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MT TALK AT COBLENTZ RISE & SHINE CONFERENCE
Copyright, Bob Hoffman 2019
Thank you, John. Good morning everyone.
These wonderful Rise & Shine mornings are meant to be pleasant,
inspiring events. I’m afraid I’m going to have to go against that vibe this
morning and talk about a few unpleasant subjects that are not flattering
to our industry. Because I think our industry has got itself all screwed
up.
The premise of my talk is that for the last 10 years or so the ad industry
has been engaged in an experiment and the experiment has not been a
success.
I am working on a book about this. If you see value in my POV I’ll keep
writing the book. But if you storm the stage and beat the shit out of me,
I’ll write a different book.
SLIDE
The working title of my book is The Pretenders. Advertising’s Decade of
Delusion. The premise of the book is that the last decade has been a
failure for our industry — primarily because we believe we know things
that we don’t really know.
SLIDE
The decade we have just experienced was expected to be one of the most
fruitful and productive in the history of advertising. We had amazing
new tools and amazing new media that we never had before. The whole
thing was head spinning and certain to engender all kinds of new
creative opportunities.
Our ability to reach consumers one-to-one with web-based platforms
was sure to make advertising more personalized, more relevant, and
more timely.
Brands’ abilities to listen to consumer conversations through social
media and react quickly couldn’t help but connect us more closely with
our customers.
And consumers themselves would be one of our biggest assets by
engendering conversations about our brands and helping us understand
and define what our brands should represent. And yet, the past decade
has been the most disappointing and disheartening period that I’ve
experienced in my advertising career.
SLIDE
It is widely believed inside and outside the ad industry that as a body,
our work has gotten worse, not better.
SLIDE
Consumer research shows that regard for our industry is at a new low.
SLIDE
IT’S GOTTEN SO BAD THAT THAT WE HAVE half the
trustworthiness of lawyers, if you can believe that.
SLIDE
Marketers are disillusioned. They don’t trust us. Their trade
organization, the ANA, has officially stated that they believe corruption
in our industry is “pervasive.”
SLIDE
Brands are facing strong headwinds. A recent study by Nielsen reported
that consumers say they are 46% more likely to change brands than they
were just 5 years ago, and only 8% say they are strongly brand loyal.
SLIDE
Regulators and governments are after us with a passion. They want to
know what we are doing with data and whether we are acting illegally in
collecting, trading and selling personal private information about
consumers.
SLIDE
Of all forms of advertising, the eight types rated the lowest by
consumers are all forms of online advertising.
SLIDE
Meanwhile somewhere between 5 and 50 billion dollars is being stolen
annually from our clients by online ad fraud.
SLIDE
Marketers are taking their advertising duties in-house and hiring
consulting firms to do what we used to do.
To say that the last decade has not lived up to expectations is like saying
the Titanic was a little boating mishap.
So how can we have been so wrong? Well, we’re human. And humans
have a nasty habit of being wrong. A few examples:
SLIDE
On April 28, 1975 in an article called “The Cooling World," Newsweek
magazine informed us that meteorologists "are almost unanimous" that
“catastrophic famines might result from…global cooling”
SLIDE
A month later the NY Times said "a major cooling of the climate is
widely considered inevitable" because it has been "well established" that
the climate in the Northern Hemisphere "has been getting cooler since
about 1950.”
SLIDE
On Sept. 14 of that year The Times reported that this global cooling
"may mark the return to another ice age.”
It seems they didn’t know what they thought they knew.
SLIDE
Up until a few years ago, we thought we knew what the universe was
made of. There was matter, which was largely atoms composed of
electrons, neutrons, and protons and other tiny little things. And there
were 4 forces - gravity, electromagnetism, and the strong and weak
nuclear forces.
It turns out that we were wrong. In fact, we have no idea what the
universe is made of. Science now believes that only 4% of the universe
is made up of the stuff we thought it was made of, and that 96% of the
universe is a mystery and we have no idea what it is. We call it ”dark
matter" and "dark energy." Which is another way of saying, we have no
clue what the hell it is.
SLIDE
For about 25 years - up until a few weeks ago - I was taking an aspirin
tablet every day because it was good for my heart. But a few weeks ago
the medical community announced that we should stop taking aspirin
every day because not only is it not good for us, it’s bad for us.
SLIDE
This is not to say that we don’t learn from science. We continually do.
But as history shows us, at any discrete moment of time we have
deluded ourselves into believing that we knew things that we don't really
know.
If the A students who study the cosmos, and math, and medicine are so
often wrong, do we really believe that us advertising and mktg bozos
know anything?
The business of marketing is particularly rife with delusions. We think
we know how advertising works. We think we know what will motivate
people. We think we know what tomorrow is going to be like. And yet
every day we unconsciously ignore significant evidence that contradicts
our most cherished beliefs about how our industry works, how media
works, how marketing works, and how people work.
A few years ago it seemed there was a law that required us to
include "Like us on Facebook" or "Join the conversation" in every ad we
created. Today if you put "Like us on Facebook" or "Join the
conversation" in an ad you'd be laughed out of the conference room.
SLIDE
In 2012, the Harvard Business Review published a piece that
purported to quantify the value of a Facebook Like. In case you're
interested, here's the formula:
Value of a Like = L / UpM x (LpD X 30) x (C/L) x CR x ACV
It is now seven years later and we actually know the true formula for the
value of a like: Value of a Like = 0
In fact, a few weeks ago Facebook started phasing out the like button.
For almost twenty years we have measured the effectiveness of online
advertising by click-through rates. Virtually all reliable studies show that
CTRs have no correlation to ad effectiveness, yet it is still the most
widely utilized measurement of online advertising performance.
Part of it is our fault. We are not willfully deceitful. We just find it very
hard to admit that we are devoting so much of our energy and our soul to
something about which we really understand so little. Part of it is the
environment. Our clients want results. They don't want to hear that they
are buying millions of dollars of likelihoods and probabilities.
SLIDE
The workings of the real world are impossibly complex and messy. As
author James Glieck says, we "prefer to turn a blind eye to reality’s
messiness."
I’ve been around advertising a long time. I spent over forty years in the
business and another six or seven writing about it. And I’ve noticed
something. I’ve noticed that we advertising experts have a lot of
unreliable opinions.
SLIDE
I had a long and pleasant career in the advertising business. I had the
opportunity to create for brands like McDonald’s and Toyota, Bank of
America, Chevrolet, and AT&T. I’ve been invited to speak in dozens of
countries. My opinions and comments have been sought by
organizations like the BBC, The Wall Street Journal and .… I’ve written
4 books about advertising that were Amazon number one sellers in
advertising. I don’t say any of this to brag. I say it for the exact opposite
reason — to make an important point. The point is this.
SLIDE
I don’t know anything. As my friends back in Brooklyn would say, I
don’t know shit.
I am faking it. I always have been. I have no idea why anybody buys
anything. I have no idea why you buy Coke instead of Pepsi, or Nike
instead of Adidas. As a matter of fact, I have no idea why I buy Coke.
In my career I’ve worked with hundreds, if not thousands, of marketing
and advertising people and, I mean no disrespect, but I don’t think they
know shit either. I think we pretend to know a whole lot of stuff that we
don’t really know.
SLIDE
What we do mostly is precision guessing. We guess. We look back at
what other companies have done, we notice their strategies, notice
methods, and if it worked for others we try something like it and hope
it’s going to work for us.
SLIDE
We have a fancy name for this. We call it “best practices.”
But the problem is, every company is different, every problem is
different, every brand is different, and every circumstance is different.
And what make best practices in one instance may be a total disaster in
another.
There are so many variables in advertising and marketing, and our
individual successes and failures provide such a small sample that it’s
hard for us to know what is the result of our acumen, and what’s the
result of … I don’t know… luck, circumstances, trends, randomness…
something else.
I’ve had enough advertising successes and failures to know that I never
knew what was going to be successful and what was going to flop. No
matter how much I thought I knew, I never really knew.
SLIDE
And it’s not only history that misleads us. The future also misleads us. If
you attend a lot of conferences as I do, you have undoubtedly noticed
that speakers love to talk about the future. In fact, it’s almost the only
thing they ever talk about. Why? Because the present is too fucking
confusing, and complicated and largely incomprehensible.
But the future is great. You can’t be wrong when you talk about the
future. No one can fact-check the future. You can say anything you want
and people will think you are brilliant and they will applaud you and
quote you in the news. And then 10 years from now when it turns out
you were wrong, who cares? Nobody remembers.
Well, I remember.
A large part of our delusions started about 15 years ago when we
advertising experts promised the business community a miracle. It was
called interactive advertising.
It was going to be so amazing. It all sounded so great.
And social media marketing was going to be unbelievable. We were
going to put this amazing new social thing to work for us.
SLIDE
A partner in Sequoia Capital said…"If you can harness social media
marketing, you don’t have to pay for advertising any more.” It all
sounded so wonderful.
SLIDE
But as that old sourpuss Winston Churchill once said, “However
beautiful the strategy, you should occasionally look at the results” And
what have the results been?
The results have been substantially less than promised:
tens of billions of dollars of online ad fraud,
corruption and kickbacks,
FBI and Justice Dept investigations,
bots,
ad blockers,
privacy nightmares,
security breeches,
election tampering,
secret files about each of us in the hands of people we don't even know
exist,
degradation of journalism,
and the disgust of the public.
Other than that, it’s been fucking great.
SLIDE
So let’s have a quick look at three of our delusions and pretensions. I
want to start with the one that I think is the most problematic.
SLIDE
I don’t think we understand how dangerous we’ve become. Two years
ago I wrote a book called BadMen.
SLIDE
The premise of the book was that advertising - which used to be about
imparting information - had become equally about collecting
information. And the collection, trading and sharing of personal private
information about us without our informed consent or knowledge had
become very dangerous.
SLIDE
The very first thing I mentioned in the book was a then little-known
company called Cambridge Analytica. I had no idea that six months later
CA would become one of the most famous companies in the world.
CA claimed to have between 4-5,000 files on every adult in America.
Gathering data, and the purported advertising benefits it provides, had
become the glib justification for all kinds of mischief and dangerous
activities.
The current online adtech ecosystem is based substantially on the
collection and deployment of data about consumers. It has become a vast
and inescapable network of tracking, surveillance, and spyware.
We know what happens when governments know everything about their
citizens - when they follow us everywhere, track our every move, read
our mail, listen in on our conversations, and keep secret files about us
which can be used to influence our lives in ways that are only vaguely
visible to us. We know how the KGB and the Stasi and the Gestapo
worked.
Except this time it isn't our governments, it’s the marketing industry that
follows us everywhere, tracks our every move, reads our mail, listens in
on our conversations, and keeps secret files about us which can be used
to influence our lives in ways that are only vaguely visible to us.
This is unprecedented and it’s hard to know where it leads. But it’s
difficult to imagine that it leads anywhere good. China is now using
online tracking in ways that would make the KGB drool.
We are told that tracking is essential to the economic health of the web.
This is 100% pure unadulterated bullshit. TV and radio and print did
very well for decades without tracking us. There is no reason online
media have to track us to be a successful advertising medium.
We are told that brands need to track us to market to us successfully.
More bullshit. But let’s pretend it’s true for a minute. Since when did the
convenience of marketers become more important than the privacy
rights of citizens?
I believe the regulators of the GDPR will soon determine that one
of the centerpieces of programatic adv — real time bidding -
which spews all kinds of personal private information about
consumers all over the web tens of billions of times a day — is
illegal.
The current model of online advertising - based on tracking,
surveillance, and massive data collection - is barely more than 10 years
old. But it is already far beyond its sell-by date. It is a ridiculous
anachronism, born in an era of naive digital utopianism, and is now
absurdly outmoded, dangerous, and unsuited to its purpose.
Next I want to talk about an issue that hasn’t gotten nearly the attention
it deserves — online ad fraud.
This guy is Professor Roberto Cavazo of the University of Baltimore.
Professor Cavazo participated in a study called ‘The Economic Cost of
Bad Actors on the Internet, Ad Fraud 2019.”
Prof Cavazo is an economist who has studied fraud for over 30 years.
After participating in the study, here’s what he had to say.
SLIDE
“I have studied the economic costs of fraud in many sectors for decades,
and I was left stunned by the scale of fraud in online advertising,”
This study estimated the cost of online ad fraud at about 30 billion
dollars annually.
This report is one of many that repudiate the NONSENSE promulgated
by our industry.
SLIDE
The ANA claims that the "War On Ad Fraud Is Succeeding" and that
fraud will fall to about $5 billion in 2019.
The ANA and other advertising trade associations continue to mislead
the industry and the public about the extent of criminal activity that is
polluting online advertising and costing advertisers tens of billions.
The digital advertising director of the Financial Times, Anthony
Hitchings, who also participated in the study mentioned above had this
to say,“The scale of the fraud we found is jaw-dropping. The industry
continues to waste marketing budgets on what is essentially organized
crime.”
SLIDE
The truth is nobody knows the exact extent of ad fraud.
But there is no doubt about one thing. Ad fraud is enormous. According
to the World Federation of Advertisers, by 2025 ad fraud may be the
second largest source of criminal revenue in the world, after drug
trafficking.
According to The Washington Post, in a twelve month period spanning
the end of 2017 and the beginning of 2018, Facebook had to remove 2.8
billion fake accounts from its platform. That means they removed three
times as many fake accounts as there are human beings in the Western
Hemisphere.
Perhaps the most damning aspect of digital advertising measurement is
that the more you learn about the subject the more you understand how
corrupt and unreliable it is.
Aram Zucker-Scharff, adtech director at The Washington Post says,
“The numbers are all f**king fake, the metrics are bullshit…”
Ellen Pao, former ceo of Reddit says, “It’s all true. Everything is fake.”
On Monday, Facebook agreed to pay advertisers 40 million dollars to
settle a suit alleging that they had knowingly inflated their video metrics
by as much as 900 percent.
SLIDE
Finally, I have one last delusion I want to talk about. The Age Delusion.
One of the practices of the ad industry that I’ve never understood is why
we spend so much of our time, money, and energy talking to young
people and so little talking to older people.
According to Nielsen, people over 50 are the most valuable generation
in the history of marketing. So why do we ignore them?
In order to understand this phenomenon, I think we need to talk about
the make-up of the ad industry.
Walk into any ad agency in the world and in 10 seconds something will
become obvious. Everyone is young.
While people over 50 comprise 47% of adults in the US, they comprise
6% of agency employees.
The excuse we are always given for this is that young people are just
more creative. Or as the insufferable Mark Zuckerberg says, “Young
people are just smarter”
I would like to challenge this notion. To do so, I would like to go outside
the advertising industry to other fields where creativity is absolutely
essential.
Let’s look at the year 2017. We’ll start with the Nobel Prize. There is
only one Nobel Prize in a creative field. It is the prize for Literature.
SLIDE
It went to Kazuo Ishiguro who is 64.
The Pulitzer Prize is awarded in several creative fields.
SLIDE
The Pulitzer for Drama went to Lynn Nottage who was 54.
SLIDE
The Pulitzer for History went to Heather Ann Thompson, age 55.
SLIDE
The Pulitzer for Poetry went to Tyehimba Jess, age 53.
SLIDE
Meanwhile at the Academy Awards, three of the four winners for acting
were over 50: Francis McDormand, 60; Gary Oldman, 59, and Allison
Janney, 58. The fourth, young Sam Rockwell, was to be 50 the next
month.
SLIDE
The Oscar for Best Director went to Guillermo del Toro, who was 53.
Next we move to television.
SLIDE
The Emmy for Best Drama Series went to The Handmaid's Tale. The
novel was written by Margaret Atwood who was 79 and was creative
consultant on the show.
SLIDE
The Best Comedy Series went to Veep, executive produced by Julia
Louis-Dreyfus, 57. She also won for Best Actress.
SLIDE
Best Limited Series went to Big Little Lies created by David E Kelley,
62.
SLIDE
The Best Supporting Actress was Ann Dowd, 62. Best Supporting Actor
was John Lithgow, 73.
SLIDE
Best Supporting Actor in a Comedy Series went to Alec Baldwin, 60.
So, let's recap.
People over 50 are creative enough to dominate in Nobels, Pulitzers,
Oscars, and Emmys but are not creative enough to write a fucking
banner ad. I guarantee you, not one of these brilliantly talented people
could get a job in an ad agency today. Not one.
Now let’s look at the facts about older consumers:
SLIDE
In the US people over 50 are responsible for over half of all consumer
spending.
SLIDE
They outspend the average consumer in nearly every category -- food,
household furnishings, entertainment, personal care, automotive…
SLIDE
They account for 55% of all consumer packaged goods sales
and dominate 94% of CPG categories
SLIDE
They outspend other adults online 2:1 on a per-capita basis
SLIDE
They have a net worth about 3x that of other generations
SLIDE
They buy about 57% of all new cars.
SLIDE
They control about 70% of the wealth in the US
SLIDE
If they were their own country, Americans over 50 would be the 3rd
largest economy in the world — bigger than the entire economies
of Germany, Japan, or India.
SLIDE
And the future? Between now and 2030 the population of adults over 50
will grow at about 3X the rate of adults under 50.
Let me ask you a question: Do you really think it’s a good idea to ignore
these people?
SLIDE
And yet, according to a 2016 study by Nielsen, people over 50 are the
target for 5% of marketing activity in the US.
SLIDE
While everyone in marketing is obsessed with millennials, we are
actually going thru one of the greatest demographic changes in human
history and it is being completely ignored.
This chart from the UN demonstrates an astounding demographic
change that is occurring in just 100 years. In the year 1950, there were
three times as many people in the world under 5 as there were over 65.
By 2050 there will be twice as many people over 65 as there will be
under 5. Our population is aging at a remarkable rate.
But we in the ad and mktg business have invented all kinds of
convenient bullshit for why we ignore mature people.
The real reason we ignore older people is …we hate them. We hate older
people.
We can't build ourselves a hot advertising career by talking to old farts.
Consequently, we have invented all kinds of bullshit to justify our
malpractice.
The neglect of mature consumers and pandering to young people is
nothing but narcissism disguised as strategy.
SLIDE
It is marketing by selfie-stick.
SLIDE
Okay, I’m almost done here. My point is this. We need to exercise a little
more modesty and discretion when we think we know things that we
don’t really know.
We need to keep an open mind and understand that reality is messy and
that there is a substantial difference between reality and wishful
thinking.
I believe we have had a lost decade. We have allowed ourselves to be
persuaded by the suspect assertions of articulate people masquerading as
experts. It has cost us dearly. Our industry needs to take a good hard
look at our assumptions and where those assumptions have led us.
My advice to you is do not listen to loudmouths like me. Give yourself
the wonderful freedom of skepticism. Dig out the facts for yourself.
Nobody is smarter than the facts.
Thank you all very much.
