5 Reasons Advertising is Dead (And What Smart Marketers Are Doing About It)

Advertising Is Dead

After a decline of over 11% in 2009, the US advertising industry grew at the anemic rate of 2.8% last year. Estimates for 2012 are in the same range. But with two major events that are historically drivers of high advertising spending — a presidential election and the Olympics — slated for 2012, the lack of projected growth raises significant questions.

Advertising as we’ve known it is dead. Here’s why:

  1.  The focus on metrics: Online advertising picked apart the advertising revenues of daily newspapers — from classifieds to daily specials to job listings — piece by piece, until there wasn’t anything left. The lure of measurable click rates and the promise of tangible ROI soon began to attract non-classified advertisers, too, and the fast slide had begun. The traditional advertising goal of creating awareness simply doesn’t translate well once the expectation has been set that everything could be measured. “You can’t manage it if you can’t measure it. If it can’t be measured it, it isn’t worth doing” was not a slogan created by an ad agency.
  2. The rise of “owned media:” The shift from paid to owned media has been dramatic: Outsell Inc projects that marketers will spend $72 billion on their own direct to consumer digital initiatives this year. Fifteen years ago, this money would have been spent on “advertising” paid media. Marketers have grown weary of searching for the elusive reach and frequency formulas that give them the right share of voice. They want to be the only voice.
  3. Shifting the budgets to lead gen. Historically, advertising expenditures sat “above the line,” classified as an overhead expense, while spending on direct marketing and field sales sat “below the line,” where it was viewed as being a direct sales expense. The Internet created a boom market in spending on lead generation activities, and allocating this expenditure is tricky. In many cases, lead generation activities are led by groups that sit next to marketing, but actually report into sales. Is it still advertising?
  4. Content is the new marketing platform. Buyers are voracious consumers of information. For marketers, creating brand awareness, preference and affinity has become about providing the consumer with compelling, useful content. Company and product brands need to have an ongoing narrative with consumers that is true to the brand, and that creates and sustains engagement. Content is the new marketing platform.
  5. The un-counted commercial minutes: Television abounds with examples of marketing expenditures that no longer count as advertising in the traditional sense. On American Idol, Ford hasn’t increased the number of 15-30 second spots it runs on the program. The company has, however, created custom content, with the finalists all participating in a video where they sing, dance and interact with a Ford car. And the winner of the show gets a Ford automobile. These 90-second “spots” do not show up in the ad tracking stats — but you can be certain Ford pays a premium for them.

If you’re tracking advertising industry stats, you’re tracking the wrong thing.

Advertising is dead. Marketing however is alive and well; even as it takes on a myriad of new forms, many of which are not easy to track.

Smart marketers no longer pay attention to “advertising growth rates.” Instead, they’re measuring bottom-line metrics like customer engagement and prospect conversions, and using those numbers to drive their marketing investment.

  • Lou Covey

    Advertising is not necessarily dead, but it has morphed significantly. What has died, very specifically, is the understanding of how media works. We’ve had a one-way form of communication for the better part of a century with the audience force fed information in whatever way to communicators wanted it to go. The audience now has more choice in how they consume information and the strength of their skepticism has grown with it. Advertising no longer drives decision but is more of an affirmation of a decision already made. It makes you feel good about your purchase and encourages you to do it again. I drive a Chevy now but I have never once considered buying one because of a commercial. Now, when I see commercials for my new car, which I am very happy with, I feel I made a really good choice. The real value of advertising, now, is customer retention, not acquisition.

    • http://twitter.com/TonyUphoff Tony Uphoff

      Lou, thanks for the comment here. Your point on advertising supporting a purchase is a good one. Marketing research released in the late 90′s showed that the majority of auto advertising was to the installed base of purchasers to drive brand loyalty and the net purchase. I’d suggest however that they way to do this today isn’t through traditional advertising but rather through content marketing, which may well be via the auto companies own content assets; sites, social feeds, video channels, etc.

      As for our understanding of media changing I’d argue that media itself has been irrevocably changed. The fundamental economic underpinnings of a large portion of the media industry has been blown apart and fragmented into a range of web and digital models, few of which scale as of yet. The harsh reality for many media businesses today is that producing quality, engaging content and aggregating a high-deomgrahpic audience around that content, is no longer the sole bastion of traditional media. Frankly the one-way broadcast culture of most traditional media companies is a hinderance in unlocking the read-write, crowd-sourced nature of media today.

      All in all a compelling and fun debate. And a truly exciting time of opportunity as we watch and participate in the reinvention of media.

      Best,
      Tony

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