication itself was central to the brand of the advertisers – and vice versa – in a way that made them partners and two sides of the same marketing coin.

Now, imagine how business owners felt when their ads appeared next to this in YouTube’s brand safety scandal. If the channel is not important, then why did companies pull millions of dollars in ad spend from Google and YouTube until their concerns were met?

Because as Faris Yakob puts it, “we judge brands, like people, by the company they keep.” The mediums in which we choose to advertise our products themselves reflect on our products. The channel itself affects the brand in an important way.

After all, if you want to brand and sell a premium, luxury product, where are you going to put it? Outbrain and Taboola — or luxury, print magazines? Ad tech platforms proclaim that they cut out the middleman, but the middleman is what builds the brand.

And they do so because all advertising impressions are not created equal. I would take one real person looking at my ad in a quality print magazine over 1,000 impressions on Outbrain or Taboola.

But I’m just beginning with the middlemen. Here’s the next myth, that ad tech also saves money by cutting out those middlemen.

Yes, those people in the middle do cost a lot of money.

Ad tech uses automated platforms to remove all of those middle men. You write an ad, pick a target audience, and push a button. The ads — in theory — are then displayed in front of anyone who fits that profile regardless of where they go online. That should save a lot of money. Again, in theory.

Digital marketers have always assumed that reaching perfect individuals returns better results than reaching all potential category buyers. But that has never been proven, and I think I know why. Ad tech did not cut out the middlemen. Ad tech merely replaced one set of middlemen with another.

Advertisers get only 25% of the value for which they pay because any ad must be sent through agencies, exchanges, and platforms within microseconds before it appears in front of consumers. And every agency, exchange, and platform takes a cut and marks up the price. In effect, advertisers pay $4 for $1 of advertising. But that is only the beginning.

Let’s look at it the opposite way. Here is the online ad journey from $1 to three cents. Let’s break it down.

You spend $1. You lose 60 cents to ad tech middlemen and have 40 cents left before you ad even appears on a website.

But only 50% of that spend is on ads that are “viewable,” leaving you with 20 cents.

After accounting for ad fraud such as bot activity and deceptive publishers, you have 16 cents.

But only two-thirds of the resulting “viewable” impressions are actually seen by someone, leaving you with 11 cents.

And among those ads that are actually seen by human eyeballs, 75% of the time, people do not look at them for more than a second — rendering those “impressions” useless.

So, after you account for all of these new middlemen, you get three cents of real value for every dollar that you spend.

That is average data. Here’s a real world example. The Guardian bought its own online ad space in a test. And what happened? The Guardian got only 30% of the money that they paid to themselves.

They said, “a host of ad tech businesses operating within the supply chain are extracting up to 70% of advertisers’ money without being able to quantify the value they provide to the brand.”

How that is how advertisers will lose $100 million every day by 2023.

Now, here’s something new that you can use. The Internet Advertising Bureau in the UK has created a list of FAQs for marketers to ask their ad platforms and suppliers so they can determine exactly how their money is spent. Just Google this, and you’ll get the questions. But do keep in mind that the IAB is a ad tech lobbying group, so they are biased.

Now, ad tech says it gets quick results, but the fourth myth is that short-term results are the most important.

Too many marketers, especially in the digital world, get hooked on short-term, direct response metrics and assign those metrics to all marcom activities. But not everything important in marcom results in immediate, trackable responses in analytics platforms. What is most important is what changes inside peoples’ heads.

Here is a metaphor.

Direct response is picking the fruit — those people have grown, are ripe, are down in the funnel, and ready to buy. Brand advertising is watering the tree so that more fruit will grow in the future. As Rory Sutherland has said, direct response tells people what to do so they will buy today and advertising tells people what to think so they will buy tomorrow.

Short-term direct response campaigns lead to limited short-term returns. But long-term profit growth comes mainly from long-term brand advertising.

And that comes from the fifth myth: that targeting solves the problem of waste.

People think advertising to people who do not immediately make a purchase is wasteful. But that idea is wrong.

When I was in sixth grade in the US in 1992, every kid wanted a pair of Umbro shorts. It was the big fad because football had flooded suburban America from the UK.

After I bought a pair and went to school, all of my classmates turned to look at me. The boys walked over, looked at my neon, nylon shorts, and gave me high-fives. “Niiiiiiice, dude!” they said. Yes, it was 1992 and we were 12.

Everyone was impressed by my Umbro shorts because everyone had developed the same brand association. Each of us knew in our heads that everyone else had all seen the same ads and had internalized the same brand messages. That is how brands are built over mass audiences for the long-term. If I had seen a random targeted, online direct response ad for Umbro clothing in 1992, I would not have given it a second thought because I would not have known that everyone else had seen the same ad.

You see, digital marketers think so much about targeting that they forget about signaling. That year in sixth grade, I liked a girl named Jennifer. She would never have bought Umbro shorts, but she thought they were cool because of the advertising. I knew that she thought they were cool — everyone thought they were cool. And that was the reason that I wanted them.

Jennifer never bought the shorts, but the ad spend to show her the ads was not a waste because the fact that she thought they were cool caused me to to buy them. The so-called “waste” is what makes the campaigns effective because of the principle of signaling. What brands you choose to buy is in part due to what you want people to think about you. Only brand advertising, not targeted online direct response, can influence that.

And that leads us to the final ad tech myth: that spending money on long-term brand building can be ignored because it is not directly measurable in the short-term.

Remember: Not every activity in marcom can or should aim to receive an immediate, trackable response. This is why the promotion mix consists of many different types of tactics.

According to BBH in London, 84% of the value of S&P 500 companies in the US comes from “intangible assets” — which is in part another term for the brand.

And how do you both build a brand in the long term and get sales in the short term? The IPA in the UK found that on average 60% of your spend should be on long-term brand advertising and 40% on short-term direct response and sales activation.

Now, here is something completely new that few have seen. LinkedIn commissioned the IPA to do the same research for B2B. They exclusively released it to me for my column in The Drum, and LinkedIn will release it publicly later this year. As I said, the B2C average is 60 / 40 in favor of brand. But the best mix in retail, for example, is 64 / 36 for brand. But it’s more even and a little opposite in B2B — 54 / 46 for activation.

But for any brand, the most effective practice is to spend more and more on brand and less and less on activation as time goes on. If anyone would like ​to see ​my column with all of th​is new, unprecedented and​ major research, just email me and I’ll send you the link.

Now, why is brand advertising so important? Sales activation brings quick but small results while brand advertising brings slow but large results.

Here’s another way to look at it. Every time that you do a direct response or sales activation campaign, you will see a quick spike in revenue — see the line in yellow. But that spike will never grow past that upper limit unless you grow the brand as well — see the line in brown. When you add the two lines together, you will see how both brand advertising and direct response together lead to the best long-term results.

Most importantly, companies with strong brands can charge up to a 13% price premium — which leads to the greatest revenue in the long term.

And on average across all industries, brand value represents 20% of total market capitalization.

So, how should you apply all of this? I agree with Nielsen’s new CMO Report, which found that traditional media is best for brand building at the top of the funnel, and online media is best for direct response and sales activation.

But if I could summarize with one thought, it would be this: Ad tech platforms and the marketers who use them focus so much on how to transmit and target ads that they never think anymore about how to create good ones.

So, ladies and gentlemen, I will leave you with one question: What is the best way to sell more razor blades in the long term? Only tracking, targeting, and hitting people with cheap, spammy direct response? Or, to bring this talk full circle, building a brand with the Venus ad of today?