The future of advertising has been decided and it will shake up the whole industry
Some time ago I was thinking about how digital advertising might develop. One thing that became really clear to me is that any advertising platform that does not manage to identify and track users across all platforms (desktop, mobile, tv, car, etc.) is simply doomed for failure. In that regard it was really interesting to see Twitter acquire TellApart which really supports this theory. Old school „inside the box“ targeting models simply will not cut it anymore. Consumers are active on a multitude of channels and all of them are turning digital.
First of all I am convinced all advertising will become completely personalized and targeted towards the individual. Classic models of running TV commercials and hoping that the program you are advertising within is actually viewed by the audience promised by the broadcaster just don’t cut it anymore. We are already way beyond demographic segmentation and potential customers experience quite a lot of very targeted advertising every day. Facebook’s release of their annual figures for 2014 nicely illustrates this trend.
Only a few players will survive
This puts just very few of the advertising contenders into a sustainable position and their success is determined by how well they manage to identity their users across all the platforms. So if you are an email provider, you already have your customers trackable on quite a few platforms. Desktop, Phone, Tablet — not a problem. Watches already increase one more step in difficulty and email on a TV screen is (and has always been) nothing but a bad joke. If your identification mechanism is email, you will need to invent something else that your users will want to do e.g. on their TV screen or smart watch.
If you travel by public transport, you are probably also observing that many of the classic billboards are turning digital as well. As of today, they have not really advanced in terms of functionality simply because the legacy advertising players have no means (and probably not even any ideas) how to identify the users passing by their displays. But with new technologies like iBeacons entering our daily lives, this could soon open up the gates for companies that have a better understanding about users and offer personalization on billboard level.
Once advertisers are able to track their users (possibly anonymized) across all of the platforms, the type of advertising we see today will be joined by a new form of digital advertising that works according to very different rules: long term advertising or behavioral change management of sorts. Imagine you are in the marketing department of a successful brand, for the sake of it let’s say Nespresso. If you would now have the chance to track users (let’s say anonymously) and their behaviour in the digital as well as the real world, you could start to try to influence them on a broad scale. If everything is digital, you could place your image ads on billboards they pass, co-brand with websites they use, give them discounts on the supermarket shelfs, etc. All of these subtle activities would be centered towards changing them into your very loyal customers. You could run your advertising over the course of multiple months or even years all with the lifetime value of your potential new customer in mind.
For players like Nespresso, the lifetime value of a customer must be in the thousands of Euros since they run a very successful club distribution model. In case of Samsung, it would be even higher since you could think of a potential target exchanging pretty much all their household electronics for Samsung products. Or if you are a car manufacturer, e.g. Mercedes-Benz, someone becoming a customer of yours means tens of thousands of Euros in profit. Such campaigns could even run for many years and cost in the order of magnitude of thousands of Euros. Given that…. someone helps you calculate the risk of your spending.
Even more startup ideas
Startups that would offer such a service, calculating the likelihood of conversion for a certain product, would make a new class of companies who’s only asset would be algorithms. They would not have any user base of their own, nor any product. Their product will be prediction values calculated across a wide range of datapoints. Such a combination of a cross-plattform identification and big data analysis startup would really become the backbone of tomorrows advertising world.