The Strategy Review

Adblocking ... just one symptom of something far bigger

One advantage of being, well, a man of a certain age, is that one has a sense of the trajectory of recent history.

My first serious job was as an assistant at a suburban branch of Our Price records. At the time, even the most corporate of record shop chains were temples of cool. And this is where I began a career in music that carried across some 12 years. Happy days. 

A little logo began appearing on the backs of album covers (CD's took another few years to land) around 1980. "Home Taping Is Killing Music (And It's Illegal)" it said.

This was absurd. The sheer time and effort involved in lovingly compiling cassettes of mixtapes - analogue playlists, early social profiles, if you like - made it an infrequent endeavour undertaken only by the rabid fan or lovestruck swain.

There was no evidence - nor is there today - that anyone suffered more than the noble curator themselves in the practice of this dark art.

But this "sledgehammer to crack a nut" response to what was largely an imagined offence, was also a sign that, after decades of delightful decadence, the music industry was falling under the influence of its new masters ... the lawyers. It had swung decisively from being a giant creative cottage industry to being a machine for - increasingly aggressive - copyright protection.

From open innovation, we could say in today's terms, to closed and hostile patenting.

Ironically, as the music business picks itself up after 20 years of battering by a ruthless information economy, those same dedicated curators would be pursued and lionised by not only the music business, but by the stars themselves. There's nothing more enticing, in these flaky times, than a passionate and influential tastemaker.

And then there was Napster. The love-in bubble burst, and all the majors began trying to sue consumers for piracy. This was as we now know a comprehensive commercial and PR disaster for Big Music.

But what was less easy to take - especially as a former insider of the business - was the whining, hand-wringing and finger-pointing that accompanied all this highly vexatious litigation. This was "Home Taping Is Killing Music" for the big screen. And it was craven nonsense, a tacky costume change from a cackling Scrooge to a cowering Uriah Heep. 

"But look at what you're doing!" "You're hitting your favourite artists where it hurts!" "We can't continue to sign great talent if you continue to cripple the business like this."

This was utter nonsense. And it was embarrassing too.

At the time, and indeed up until 2005, which disc sales peaked and began their steep decline, manufactured music and video too were riding the CD wave all the way to the bank. And the record companies were squeezing buyers for every dollar they could. CD prices were almost criminally high - this was far worse in the UK than the US, by the way.

Many, many suits were also fought by the artists who could afford it, to achieve a fairer share of the royalties that were being hoovered up by the labels.

Alongside this two-sided daylight robbery, not just the artistes (as is their right) but the record companies themselves, flushed with their apparently endless CD rights windfall, rode around in limos, flew first class, and continued to party like it was 1999.

There were of course exceptions. Many are still happily in business today, by the way. Martin Mills of Beggars Banquet doesn't do limos, continues to thrive through good and bad times, and partners with many of our most beloved and enduring talents. And, by the way, they love him.

And who can forget Geoff Travis's 80's dream of a socialist record company collective. That was - and still is - the glorious Rough Trade. Today, probably the best record shops in the world.

Coming back to today, the current flood of concern and dispute about the now-ubiquitous adblocking is showing signs of echoing music's crisis. "Adblocking Is Killing Content!" Or along those sort of lines.

The discourse here is nearly all about lost commercial and consumer value. I recall several years ago - I do hope to his eternal shame - a senior CNN executive seriously and loudly claiming at a high-profile industry event that ad-skipping (a la Tivo et al) is copyright theft.

But this type of "theft" began, if not before, then certainly with the TV remote. The ability of the technology-empowered media consumer (or audience, or indeed citizen) to switch off what they don't wish to see is part and parcel of the modern world.

The debate about relative value will not, in the end, get us anywhere. To suggest that the solution to adblocking is, well, better ads is to miss the point. While not in any fashion denying the power and value of great creative work, it's sadly the wrong tool for the job. To remind music consumers that by illegal file sharing they are - immediately or eventually - thereby missing out on "great content" is also not a valid argument.

And let's not even begin to dream that this is another chapter of the better targeting motif.

Some years ago I was advising a group of the major movie studios' home entertainment divisions on the impacts and implications of digital. What become starkly clear was this ... If only piracy was the most serious problem they had to face. In fact the worst threat to these giants of entertainment was not high profile issues such as the Netflix effect and the increasing truncation of the hallowed release window.

It was, and still is, Facebook, a media environment where consumers could happily mess about sharing their own stories and lives, with nary a movie, an album or, more importantly, a rights exploitation opportunity, in sight. Social media is surely, if nothing else, a savage drain on monetisable attention.

The lens of value will continue to be placed over the adblocking conundrum. But alongside that, if we fail to take into account the radical shift in media power to the audience that digital media has conferred on every stakeholder at the table, we're missing the biggest point of all. 

The file sharing revolution was not, in fact, about fair value. It was, we could say, about unfair power. 

Let's not forget one of the biggest scandals to hit a major media conglomerate in recent years, the Sony root-kit fiasco. The company, as you may recall, was caught covertly installing spyware on any user's PC, using audio and video CD's as vehicles. That speaks of a business model forced into playing dirty in order to regain a power that had already been lost.

Adblocking, no matter how distasteful the players and the practices may currently be, will not go away. In order to find viable commercial solutions, we need to dig deeper, to uncover and accept the real drivers of this unfortunate, but entirely predictable and inevitable, cultural shift.

With a glance back again at the Napster uproar, perhaps we might say that adblocking is the darker instrumental flipside of the unfettered consumer targeting we've been focusing on so hard.

Are consumers, now, targeting brands?

Will data kill the consumer brand?

Barbarians in the kitchen

It’s a surprise, and something of a concern, that consumer brands are not more publicly focused on the significant potential impacts of automated shopping and replenishment offerings such as Amazon’s Dash and Echo.

Such services surely signal a determined home invasion, only the first of no doubt many forays into the home territory of our most well-known heritage products.

Already under unrelenting pressure from powerful retailers and, more recently, empowered consumers, not to mention an economic austerity that will not lighten in the foreseeable future, how should a household staple respond to this latest wave of disruptive, data-enabled friendly fire?

The received wisdom is that the present and foreseeable health of consumer brand marketing will be defined and driven by the sophisticated use of data.

And yet, despite the sharply increasing range and depth of data available to practitioners, alongside a lively scrum of martech and adtech service providers, we are if anything more distant from a meaningful connection with consumers than ever.

Down to the crossroads

Should we sit tight and wait for the answer to emerge, or do we challenge the current assumptions and seek alternative approaches? Whatever our choice regarding the former, the velocity of change in market and the ongoing feeling of uncertainty surely demand a regular and rigorous health check.

Are the heavy expectations that lie on digital marketing, advertising and data justified? Or does the way we think about the future of the consumer brand need a radical rethink?

Here I’ll argue for the latter. Having worked in digital media, marketing and advertising for a quarter of a century, and advised leading players on both demand and supply sides, I’ve come to see that a reliance on the current and envisioned applications of digital and data could lead to a severe crisis, at least in their current manifestations, for many of the world’s most familiar and successful consumer packaged goods.

I’m relieved to report that this current challenge is not, necessarily, the end of the road for FMCG. It’s potentially the beginning of a new chapter, one that will demand, alongside a continuing focus on new technologies and ever-richer and more comprehensive forms of data, degrees of bold invention that have not been seen in brand advertising since the golden days of Madison Avenue.

A Game of Thrones

It’s easy to overlook why we have brands, and why they have been so important in both culture and commerce.

Branding was invented in the late 19^th century in the United States by manufacturers of consumer goods. They had become frustrated by the increasing dominance of the wholesalers that controlled, through an effective monopoly of railways and warehousing, the national and regional distribution channels.

The evolution of the retail chains from the middle of the last century, first in the US, then across much of the developed world, extended the field. The power that chains such as Wal-Mart, Target, Tesco and Carrefour have over everyday household brands continues, as is well-documented elsewhere, continues to both expand and to change.

Branding, therefore, has always been about power before value.

Advertising, the undisputed driver of the media landscape of the past 75 years, introduced a new combatant in this unfolding Game of Thrones. Ads are, we tend to forget, information provided to an audience to co-opt them to the cause of the brand. And in doing so, choice enters the picture. And with choice, come the first incremental, then rapid and explosive, empowerment of shopper and consumer.

The great copywriters of the mid-20^th century could never have anticipated the rise of this ruthless connected consumer.

And so we arrive, today, at a kind of pincer movement, with the retailer – on- and offline – and the shopper, equipped to push the beleaguered brand around, with powerful weapons of mass commoditization. At the heart of this brutal new system, of course, lies the data.

There’s no need to go into further detail. The state of play in our Game of Thrones finds consumer brands at a severe disadvantage. The mistake, however, is to assume without close examination that, if digital technologies plus data are the problem, then they must therefore be the entire solution.

Marketing vs. advertising

One little-discussed effect of the digital revolution has been to enmesh the previously separate disciplines of marketing and advertising. Understandable, especially when many of us have concluded, often tacitly, that if it’s all about the data, then we’re really just using different information at different points along the purchase funnel.

I think this has led to important misconceptions, and have found it useful to re-separate them using value as the distinction. We could say that marketing’s primarily about the articulation of value, and advertising’s about its communication.

The discrete roles of data come immediately into focus. Whether used for research, validation of ROI, integration into smarter product and services, prediction and so on, we can’t question that data has been and remains front and centre in intelligent modern marketing.

Furthermore, despite its frequent misfires and continuing disappointments, and while not being the driver of transformation that we once hoped, CRM’s ongoing journey remains at least valid. We should note in passing however that CRM is often partially siloed in customer service. Of which more later.

It’s data’s role in advertising that seems less sturdy.

The vocabulary of digital advertising merits inspection. In particular, the word “relevance” is a daily touchstone of value that should concern us. While a product or service must, from a marketing point of view, resonate with current or anticipated consumer need or desire, surely the task of advertising is not to simply reflect back to our audience all the data we currently hold on them (like an ecommerce recommendation: “If you bought this you might like that”).

To the contrary, advertising’s job is, by blending creative alchemy and astute planning and buying, to convert initial indifference to some level of consideration. We are, we could say, in the very business of irrelevance.

Stephen King, after close to 50 years, still says it best. “How to measure advertising and its effect is not terribly hard if you work out in advance what sort of response you are trying to get, because the basic question then is: Are we getting that response?”

If equity, at its most commercial, is a disposition to prefer our brand over others, and to pay a reasonable premium for it, we must surely concede that, with honourable exceptions, significant ground is being lost to the ubiquitous yellow discount label in the store, and in-basket substitutions and one-click price comparison services online.

While not doubting for a second that media planning and buying should and will continue to be ruthlessly informed and optimised – the programmatic explosion says it all – nevertheless, the magic data bullet that that will rescue the household brand from the Game of Thrones remains elusive.

Efficiency vs. growth

Leading marketers are waking up to a stark realisation. Having spent up to 5 years investing in large programmes of digital transformation that were envisioned as bold steps into the future, they have, instead, become mired in the past.

These initiatives are not, in the main, transformations or innovations. They are programmes of incremental improvement. Efficiency projects. We become, well, smarter, faster and cheaper at doing the things we needed to be better at doing five years ago.

Notoriously, efficiency projects in themselves deliver no business value beyond cost savings. Putting aside the common estimate that 70% of corporate change projects fail, in sharp contrast to even 5 years ago, the sheer accelerations that life and business on the network have conferred on the market mean that we no longer have the luxury of “semi-optional” change gambles.

Life does not go on outside. It rushes past us.

Here, perhaps, a throwaway (and typically cryptic) line from McLuhan’s 1964 masterpiece Understanding Media comes back to haunt us. “The paradox of mechanization is that although it is itself the cause of maximal growth and change, the principle of mechanization excludes the very possibility of growth or the understanding of change.”

Our transformation programmes must not be mistaken for a result. Being digital is simply to arrive, often a little late, at Basecamp One. The mountain of tough competition remains entirely unclimbed.

Having focused, arguably to our detriment, exclusively on the science, we now need to swing back rapidly to the art. It’s creative growth, departing from our platforms of digital efficiency, that demands urgent focus.

Product vs. service

A friend and colleague, one of the country’s foremost engineers, when we were discussing the impact of automated services on consumer products recently, made an observation that must be noted. “But won’t these brands soon enough be selling themselves not to consumers, but to the machines that serve them?”

Indeed. What happens to the intangible and perceived value created by huge investment, over multiple decades, in advertising – with or without the data – when the shopper is, in any sense that we’d recognise, no longer the shopper at all? This is far from a dystopian vision. One way or another, home automation is a reality.

And yes, the data we currently collect and look to for advantage will go on to play a central role in this new episode in our Game of Thrones.

But this will be about services. Amazon, in fact, is best viewed no longer as a retailer, but as an increasingly must-have service provider: this is the logic behind the – for now still reassuringly feature-light – Dash and Echo programmes. The former offers replenishment services for participating brands via either its recently launched one-tap stick-on sensors, or its rather magical Wand.

The latter doubles as a speaker for various audio channels and – far more compelling – a voice-activated home control tool. “Alexa? I’m nearly out of mayonnaise. Get me anything on special offer – over 50% discount – to arrive … oh … Thursday evening. The same size as before.”

We get the picture. The unmediated interaction that consumers and product brands have maintained for so long, is interrupted by a layer that anonymises both sides of the transaction and the relationship.

The fundamental logic here is that quality of service, in the end, always trumps quality of product. We’ve seen this repeatedly in marketing, and of course the digital revolution has accelerated the timelines between comfortable, bankable brand equity and also-ran commodity.

The stark realisation that follows, if we accept this logic and the trajectory we’re seeing so far, is that no matter how we may juggle and refine our marketing communications on behalf of the product brand, we can’t defend against the service players.

A way forward

We are close to marketing heresy here, of course. But looking around at the wholesale disruption we face across all sectors that are exposed to the destructive power of unfettered information, it’s hard, when we’re honest, to imagine that our product brands are somehow immune. To imagine that a data-led communications strategy will provide a sustainable defensive halo, is to ignore what’s right in front of us.

Will data kill the consumer brand? Well, not exactly, despite the clear and present dangers outlined here. It’s branded products that are under immediate threat.

Branded services – initially built around existing products, naturally, but rapidly evolving to create radical, ownable new forms of consumer value – are where logic demands we seek opportunity.

The question that remains is whether brand owners are realistically equipped to take this on at all, in terms of the longer game. Point services, based around a single product or category, will soon enough be subsumed, for the same reason that most branded smartphone apps fail.

Nevertheless, with improved focus and urgency in our various Connected Home programmes, we will uncover innovative, perhaps transformative service models of our own. Multi-category FMCG brand owners hold a particular advantage here, as to stand a chance of remaining, well, relevant in this bleak future context will require offerings that are integrated right across the home, indeed reaching beyond it.

This is not simply a challenge of technology, not indeed of marketing or advertising. I believe it represents, the single most urgent form of transformation that consumer brands should undertake, in order to sustain a useful and valued role in both culture and commerce.

5 leadership fails that block transformation

1. "Not on my gold watch ..."

It's entirely natural to resist change. Business leaders who feel lost and disempowered to lead the type of transformation that's now needed, are tempted to bluster and, most importantly, to refuse to accept and define a business context that demands the most radical rethink ever. There is no simple solution to this. Without a truly Damascene leadership conversion, the enterprise will deliver nothing more than minor tactical innovations and incremental process improvements.

2. "It's all about digital ...

... therefore the solution must also lie in digital." Businesses that are still mired in the idea that "being more digital" is a way forward, to the exclusion of dramatic creative reinvention and growth, get stuck in the recent past. Life no longer goes on outside, it rushes past us. DT projects tend to net out as efficiency programmes. We're fiddling, when we should be burning Rome. Digital is not the endgame, it's an entry level ticket to the new game, one in which everything - and therefore nothing, usefully - is digital.

3. "I've been to Silicon Valley ...

... and now I get it." Most major corporates with any interest in technology are either making the pilgrimage or bringing a range of youthful Mohammeds to the mountain, in the form of hackathons, start-up parades and so on. Again, this is not wrong per se, but left in isolation is merely transformation porn, when what's urgently needed is consummation. There is nothing per se to learn from technology start-ups other than that, if we don't move very sharply, the future belongs to everyone but us. Great entertainment, but a sideshow. What should we be doing in the big tent?

4. "We have an innovation programme ...

... and we're really excited." Innovation, like digital, has become a term that excuses a lack of significant transformation. Too often, it's what we do - and worse, all we talk about - while we try to work up the courage to disrupt ourselves. Blind innovation without a respectable, and highly flexible, set of hypotheses for fresh enterprise and customer value is a waste of time, worse even than a waste of money in this accelerating market. Significant innovation, even done perfectly, does not lead transformation, it follows it.

5. "Are we there yet?"

From here on, there is no "there". We are never transformed, only transforming. This is perhaps the most difficult cultural shift of all. The language of business - in particular, the language of success - is peppered with metaphors of triumph over adversity, overcoming obstacles, and heroic, final arrivals. In other words, the conclusive delivery of results - laurels that we can proceed to sit on for a couple of years or more - has been the game. Well, it's over. Competitive advantage, to reference Rita McGrath's excellent book, is from now on only ever transient. No more heroes? Well, not exactly. But stone-faced rigidity and going down with the ship are so last century.