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Is Digital Age Burying the Advertising Industry?
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As much as a third of marketing budgets in the U.S. are spent on digital advertising.

On May 12 at the 4A’s annual conference in 1994, Ed Artzt, the CEO of Procter & Gamble, America’s biggest advertiser, delivered a sensational speech that is still buzzing in the advertising industry’s corners today.

The lionized speech that was rendered much before the internet took over, cautioned of a time in the future where consumers would be control of what they want and disdain advertising altogether unless the business provided them a reason to pay attention.

"If we don't influence changing technologies -- and if we don't harness them -- loyalty to our brands could suffer in the long term," Mr. Artzt said. "If user fees replace advertising revenue, we're in serious trouble. New-media suppliers will give consumers what they want and potentially at a price they're willing to pay."

He prophesied that the advertising industry would undergo a considerable transformation, "We are going to need to get engineering in the teeth again and make it work for us."

So two decades after the insightful speech, let’s find out how the ad industry is doing.

Artzt's Prediction:

Presuming that advertising is no more required to pay the vast majority of the expenses of home entertainment, then advertisers like Procter & Gamble will have some major snags attaining the scope and frequency required.

What really happened?

Advertising is still required to pay the expense of home entertainment, yet by a few measures it pays for less than half in developed nations than it does in the U.S. P&G has progressively turned to lower-cost digital alternatives to attain the reach and frequency needed.

Artzt's Prediction:

Individuals will get to be more program-driven and less channel-driven. This means we may lose access to wide fragments of our audiences on the grounds that program-driven viewers will no more stay tuned to a specific channel. Truth be told, they may not in any case stay tuned to ad-supported programming at all.

What really happened?

Binge watching has taken over on Netflix, HBO and Showtime.

Artzt's Prediction:

Remote controls will be supplanted by program-navigational services that will on a very basic level change TV viewing dynamics. These navigators will be heavily advertised subscription services. They'll tell viewers what's scheduled, they'll also know what sorts of programs a viewer enjoys watching. They'll be able recall everything a viewer has viewed.

What really happened?

Isn’t this prediction the design brief for popular digital video recorder TiVo.

Artzt's Prediction:

Presuming that advertising is moved alongside the program, and individuals don't have the choice to cancel, that could make a significantly bigger crowd than a solo showing can plan to attain.

What really happened?

Buyers got the choice to cancel. Advertisers got the alternative to not pay for TV-program playbacks exceeding three days.

Artzt's Prediction:

We can target a demographic slice as well as individual families. In case that a family has an infant, we can verify they get a Pampers commercial.

What really happened?

Less through interactive TV ads Artzt envisaged at the time, yet a morsel of it through the accumulation of such inventive tools as the automatic advanced digital-ad buys, brand sites and digital content Pampers utilizes today.

The best content is the one that is ad-free!

Rishad Tobaccowala, chairman of Publicis Groupe’s DigitalsLBi and Razorfish, said that despite the fact that 35% of content was viewed without advertisements through membership services in 1994, it stands at 60% to 65% in today’s age. For $60 a month, consumers are paying for access to the best content on the planet without viewing a single ad, he said totaling the expense of subscribing to HBO, Netflix, Showtime, Hulu and Spotify.

In today’s age of digital-ads, even tech giants like Google and Facebook continue to struggle to find ways that work for both customers and the advertisers, who are forced to serve ignorable pre-roll, emulsifying other content with local ads, or creating branded entertainment in order to stay in the business.

Post boom from 1994 to 2000, spending a part of gross domestic product for ads succumbed to 10 years and hasn't bounced back from the 2008 global recession either in North America or other geographies, as indicated by Zenith Optimedia.

Estimation on click-rates has scarcely improved. It's hard to allocate any worth to standard advertisements – banner ads - 99% of them don't get clicked, and until March 2014, when the Media Rating Council licensed a moderate visibility standard, there was no benchmark for those that do. Digital advertisers are applying the same factual sampling idea they utilized for TV agreements in 1994, based on Nielsen and Comscore, in spite of proof that buying and other behavioral information predict an ad response in much better light.

Television still is at the top of the throne, however it’s considered quite expensive. Its cost per gross rating-point to reach out to 18-to-49-year-olds has quadrupled in the previous two decades, as indicated by Horizon Media, and its span has been weakened by the rise of other media.

Outdated measures 

Edwin Artzt at Proctor & Gamble headquarters

(Image: Edwin Artzt at Proctor & Gamble headquarters)

Artzt's forewarning went substantially unnoticed by marketing managers in charge of delivering results in the coming quarter, not to mention the coming millennium and advertisers tiptoeing around. In a recent interview Artzt, stated, “What concerned me at first is that the speech was followed by a lot of cash-outs in the agency business, and agencies that were merged or swallowed up, much of it going overseas. Apparently there was a willingness to turn this threat of what do we do about the future over to bigger entities."

In the next five months of Artzt’s speech O. Burtch Drake, then president of the 4A's, helped build the Coalition for Advertising Supported Information and Entertainment. In a span of a year CASIE had made the web's first security standards and filtered out the quantity of ad units to 16 from 250.

A year ago, P&G's chairman and CEO, A.G. Lafley, said that as much as a third of its brands marketing budgets in the U.S. are spent on digital advertising.  One of the biggest factors driving this change is the lower expense of digital advertising.

Power in the hands of the consumer

Two decades later, Artzt today says that in his opinion the core objective of saving a spot for advertising underpinned entertainment as well as data was attained. "The whole ad industry really got on top of the issue," he said.

However grabbing technology in the teeth, as Artzt said in his 1994 speech, "isn't going to be as simple as it was to adapt to radio or TV, where everything favored the advertiser." Well, isn’t that pretty much the stark truth of the advertising industry?

Tobaccowala says that advertisers, organizations and other people now need to consider better approaches for engaging with the audience. Advertising needs to be more proactive, with brands offering shoppers utility as well as services.

"It's not one of those things where advertising dies," said Tobaccowala. "But the old ways will matter less."

Artzt in his influential speech mentioned that advertising industry will have a bundle of useful tools needed to enlighten the lives of shoppers, and in case if those tools are utilized in the right way, the industry will still dominate.

Two decades have passed and yet the advertising industry is still off the course.

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