The fight for the future of marketing spills out onto the streets

Further to Ad Age Editor, Jonah Bloom’s, remarks to the ANA last week about the current role of procurement in the marketing industry, the IAB’s CEO, Randall Rothenberg, has published a comprehensive review of how we got here, to the point where as an industry we are convulsed by the question, “Is Marketing a Strategic Resource or a Procured Commodity.”.

Back at Ad Age, Jeff Jones, a partner at ad agency McKinney chimes in on the need for marketing leadership. Says Mr. Jones:

“I’m frustrated by marketing being so misunderstood by so many, and I’m tired of reading articles placing all of the responsibility on the CMO.”

We should regard each of these items as part of the same awakening: marketing cannot be allowed to hit bottom. Within a consumer-driven world, marketing must have purview to engage consumers in a way that builds trust with consumers – which can mean something very different from using marketing for results in the short-term. 

Who is Louie Volpe?

 

Who is Louie Volpe?

Type the word “holiday” into almost any search engine and “Holidays.net” emerges as the top return on a list of results 100,000,000 to 200,000,000 long. Founder Louie Volpe has been the owner and proprietor of Holidays.net for over 15 years and in that time the web site has paid the rent, put his children through college and employed people in addition to himself. It began as a simple side-line venture to his early web development business. Today, it’s what Louie does, and he has been supported by advertisers from all over the world keen to reach people when they are planning for the holidays – something people do, yes, all over the world.

This week the IAB released the results of a study by two Harvard Business School professors showing the deep roots the Internet has sunk into the U.S. economy and the contribution it now makes to not only users, but thousands of small business people. As a Company with deep roots of our own going back to the commercial beginnings of the Internet, we can confirm that the lives of countless people, like Louie Volpe, have been supported by the growth of this remarkable media industry, thanks largely to revenues derived from advertising.

Once upon a time it was mostly a pipe dream for most of the publishers that Burst, and others, support to leave their day jobs and pursue a small business career that might be attached to their personal interests and passions. Today, many publishers have done just that, like Louie Volpe.

The IAB’s research is aimed, in part, at interest groups trying to prevail on government to regulate the Internet economy with privacy legislation that would knee-cap online advertising. The closer we get to the issues as an industry the more we realize that there is a gross misunderstanding of how online advertising works among the people setting the tone of the discussion.

Online advertising is anonymous, anonymous in the way that newspaper and cable subscriptions are not. No names. No addresses. No people at the other end that can be recognized.

Except Louie Volpe and many thousands more like him who create the rich fabric of the Internet on which people have come to depend, all over the world. These people need to be recognized by everyone in this discussion.

Here is the release announcing the IAB’s report:

WASHINGTON, D.C. (June 10, 2009) – Interactive advertising is responsible for $300 billion of economic activity in the U.S., according to a new study released today by the Interactive Advertising Bureau (IAB). The advertising-supported Internet represents 2.1% of the total U.S. gross domestic product (GDP). It directly employs more than 1.2 million Americans with above-average wages in jobs that did not exist two decades ago, and another 1.9 million people work to support those with directly Internet-related jobs. A total of 3.1 million Americans are employed thanks to the interactive ecosystem. These are the key findings of the first-ever research to analyze the economic importance, as well as the social benefits, of the Internet.

The study, commissioned by the IAB was produced by Harvard Business School professors John Deighton and John Quelch, along with Cambridge, MA-based Hamilton Consultants. The study was designed to provide an impartial and comprehensive review of the entire Internet economy and answer questions about its size, what comprises it, and the economic and social benefits Americans derive from it.

“This is the first time anyone has undertaken a comprehensive analysis of the size and scope of the Internet economy and measurement of its economic and social benefits,” said Professor Deighton, the Harold M. Brierley Professor of Business Administration at Harvard Business School, and an author of the study. “I am convinced the results of this study will prove useful for business leaders, legislators and the educational community.”

“This study underscores that the Internet ecosystem is generating an increasing level of economic activity in every corner of the nation,”said Professor Quelch, the Lincoln Filene Professor of Business Administration at Harvard Business School and a co-author of the study.

The study looks at the entire interactive marketing ecosystem, which includes:

The ad-supported Internet, narrowly defined as the content and usage supported by an estimated $23.4 billion of Internet advertising in 2008

E-commerce

E-mail, the cornerstone of lead generation and customer care for many companies

Enterprise websites, the Web sites that businesses, large and small, develop and maintain for communication.

Among some of the other important findings:

Small businesses have thrived as a result of the Internet:

• There are more than 20,000 Internet-related small businesses in the U.S. that provide a variety of services such as web hosting, ISP services, web design, publishing, and Internet-based software consulting. Many of these businesses have 10 or fewer employees.

Internet-related employment is particularly important to certain areas of the country but exists in every one of the 435 U.S. Congressional Districts. Some Congressional Districts have more than 6,000 Internet-related employees.

Interactive advertising has substantially reduced what consumers have to pay for access to the Internet and for e-commerce products and services. In addition to its financial contribution to the U.S. economy, the Internet has produced large social consequences as an infrastructure and platform, providing American society comprehensive qualitative benefits that include:

•  Universal access to an almost unlimited source of information
• Increased productivity (output per unit of capital or labor, or increased consumer utility at a lower cost)
• Innovation in business practices, consumer behavior, commerce and media
• Empowerment of entrepreneurs to start small businesses, find customers and grow
• Environmental benefits derived from saving natural resources lowering pollution through the reduced use of petroleum-based fuels and paper

“The results of this study confirm the vast influence and driving importance of the ad-supported Internet to the overall economy,” said Randall Rothenberg, President and CEO, IAB. “By understanding the total contribution of the Internet to the U.S. economy, we can more accurately assess the impact of potential legislative changes on the Internet’s operations, particularly the consequences of any actions that would alter ad-supported business models.”

The research divided the Internet ecosystem into 14 different types of companies:

• Internet service providers (ISPs)
• Hardware providers
• IT consulting and solutions companies
• Software companies
• Web hosting and content management companies
• Search engines and portals
• Content sites
• Software as a Service (SaaS)
• Ad agencies and support services
• Ad networks
• E-mail marketing and support
• Enterprise staffs and subcontractors responsible for Internet advertising, marketing and web design
• E-commerce companies, including physical delivery
• B2B e-commerce

To read the full study, please go to www.iab.net

Getting behind the wheel to drive

The IAB Annual Meeting that concluded yesterday in Orlando, FL., was an event with a broader agenda than just the Internet. The IAB meeting was a beginning referendum on the future of advertising. This is appropriate. After years as a smug, wise-cracking youth that was dismissive of traditional advertising and media, the Internet has it all on its shoulders now. A passing generation of media giants – magazine, newspapers and TV - is desperate for an heir. Along with everyone else, the old media guard has stood by waiting to see if the cocky self-assurance of the Internet would manifest itself in a new and improved advertising model - a one-to-one, risk free advertising model. Not yet, and despite the the bravado – or because of it – no has been quite ready to trust the Internet with the keys so that it can drive.

The Internet is in catharsis. The title of the IAB conference said it – “Brands battle back” – as did the conversations of everyone who attended and debated the art and science of persuasion. The Internet is trying to define itself in a world that needs it and that is weary of plugging holes in media buckets that have been leaking audience for 20 years. “Grow up” is all that’s left to say on the matter after 15 years of cheeky hair-dos and body art. DO something. Clean up your act.

One thing was clear from the Annual Meeting in Florida, the IAB is doing something. It has emerged as an advocate for the industry, and not just as its administrative assistant. It is leading, offering a panoramic view of the Internet landscape that shows unique form and function. It put some of that form on display with a video presentation, “I am the Long Tail“ that documented the passion of a few of the Internet’s legion of independent web publishers. It showed that it was willing to put the key issues on the table for discussion and invited provocation.

Which it got. Terance Kawaja, Managing Director of GCA Savvian Advisors, gave what may have been the most entertaining presentation during the two days, but one that was not, in the end, loaded with mirth. Terry speculated that the downward slope of prices online, brought about in part by the efficiencies of ad networks may, in fact, represent the true value of Internet advertising. Indeed, he said, it may even expose the true value of all advertising. Offering up the sins of the irrationally exuberant and sometimes fraudulent financial services industry to let us know he has walked in our footsteps and seen the way, Terry asked, what if Madison Avenue had been a giant deception for the last 100 years? What if it had perpetrated a fraud bigger than Enron, Worldcom, Stanford, Madoff and the sub-prime crisis put together by what it had charged customers to advertise over the years?

Not mirthful. Editors from the New York Times spoke after Terry and likely erased the thought that people may have been giving to what he suggested about media value over the years. They demonstrated the truly unique capabilities that only a digital medium can provide, such as their rock star graphics. But, people should pay attention because Terry’s comments, while offered tongue-in-cheek, express a true sentiment that lurks below the surface of the people sitting in judgment of our industry today, who are all members of the accounting classes. John Wanamaker was only half right, they think. In truth, it’s all wasted.

The IAB conference, therefore, was a beginning referendum on the future of advertising. In a pattern that has repeated itself since time began the next generation will have to answer for the sins and promises of its forebears and show the way forward. Just as surely this generation will stand on the shoulders of the past, and with mounting irony be called upon to rescue brand. 

It is a lot of responsibility for a 15 year old, but are we happier to have the Internet behind the wheel or television, which announced this week that it was feeling more effective than ever?

The answer is easy. Give me the keys, Dad. I’ll take us home.

IAB Annual Meeting: Brands Battle Back.

I have always been bothered by the fact that the Internet’s leading trade show is called “Ad Tech.” The name has implied from the start that the value proposition of our industry would be in the tools of our delivery, and it has led to a gum ball rally sort of race for one-to-one audience connections brought about by data and measurement. The result (no pun) today is a business heavily reliant on direct response, or performance-based advertising which is the only iteration of the advertising trade capable of holding-up the proposition.

The IAB’s annual meeting kicked-off yesterday with the theme, “Brands Battle Back”, and a call from IAB CEO Randall Rothenberg and Chairman, Wenda Harris Millard, to move beyond the immediacy of direct response and to invigorate the art, not just the science, of our business. Entering into our 15th year (roughly) as an industry, perhaps it is dawning on us, then, that our value proposition isn’t simply in the technology - any more than it is in the technology of other media. Audiences, after all, do not sink into their chairs at night to marvel at the fact that TV comes to them via a satellite in orbit over earth. Radio, still a miracle, is meaningful only if you like what’s on. Newspapers, delivered at enormous effort and expense (and also by satellite in cases), sell only if people are moved by the headlines.

The Internet is a marvel of content. Audiences respond to content. We need to sell the content. Internet content overwhelms the competition.

The IAB’s media partner for it’s annual meeting, Advertising Age, carries this story on the front page, today: “Guess which medium is as effective as ever: TV”. It sites evidence that TV advertising works and its effectiveness may be improving. The story reminds us that measurement and effectiveness as media value propositions are not unique and not high ground. If we want to challenge TVs dominant position on media plans today we must offer the chief reasons for why people would rather be online – and technology, measurement and effectiveness aren’t among them.

Time to battle back.