is this the most misleading chart in...
TRANSCRIPT
Is this the most misleading chart in advertising?
Source: KPCB2
1. The end of the mass-media / mass-consumer complex changes everything
3
End of growth?
-20%
-15%
-10%
-5%
0%
5%
10%
15%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Ad spend is getting decoupled from wider economic growth
US total ad spend GDP
16,5%
13,8%
11,8%
10,4%
7,0%6,6%
2,7% 2,6%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
LATAM Africa ME APAC World CEE US WE
Ad spend CAGR 2016-2021: mature ad markets are post-growth
4Source: corporate filings, local industry bodies, GroupM IAB Europe, own calculations
Brands scrutinize spend
8,6%
8,4% 8,4%
8,3%
8,4%
8,3%
8,4%
8,2%
8,0%
7,9%
7,4%
7,6%
7,8%
8,0%
8,2%
8,4%
8,6%
8,8%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
A & P spend/revenue for top global advertisers
5
But counting numbers misses half the story: marketing = experience = product
Source: Nike, mobile website
6
Source: Mr Porter, tumblr.com
2. Agencies must rebuild and re-emerge as very different companies
7
Agency headlines paint a now familiar story
8
But the agency economic model has been under pressure for a longer time than pundits care to admit
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
400 000
450 000
500 000
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
Agency fees in long-term decline & down 3.5% CAGR since 2007
0
1
2
3
4
5
6
1992 2000 2005 2012 2015
…while workload for creative staff has been increasing
Fees per Scope Metric unit (in 2016 dollars) Scope Metric Units per Creative
Source: Michael Farmer – Madison Avenue Manslaughter; Deutsche Bank; own extrapolations9
142,8
79,9
36,8
19,515,4
10,8 7,8
79,4
35,728,3
19 16,89,6
0
20
40
60
80
100
120
140
160
IBM Accenture Deloitte WPP Omnicom Publicis Interpublic
The size of consultancies is daunting, in revenue & market cap…
Revenue 2016 Equity Value
But are the consultants really coming to eat the agencies’ lunch? Data looks daunting at first…
414
384
244
133
79 79
50
0
50
100
150
200
250
300
350
400
450
IBM Accenture Deloitte WPP Omnicom Publicis Interpublic
…and in terms of employee base
#employees in 000sUSDbn
Source: Factset, company websites10
…and consultancies claims to solve the ‘new problem’…
"You know why? He’s in the wrong pitches... He’s actually solving the wrong
problem. He’s solving yesterday’s problem on driving more leads, through
better campaigns and better creative. Meanwhile, the CEO, his reaction is:
‘I want to take down my marketing spend, not increase it’.”
WSJ 31 May, 2017
A consulting leader on Sorrell:
11
…but in reality both compete for ‘digital transformation’ budgets that are incremental to traditional marketing
4%
23%
15%
13%
12%
11%
7%
6%
5%4%
Market share ‘digital transformation spend’
Omnicom Health Accenture Interactive IBM iX
Deloitte Digital Publicis.Sapient PwC Digital
Epsilon Wunderman (WPP) Ogilvy (WPP)
HavasSource: Deutsche Bank, Bloomberg
$20bn market
8% yoy growth
12
3. CFO ❤️CMO
13
CMOs must deliver business results, not just marketing KPIs
14%
9%
45%
33%
“Does your marketing organization have its own P&L
to capture revenue?”
No, but plan to in the next 24 months
No, and no plans to add within next 24 months
Yes, has own P&L
Yes, but shares P&L with other business units
Source: Gartner, n = 348
But the relationship between
marketing and the wider
business is broken
• Tradition: proxy metrics don’t
define business outcomes
• Complexity: consumer, channel
and technology landscape ever
harder to orchestrate
• Accounting = Culture: marketing
typically exists as a cost center
under tight financial scrutiny
14
4. Data value capture remains exception
15
92% 90% 85%78% 75% 72%
83%
65%55%
45% 40%
8% 10% 15%22% 25% 28%
17%
35%45%
55% 60%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
New
sp
ap
ers TV
Radio
Cin
em
a
Out-
of-
Ho
me
Ma
gazin
es
Paid
-fo
r-S
earc
h
Onlin
e D
ispla
y &
Vid
eo
Pro
ga
mm
atic
Mo
bile
Socia
l
Advertising Spend Structure By Medium in 2018
Media Buy Agency Labor*
Digital MediaTraditional Media
*all agency production & service costs including shoot, talent, creation, advisory, planning, measurement, optimization
The value of data already can exceed media value
16
Data Explosion = Complexity Explosion
1 person 2 genders 4-6 income
bands
5 age groups Daypart of
12 hours5 device types 6 promotional
units
2,984 UK post
code districts
27,000 Netflix-
style genres
174 x 101064,454,40021,6003,600720601 2 12Po
ssib
le
com
bin
ations
va
ria
ble
s
17
Ground-up redefinition
of “computation”
purpose-built for AI
Advanced algorithms
to gain deep
relationship insight at
Billion-user scale
Automated
orchestration to deliver
real-time decision
insights for managers
$16.6bn $7.8bn $250m*
Massive, easy to
deploy array of cloud-
based media services
$22.6bn
AI-Compute Data-Driven InsightAdvanced Algorithms Business IntegrationArea
Platform
Innovation
R&D
budget
*on personalized
recommendations alone!
Mastering complexity requires innovation in 4 areas
18
Programmatic needs to reform: complexity means only few can win with data & algorithms
19
5. Amazon will reshape the ad landscape
20
Amazon’s ad revenue crossed $10bn in 2018 – but Bezos hasn’t even started yet
0,5 0,6 0,7
1,10,9 1,0
1,1
1,7
22,2
2,5
3,7
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Amazon’s Global Advertising Revenue ($bn)
CAGR: +58% CAGR: +125%
21Source: corporate filings, own calculations
6. Silicon Valley Tech – it is a different world now
22
Mark Zuckerberg, January 2018
“I’m changing the goal I give our product teams from focusing on helping you find relevant content to helping you have more meaningful social interactions.”
23
Facebook Newsfeed algorithm changes over time
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2006 1
2007 1
2008
2009 1 1
2010
2011 1
2012
2013 1 1
2014 1 1 1 2
2015 2 1 2 6 3
2016 1 1 1 2 1 2 1 1 2
2017 2 1 3 2 6 2 1 1
2018 2
24
We live in the age of the Techlash – Silicon Valley has lost its sparkle
25
Advertising is part of major geopolitical & economic changes –Asian platforms will begin to have major influence in Europe
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
200
1
200
2
200
3
200
4
200
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200
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9
201
0
201
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7f
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9f
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0f
202
1f
202
2f
202
3f
202
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202
5f
202
6f
202
7f
202
8f
202
9f
203
0f
Digital Share of Net Ad Spend by Region
NORTH AMERICA LATIN AMERICA
WESTERN EUROPE CENTRAL & EASTERN EUROPE
ASIA-PACIFIC MIDDLE EAST & AFRICA
• Digital will be 50%+ of
ad spend in 4 out of 6
global regions by 2028.
• Asia-Pacific will
generate 76% of all its
ad spend via digital
channels by 2030,
mainly driven by China,
where the explosion of
digital devices
combines with tight
advertising restrictions
on TV to powerful
effect.
*Does not include digital out-of-home, or addressable/programmatic TV.Sources: IAB Europe, calculations based on GroupM, iResearch, company reports26
7. The video battle will only heat up
27
Ad TV: Financial analysts sceptical
28Source: Deutsche Bank
Linear TV advertising is declining, but ‘total video’ (TV + online video) is climbing to ever new heights
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
90 000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Advertising Revenue: USA 'Total Video' vs TV ($000s)
Total Video Advertising Trad TV Advertising
‘peak old TV’
29Source: corporate filings, local industry bodies IAB, Europe, own calculations
But legacy TV’s share of total video advertising down 20ppt in 10 years
96,8% 95,3% 93,7% 91,1% 88,4% 85,8% 83,8%81,0% 78,8% 76,5%
0%
20%
40%
60%
80%
100%
120%
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
USA: Legacy TV’s revenue & share of ‘total video’ advertising
Linear TV Advertising Legacy TV Ad-Funded Online Video TV share of 'total video' advertising
$000s
TV
’s s
ha
re o
f ‘tota
l vid
eo
’ ad
ve
rtisin
g
30Source: corporate filings, local industry bodies, IAB Europe, own calculations
Legacy TV will remain the first among many, but glacial erosion continues
2017
Legacy TV YouTube Facebook Others
2023
Legacy TV YouTube Facebook Others
2014
Legacy TV YouTube Facebook Others
Share of ‘total video’ advertising over time
31Source: corporate filings, local industry bodies, IAB Europe, own calculations
32
Growth in connected devices is coming from the living room, not the smartphone
Source: IHS Markit
0
200
400
600
800
1 000
1 200
1 400
2015 2017 2019 2015 2017 2019 2015 2017 2019 2015 2017 2019 2015 2017 2019
USA UK Japan France Germany
Connected devices installed by type by country (m)
PCs Smart TVs Pay TV STBs DMAs BD players Game Consoles Tablets Smartphones
33
Channel 4: suddenly ‘OTT-first’
34
2016
~10-15%
2018
~55-60%**for some shows, e.g. British Bake-Off
OTT+ Usage (share of total consumption)
Roku: Indicator for the Streaming-Explosion
35
284 326
225
417
0
100
200
300
400
500
600
700
800
2017 2018
Roku revenue ($m)
Player revenue Platform revenue
9,2
24
0
5
10
15
20
25
30
2017 2018
Roku: Streaming hours on Smart TVs (bn)
+161%
Source: Roku letter to shareholders, Q4 2018
8. Voice will perk advertisers’ ears
36
More than 7bn voice assistant capable devices in use by 2020: 7% of marketers see them as top priority
0
1
2
3
4
5
6
7
8
2016 2017 2018 2019 2020
World: selected voice assistant (system/ OS level) capable devices (bn)
Smart Speaker Tablet Smartphone PC Games Console DMA Smart TV
37Source: IHS Markit
Emerging marketing strategy on voice assistants
branded skills ‘on assistant’ paid media (spots, sponsorships,
promotions), e.g. via VoiceLabs
aural identity (e.g.
earcons)
Underlying search engine (e.g. Google,
Bing)
Store placement strategy(e.g. Amazon
placement strategy)
Trigger
consumer
actions on voice
through off-
voice brand
advertising
Hijacks,
Exploits
Continuous
monitoring &
intelligence
Voice direct
Vo
ice
in
dir
ec
tO
uts
ide
vo
ice
ec
os
ys
tem
Algorithms
38
Digital audio ads to become a €1bn market
39
246
349
471
608
730
949
1 186
0
200
400
600
800
1 000
1 200
1 400
2017 2018f 2019f 2020f 2021f 2022f 2023f
Europe: Digital Audio NAR (EURm)*
Sources: Company reports, RadioCentre, own model *audio ad formats only – excludes banner & video ads sold against audio content
• Growth driven by podcasts, music streaming
services, digital/online radio from ‘legacy’ radio
firms.
• Smart speakers have no direct impact on growth
yet but drive awareness of voice.
• Radio Apps in smart speakers will become
significant growth driver.
• Log-in based streaming services have advantage
due to tracking & attribution.
• Radio marketers forming alliances & investing in
data pools.
• Programmatic share still very small. Comparison:
Spotify made ~$15m from programmatic audio in
the US in 2018.
9. AI – mislabeled, misunderstood, massive
40
AI: fine line between hype & reality
55,8%
44,2%
Europe: AI Start-Ups
found to use AI no evidence of using AI
Source: MMC Ventures, n = 2830 41
3 ways AI is set to transform advertising
AI
MARKETING
WITH
PROGRAMMATIC 2.0
MEDIA BUYING
AD ORCHESTRATION
CREATIVE 2.0
INFLUENCER
ENGAGEMENT
AI
MARKETING
OF
SERVICE EXPERIENCES
CAMPAIGNS
VOICE CAMPAIGNS
AI
MARKETING
TO
SEO
VOICE SEARCH
VRM
AI MANIPULATION
Source: OMD, modified examples by IAB Europe42
10. Regulation moves from data to consequences of calculation
43
Rights attached to conclusions from data?
Source: University of Oxford (website screenshot)44
XAI (explainable AI) may be a new accountability paradigm
Source: DARPA45
Reality Check
“People worry that computers will get too smart and take over the world, but the real problem is that they’re too dumb and they’ve already taken over the world.” Pedro Domingos, The Master Algorithm
46
