The bar

Upfront credits to: Ben Thompson, Martin Kihn, Doc Searls, Scott Brinker, Samuel Scott, Bob Hoffman, Tom Goodwin, and Johnny Ryan, whose publications or research have helped me gather some of the data and ideas expressed below.

The bar

Here’s a marketing story: a consumer, a brand, an ad agency, and a medium walk into a bar.

They all look pretty good:

• The consumer has data and time
• The brand has money
• The agency has ideas and leverage (over a plurality of media)
• The medium has content

Fifteen year later:

• Two barmen are rich
• A giant fish tank occupies most of the space, with a thousand different species feeding on the brand’s money and the consumer’s data

Meanwhile…

• The medium is broke
• The brand is in trouble
• The agency has run out of ideas and leverage
• The consumer is drunk on free content and useless ads

To cap it all off, all four are stuck in the bar for good, mostly sitting around and having their own separate flashbacks, remembering the promises that once enticed them to walk through the door.

What is the consumer thinking?

The consumer seems to recall a promise of free content and services in exchange for her attention span, analogous to the trade-off she had already experienced on television. As a bonus, ads were supposed to get smarter over time in exchange of a tiny level of snooping.

She has ended up in a bar plagued with insufferable ads and annoying legal terms (cookie banners, notices, and consent walls erected in the name of her privacy) that pretty much destroy every possible mobile or desktop experience.

Not only does she not understand a word of the agreements she seems to be getting into, but she has already realized that, for all the data she shares, targeting is pretty useless.

What happened to the brand?

The brand can still remember how its CFO imposed short-term results and proven ROI requirements on its CMO, who, in turn, demanded attribution models that allocated “appropriate weight” to each specific investment along the “customer journey”.

The agency (now sitting at the other side of the fish tank, looking even more miserable) had promised to fulfill this precise need by walking together into the bar. The bar provided everything they needed: measurable results, high-precision targeting, revenue attribution, and even a 360-degree view of their audience that would help build “trusted” one-to-one relationships.

A very different list of metrics lies on the table a few years later, though:

• Ad fraud will reach $19bn in 2018
• People are more likely to survive a plane crash than click on a banner ad *
• 26% of users had installed ad blockers by the end of 2016, with all the leading browsers incorporating some sort of ad or cookie blocker one year later
• For all the talk of ROI, a $140m cut in digital ad spend seems to have had no impact whatsoever on business results

All of which does not even matter that much in the greater context of the brand’s health. Belonging to a long tradition of Consumer Packaged Goods (CPG) companies, Its three vital organs (R&D capabilities, mass media and distribution bottlenecks) are all in a poor state:

1. Leverage over shelf space means less every day, in the new context of infinite inventory
2. Leverage over limited air time on mass media means little when the consumer’s attention lies elsewhere and any micro-supplier can bid for it
3. More efficient information flows democratize access to research and manufacturing

Faced with stagnant growth, the brand has resorted to cutting spend on both brand building and R&D in favor of maintaining short-term returns — which basically contributes to exacerbate the effects of points 2 and 3 above, and further undermine its long-term prospects.

Brands in other industries are not faring much better, being either built on similar pillars or subject to commoditization and unbundling through the same process of digitization.

The cure for all of them seems to remain the same, regardless of the doctor/consultant prescribing it: build a disintermediated relationship with end users that provides strong insights into their real needs, as well as a manner to “activate” customer data.

This cure may come from the definition “memorable experiences” (i.e.: brand-owned physical stores and branded mobile apps). Or it may just come from making life easier for people, however they choose to live it.

It may come from measuring people through more reliable, first-party data. Or it may come from simply letting people measure themselves, then declare their needs to any potential supplier of their choosing.

*Overall rate of effectiveness in display ads is 5 clicks per 10,000 ads served according to DoubleClick’s Display Benchmarking Tool — as updated on January 2018.

Media’s blues

The medium remembers a time when it had full control over both content production and distribution within a particular market. Monetization and ad delivery were not yet handled by unknown third parties, which resulted in a smooth, integrated consumption experience for its audience.

Production and distribution bottlenecks dissipated as soon as the medium walked into the bar, however. Both were commoditized through digitization and every single piece of news, entertainment, or research was thrown into a pool of infinite inventory and asked to compete for attention. Since brands and their agencies were already favoring the precision of their targeting over any sort of affinity to the particular content (or the medium’s brand), cat pictures were quickly more successful than lengthy, thorough pieces of investigative reporting.

New formulas emerged to capitalize on faster, cheaper, clickbait content. But of course it did not take long for them to be dragged into the same black hole: nothing can be cheaper than free content that consumers produce and distribute themselves.

Content discovery (provided by the barmen) became the new bottleneck, as well as the primary source of advertising income. In turn, the only viable manner to correlate audience growth with revenue growth (again, in a space of infinite inventory with prices on a death spiral) was a subscription model that could not only bear higher production costs (associated to the higher value justifying the subscription), but also support audience acquisition costs, themselves necessarily tied to the entire medium/bundle as an entry point. In other words, the medium as a brand.

Oblivious to most of this, the medium was still hoping to maintain the status quo by asking the barmen to contribute to the business that, the medium thought, they were destroying. The barmen, being nice people after all, thew a few coins at the medium in exchange for kindly accelerating its demise by handing over its seat by the door (point of entry) and, in the process, the medium’s ability to leverage its own brand.

Understanding the barmen

The barmen are in charge of two very essential functions in the bar, a consequence of the manner in which the disco lights at the entrance transform every walking creature into digits.

• Given the fact that everything becomes “content” through digitization, navigating through the maze requires “discovery”.
• As physical connections in the outside world need to be mapped to “people”, in the digital world, this process of “teletransportation” has to be accompanied by a means for consumers to easily leverage the commoditization of content production and distribution.

Now, the barmen have not got where they are without merit. Many others have tried to get behind the bar before, but now that these two have arrived they are essential utilities and it is pretty much impossible to build an alternative, given that:

• Indexing more content results in better discovery, which provokes more searches, which in turn attracts further indexing. Only a discovery function at a separate stage in the fulfillment of consumer needs (beyond information) would have a chance to survive (a third barman has just found a spot by providing product discovery at the point of purchase).
• Once all physical relationships have been digitized across self-publishing and messaging, there is no room for others to ask a meaningful mass of consumers to go through the same process again. Only a separate function or feature worth social sharing would have a chance to succeed (a fourth barman is serving a few drinks in a corner hoping to do just that for “live stories” and ephemeral publications).

Their new position as essential bottlenecks has resulted in brands and agencies shunning media in their favor. After all, these entry points cover two important missions:

• Obtaining reach, wherever people have nothing better to do (akin to TV)
• Tapping on intent — whenever people look for something specific.

The agency’s new life

Things looked quite rosy when digitization added more complexity to the media buying process. Direct brand-to-medium deals would make even less sense, while creatives had to be adapted to a myriad of formats.

But, as the barmen became the new choking point for consumers, they also chose to build a direct relationships with brands. This left agencies with little leverage, particularly at the point when 90% of the growth in digital advertising took place with the barmen. As for ideas and creativity, the agency itself shrugged most of them off in favor of the science and metrics that would result in demonstrable, short-term outcomes.

Once the agency replaced its ideas and media buying leverage with an advisory role and as an advertising technology provider, consultancies that saw marketing departments cannibalizing technology budgets decided it was also their natural hunting ground.

To cap it all off, a dependency on the same large brands that were most vulnerable to digital disruption (severely cutting their advertising expenditure), and the absence of a stake in the small supplier market that the barmen had managed to tap into, resulted in a free fall for the agency.

The case for a fish tank

The most obvious outcome from the current interplay between all four actors (+ the barmen) has been a breakneck proliferation of digital advertising brokers and facilitators, together with all-purpose repositories for audience or customer data. All of them in the form of Software as a Service offerings.

The following categories group the majority of species coexisting in the fish tank:

• Data aggregators and audience data activation: Data Management Platforms, Customer Data Platforms
• One to one relationships and Single Customer View: Customer Data Platforms, Tag Management Platforms
• Data suppliers: Data Onboarding, Cross-Device Tracking
• Automated media buying and selling: Supply-Side Platforms, Ad Exchanges, Demand-Side Platforms, Ad Servers

To make it more complicated, some of the fish are owned by the barmen.

As said, this ever-growing party feeds on the brand’s money and the consumer’s data:

• In programmatic advertising alone, this fish tank is estimated to devour more than half the advertiser’s total expenditure.
• Many of the creatures in the tank feed on the customer’s pseudonymous data (and mean little without it) and have a strong say in the manner in which it is processed and used, but none of them has a direct relationship with such customer that would provide the opportunity to obtain end user consent. In fact, the most common relationship is a chain of connections (and unconsented data exchanges) between different species.

This last point becomes the source of another problem.

The police enter the scene

As all of this was happening, a police car from the Privacy unit parks outside the bar. Two agents cordon off the premises and list a few conditions that everyone will have to follow prior to doing any further business with the consumer. Among many others:

• Every fish in the tank will have to find a way to justify the personal data (including pseudonymous data) they have been ingesting and passing around from one species to another, whether using it for their own purposes or processing it on behalf of others (brands, agencies, media). Since they do not have access to the consumer, they are demanding that the medium obtains user consent on behalf of all of them (a consent standard has been released by the Interactive Fish Bureau)
• Barmen have started to prevent the fish they do not own from accessing the audience under their own control, compensating the impact of any missing data (which fish used to bring along) with new, non-personalized advertising products. All of it in the name of fulfilling their own legal obligations
• The brand should be able to tell the consumer everything it knows about her, at any point in time, besides obtaining specific consent whenever data is to be collected in the context of the bar.

Faced with these burdens, all four characters are seriously pondering two options:

1. Maintain the status quo by introducing the smallest possible changes and hoping that the most technical and impactful of these conditions will neither be understood nor enforced by the police or the consumer.
2. Accept that the bar was a cool idea for a while, and that it is time to move on to a very different kind of place, with every participant sitting around the consumer. There will not be room for the same roles in that place, but it may just happen to deliver on the promises that the bar simply could not.

The restaurant

A new gig is about to open across the street. It will only use clean data (permission-based) ingredients.

Consumers sit in the middle, enjoying free food that is ad free and tracking free, courtesy of the brands and suppliers that those consumers themselves have chosen to enter into a one-to-one relationship with. Consumers can, at any time, understand who is holding which data about them and for how long. They can request changes, erasure, or portability of such data.

Brands and micro-suppliers establish a fully disintermediated relationship with consumers and are able to both propose specific solutions and be first in line to answer their needs. They can also leverage any data held and exposed by consumers to provide a service that is as tailored as consumers want it to be.

The medium is now ad free and gets paid for by the restaurant on the basis of the consumer’s actual consumption of its content. The same has happened with a myriad of mobile apps that used to rely on advertising and personal data trading for a living.

In the meantime:

A few fish have survived the migration of the entire dirty water tank to a new, clean water aquarium. The surviving fish are transparent, built on open standards. They help the brand understand and process the data exposed by the consumer, while ensuring full compliance with her rights.

The barmen now number eight, some of them having been forced to split by competition authorities (no drama: they happened to be unicellular creatures). They truly compete against each other to provide consumer services that are either supported by contextual advertising, or financed by brands and micro-suppliers.

Agencies have rediscovered the value of great ideas and found fresh opportunities creating memorable new brands and helping businesses make the most of the restaurant and the barmen.

The restaurant is called PrivacyCloud. It will open its doors on May 8th 2018 and you are very welcome to help us shape the future of marketing if you have got this far and are still with us :)

A new balance?