In this week’s Rundown, we look at digital advertising’s effectiveness being questioned again, while agencies are doing their best to hire people — and starting to pay for it.
Pivot away from digital?
Here we go again: Once again, the effectiveness of digital advertising is being questioned, and once again advertisers are restricting spending in some areas over concerns their investments aren’t working properly. This time, it’s sportswear brand Adidas that’s weighing up the price of precision online.
How Adidas’ marketers decided digital investments had gone too far was the crux of a talk media director Simon Peel gave at an IPA conference last week. In a nutshell, the advertiser discovered four years ago it had focused on return on investment and return on ad spend — metrics widely regarded as proxies for efficiency — at the expense of reach, penetration and broad brand building activity proxies for effectiveness. Peel and his colleagues thought only performance drove online sales for the brand, when in fact, brand activity also played a part. It left the business reliant on last-click attribution and four attribution models — Google Last Click Google Custom, Adobe and Facebook. Now, Adidas’ marketers compare performance and cross-channel lift.
Adidas’ case study is a microcosm of what appears to be a quiet discussion around the true efficacy of digital advertising, particularly in a world where fraud is rampant, privacy regulations make it harder to target individuals, there’s trickier tracking in the absence of cookies, and agencies have hidden agendas. It’s no wonder some advertisers are re-evaluating where they buy ads online.
But those concerns are nothing new. In 2016, Procter & Gamble said it had gone too far in targeting online users, for example. What’s different this time around, however, is the likes of Adidas appear to be reaching diminishing returns with digital advertising in terms of media allocation and impact. The fact that there’s been sustained growth over the last several years means there was always going to be an inevitable point where the intersection of digital market maturity and client budget size prevents continued share of growth.
Spending online is on course for its first decline in 10 years. In the U.S., investment in the first half of 2019 grew 17% year over year to $58 billion, down on the latter half of 2018, per the IAB, The last time that happened was in 2009, the year of the industry’s first decline in online ad spend, which was attributed to the recession. It’s a similar situation in the U.K. where advertisers made cuts to budgets for the first time in seven years, according to the quarterly Bellwether Report from the IPA. Search, for example, reported growth of 6.1% in the most recent quarter, although this was down from 9.9%. — Seb Joseph
A license to sell
Revenue diversification was the key topic at Digiday’s Publishing Summit Europe, which was held in Budapest, Hungary, this week. It’s not just about publishing companies growing their subscriptions, events and commerce arms, either: Publishers are becoming the new vendors.
Washington Post is licensing ad targeting and content software to other publishers. Vox also has a CMS licensing play. Elsewhere, The Financial Times announced a move into consulting, offering its subscription expertise to other companies looking to build direct-to-consumer businesses, including those outside the publishing sector.
Revenue diversification comes with its challenges. In a Town Hall session on Monday — conducted under the Chatham House Rule, which allows reporters to share what attendees said without identifying them or their companies by name — one publisher said its move from being an advertiser business to a subscription business received some pushback from the advertiser side. The gripe eventually boiled down to: Well, it’s great you’ve managed to sustain your business, but how does this help me?
Some hand-holding with in-house ad-sales teams will clearly be required when publishers expand their horizons beyond advertising. Revenue diversification can cannibalize some traditional ad sales in the short term, publishers said.
As another publisher said during the same Town Hall session, the process of broadening revenue streams requires constant ad-sales team education. Page views or monthly uniques might not be the right metrics when trying to sell advertisers on the quality or loyalty of your audience.
As Kjersti Thorneus, director of product management at Norwegian publisher Schibsted, said: “To me, having users pay for your product is the ultimate proof that you have created value; that you have solved a problem in their everyday life so much that they are willing to pay for it.”
Ultimately, while teething problems are inevitable, a user-driven business should be good news for the advertising business too. — Lara O’Reilly
Agencies to employees: We’ll do anything
Talent issues are turning into quite the sore spot for agencies. Unemployment is low and especially if you’re a smaller, non-coastal-city shop, it can be hard to find good people. Ad agency execs are finding it particularly hard to find people to fill certain roles, especially in data analyst positions, and people who understand what one exec described to me as “advanced social” — just understanding paid social marketing.
There’s a lot that’s being done for these talent issues. But what’s also interesting is the lengths agencies are now going to make sure people stick around. At one agency, a vegan account planner was given carte blanche to turn down any accounts for clients that sold meat, as well as any non-vegan beauty product accounts. At another, someone who hated the hot summers in Texas was given the option to spend a short sabbatical in Colorado. But perhaps the most egregious one was this: A lot of agencies want to make sure they’re hiring the right people, so basic tests to ascertain knowledge about marketing and social are pretty normal. But as the job market gets tighter, more candidates are saying “no” to interviews lasting more than one round, and certainly saying “no” to coming in and spending a couple of hours on a test. In response: At least three execs told me they’re paying people for interviewing time, including one who hands out $100 gift cards, and another who just pays cash. — Shareen Pathak