PPA Festival 2017 Marketing short-termism: is an effectiveness crisis looming? [email protected] | 020 7851 0910 | @DouglasMcCabe
10 May 2017 Publishing Tech Music/Radio Funds Archant, Cedar, Centaur, DC AutoTrader, DAZN, Facebook, Bauer Radio, BMG Rights Aberdeen Asset Thomson, DMGT, Dow Jones, Google, Jobsite, Microsoft, NTT Management, Management, Baillie ESI Media, Financial Times, Data, RadiumOne, Yahoo! Communicorp, EMI Music Gifford, Cedar Rock Future, Guardian Media Group, Publishing, Pandora, PRS Capital, Cenkos Securities Haymarket, Hearst, Film/Television for Music, Sony Music plc, Highfields Capital Holtzbrinck, Immediate Media, 21st Century Fox, Arqiva, BBC, Entertainment, Spotify, Management, LionTree, Johnston Press, Magnetic, BBC Worldwide, Bein Sports, Universal Music Group Morgan Stanley News UK, Newsworks, NLA Bertelsmann, Box Plus, Channel 4, Investment Media Access, Penguin Random Digital UK, Discovery Professional Services Management, Veritas House, Telegraph Media Group, Communications Europe, Accenture, Afiniti, Allen & Investment Time Inc, Trinity Mirror, Which? Endemol Shine Group, Fox Overy, Baringa Partners, Management, CapeView Networks Group, Freeview, IMG Bain & Company, Deloitte Capital LLP Agencies Media, ITV, Ludorum, Miramax, Consulting, Edelman, Ernst Acceleration, Blue State Digital, NBCUniversal, ProSiebenSat.1, & Young, KPMG, Investment Banks Dentsu Aegis Network, Engine, Scripps Networks Interactive, Linklaters, McKinsey, Miles Allen & Co, Barclays SevenOne Media, Sky, Sony Finsbury, Geometry, Grey, 33, OC&C Strategy Capital, BNP Paribas, Pictures Entertainment, STV Consultants, Oliver & Citigroup, Lepe Partners, GroupM, GTB, Hill & Knowlton, Group, Turner Broadcasting, Ohlbaum, PWC, Russell Moelis & Co, NM Hogarth & Ogilvy & Mather, J. UKTV, Viacom, Virgin Media, Reynolds, Tata Consultancy Walter Thompson, Kantar, Vivendi, Walt Disney Company, Services, Venture Rothschild, Raine Group Karmarama, Kinetic, MEC, Warner Bros Entertainment UK, Consulting, XIX M/Six, Maxus, Mediacom, Wireless Group, YouView Entertainment Private Equity/Venture Mindshare, Possible, Prism, Capital RadiumOne, Starcom, Tenth Telecoms Public Sector Apax, Cinven, Gloo Avenue, WPP, Wunderman, BT, EE, H3G, Liberty Global, Dept Culture Media & Networks, Permira Openreach, Post Office, Xaxis, Young & Rubicam Sport, European Advisors, Providence Samsung, TalkTalk Group, Equity, Taconic Capital Telefónica, Tesco Telecoms, Broadcasting Union, Utility Warehouse, Vodafone, European Commission, Advisors, Usaha Tegas Vonage UK Ofcom, National Audit Office PPA conference, 10th May 2017 2 We are at a tipping point: online is more than 50% of all advertising spend
UK advertising spend (£m)
25
Online Offline
20
15
10
5
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f 2018f
[Source: Enders Analysis based on AA/Warc]
PPA conference, 10th May 2017 3 Corporate and investor short-termism is rising
Ownership of UK quoted shares
100%
26% 36% 37% 80% 42%
60% 31%
40% 43% 54% 54%
20% 43%
14% 11% 9% 0% 1998 2010 2012 2014 UK Insurance companies & pension funds Overseas investors Others
[Source: ONS, Enders Analysis]
PPA conference, 10th May 2017 4 Procurement is driving media agency deals
Proportion of media agency deals which involve procurement (%)
100% 2003 2016 90%
80% 23% of media agency negotiations are undertaken entirely by procurement 70%
60%
50% 91% 40%
30% 51% 20%
10%
0% Procurement involvement
[Source: ISBA, 2016]
PPA conference, 10th May 2017 5 Agency–client tenures have fallen substantially
1984 2013 90
80
70 65% decline 60
50 86 40
30
20 30 10
0 Months
[Source: Emma Harris, IPA breakfast]
PPA conference, 10th May 2017 6 With particular implications for marketing: CMOs last half as long as CEOs
Average tenure (years) 9 8 8
7
6 5.1 5 5 4.3 4.1 4
3
2
1
0 CEO CFO CHRO CIO CMO
[Source: Korn Ferry, 2017]
PPA conference, 10th May 2017 7 And, anyway, marketing chiefs are not on the board
Proportion of S&P-1,500 directors with marketing experience, measured over a 6-year period 2.6% (65,000 directors)
[Source: Kimberley A Whitler et al, When and How Does Board-Level Marketing Experience Impact Firm Performance?, Marketing Science Institute]
PPA conference, 10th May 2017 8 Mobile is becoming universal
Smartphone adoption by age (% of adults, average of last 4 quarters)
100% 94% 93% 90% 89% 82% 80% 76%
60% 55%
40% 30%
20%
0% 15-24 25-34 35-54 55+
Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Personally use smartphone [Source: Ipsos MORI, Enders Analysis]
PPA conference, 10th May 2017 9 And ecommerce is going mobile….
Share of ecommerce transactions via mobile devices (%)
100% 95%
80%
60%
40%
20%
0% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015
Mobile PC Includes physical and digital goods and services [Source: IMRG/Capgemini, Enders Analysis]
PPA conference, 10th May 2017 10 It’s direct response – or activation – advertising that’s growing
Direct response ad expenditure (£m) Display ad expenditure (£m)
12,000 12,000
10,000 10,000
8,000 8,000
6,000 6,000
4,000 4,000
2,000 2,000
0 0 2000 2015 2000 2015
Analogue Digital Analogue Digital
PPA conference, 10th May 2017 11 We have gone from 40:60 activation/brand to 50:50
Adspend by campaign goal, 2000 Adspend by campaign goal, 2016
12%
38% 48% direct response 43% 39% direct response 61% Brand display 28% 52% Brand display 60%
101%%% 9% 9%
Analogue brand display Digital brand display Analogue brand display Digital brand display Digital DR display Digital DR Digital DR display Digital DR Analogue DR [Source: Enders Analysis estimates based on Warc/AA] Analogue DR [Source: Enders Analysis estimates based on Warc/AA]
PPA conference, 10th May 2017 12 A vicious circle of short-termist marketing
Media and context Automated trading become grows in scale and commoditised influence
Advertisers deploy vigorous procurement practices, and Long-term and Automated short- CMOs become reputational term trading most volatile measures and measures become role on boards outcomes diminish more important
PPA conference, 10th May 2017 13 Digital marketing hugely overstates conversion
Marketing objective Digital ad unit
Media Awareness: Visits: display, video $0.01/visit
Interest: Audience: social $0.05/profile
Consideration: Signups: email $0.25/lead
Conversion: Purchase: Retail search $1.00/click
[Source: based on blinkx, illustrative only]
PPA conference, 10th May 2017 14 Disruption is not just in media, it’s in commercial categories
[Source: Enders Analysis]
PPA conference, 10th May 2017 15 Digital growth = Google and Facebook growth
Google & Facebook shares of digital ad spend (£bn) Google & Facebook shares of digital ad growth (%)
9.9 10 100% 8% 11% 27% 8 3.6 80% 38% 36%
6 60% 1.1
4.2 54% 4 3.7 40% 1.2 1.6 1.0 5.2 54% 53% 2 20% 1.1 2.0 20% 1.0 0 0% Display Mobile Total Display Mobile Total
Google Facebook Others Google Facebook Others
[Source: Enders Analysis] [Source: Enders Analysis]
PPA conference, 10th May 2017 16 Context and value do matter
[Source: Enders Analysis, illustrative only] [Source: Enders Analysis, illustrative only]
PPA conference, 10th May 2017 17 Brand building takes investment, and time
Estimated ROI impact, 1 Week of spend
Branding media Performance/tactical media 1.4 1.23 1.23 1.23 1.23 1.2 1.05 0.99 1
0.8 0.8 0.7
0.6 0.45 0.4
0.2 0.2
0 Week 1 Week 1-4 Week 1-13 Week 1-26 Week 1-52
[Source: Enders Analysis based on an illustrative case]
PPA conference, 10th May 2017 18 Some recommendations
Recognise limits of attribution – and structural biases
Procurement is too frequently applied as a blunt price instrument
Planning and creative need to be valued again, and integrated where possible
Transparent contracts – be clear about where money is made, and accept value chains need profits Experienced judgement is NOT the enemy of data and evidence
Context and environment – the industry needs to size the benefits and risks
Quality response signals. It is not enough to record response rates, and to assume response failures are “neutral” Short-term and long-term measurement integration
[Source: Enders Analysis]
PPA conference, 10th May 2017 19 Disclaimer
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PPA conference, 10th May 2017 20