Frenemies

Advertising used to be an art, but today, it's increasingly a science powered by data, algorithms, and relentless surveillance into your personal life.

1. Marketing has evolved into an all-encompassing discipline.

Modern marketing goes beyond traditional advertisements. It includes every touchpoint where businesses interact with customers. From direct mail campaigns to public relations damage control, marketing’s scope is vast. Companies rely on strategy consultants for advice, influencers for product promotion, and even redesign corporate logos to stay relevant.

Smartphones have further revolutionized the field. With six billion users worldwide, smartphones serve as both a medium for advertising and a tool for collecting valuable user data. For instance, a single iPhone now carries the computing power to track and engage customers in real time.

Platforms like Tencent in China exemplify how mobile technology is used to facilitate commerce and social networking. With 800 million daily users generating hundreds of millions of interactions, Tencent not only connects individuals but also creates new opportunities for highly customized advertising.

Examples

• Public relations firms smooth over crises, such as Volkswagen’s emissions scandal.
• Influencers like the Kardashian family feature products on social media to sway millions.
• Tencent's platform allows users to shop online and interact, generating massive data for targeted ads.

2. Traditional ad agency commissions belong to the past.

In the golden age of advertising, agencies enjoyed hefty commissions both from ad creators and media platforms. A 15-percent commission from media outlets for placing ads and 17-percent earnings from clients made ad agencies rich. Agencies also benefitted from collaboration with publishers, keeping ad costs high.

This cushy system collapsed in the 21st century as businesses scrutinized expenses. The 2008 financial crisis further pressured CEOs to cut marketing budgets. At the same time, the shift from print and TV to digital media diminished the influence of traditional advertising giants.

Today, many agencies face reduced budgets and are forced to prove the effectiveness of every dollar spent. The era of endless client spending has given way to greater accountability and shrinking resources.

Examples

• In "Mad Men" days, ad agencies profited handsomely from their dual-commission model.
• CEOs tightened budgets following the 2008 financial downturn.
• Volkswagen and other large brands began demanding measurable returns on marketing.

3. Big data has reshaped advertising from creativity to precision.

Big data has redefined advertising by using online behaviors to create targeted campaigns. Instead of vague newspaper ads, agencies now track who clicks on their digital ads and where those viewers go next. This precision helps advertisers directly appeal to the most relevant audience.

As a result, power has shifted to media agencies. These firms, with their data scientists and engineers, now manage ad placements and customize messages in ways traditional creative agencies cannot. By analyzing behavioral patterns, media agencies divide audiences into micro-segments and tailor adverts specifically to those groups.

For instance, Revlon’s "Love Is On" campaign successfully targeted women with personalized messaging. This campaign was driven by media agencies using data rather than traditional creatives pitching a single "big idea."

Examples

• Media agencies utilize digital cookies for tracking online behavior.
• Facebook allows advertisers to measure online ad effectiveness.
• Revlon’s campaign focused on highly personalized, data-driven ads.

4. Mining data is essential, but it’s not always easy.

Big data comes from three main sources: first-party, second-party, and third-party data. First-party data, like customer names and purchase histories, is gathered directly by businesses but cannot be shared openly for privacy reasons. Second-party data is anonymized and often exchanged between companies, while third-party data is purchased and often less specific.

Accessing this goldmine remains challenging. Internet companies like Google and Facebook own vast amounts of first-party data but rarely share it. On top of this, mobile devices – though heavily used – present difficulties in running consistent ads due to missing technologies like Flash.

Furthermore, industries lack enough skilled data engineers capable of managing large-scale analysis, leading to tight competition in hiring experts who can harness user information effectively.

Examples

• Amazon collects first-party data directly through customer interactions.
• Nielsen shares second-party data while keeping identities confidential.
• Google refuses to share its invaluable search-user data with most advertisers.

5. Data giants are constantly breaching personal privacy.

Companies like Facebook, Google, and Amazon harvest detailed personal data from users. Facebook alone gathers information on pharmacy records, political affiliations, and shopper loyalty habits. This allows for 1,300 consumer categories for advertisers to target.

Google leverages its massive search engine usage to provide advertisers with data on users' education, phone numbers, and even nicknames. Amazon’s Alexa takes things further by monitoring conversations in users’ homes to tailor recommendations and ads accordingly.

This extensive tracking has sparked concern over consumer privacy, with critics calling these companies "frenemies" for exploiting personal habits while providing useful services.

Examples

• Facebook tracks user content across Instagram, WhatsApp, and its main app.
• Google’s "About Me" service offers advertisers a detailed profile of users.
• Amazon's Alexa collects information on entertainment and grocery shopping habits.

6. Trump 2016: A case study in targeted advertising.

Donald Trump’s 2016 presidential campaign demonstrated how intelligently segmented digital communication can outdo traditional big-budget advertising. By spending less than rival Hillary Clinton, Trump used data analytics to strategically target audiences predisposed to vote for him.

Trump hired Cambridge Analytica, which collected 4,000 data points on each potential supporter. These insights helped his campaign craft hyper-personalized social media messages, bypassing mainstream media.

This campaign proved that large-scale TV-based ad strategies are outdated. Digitally targeted models resonated with modern audiences, challenging older methods of voting influence.

Examples

• Jeb Bush outspent Trump but lost due to untargeted strategies.
• Clinton’s conventional ad-heavy campaign failed despite her higher budget.
• Trump used Facebook ads to send personalized communication to specific groups.

7. Smartphones power real-time tracking and engagement.

Smart devices serve as advertising's ultimate platform. With billions engaging with their phones daily, advertisers use apps to monitor location, interests, and behaviors, creating ads tailored to those specific moments. Mobility adds another layer by tracking shopping or commuting habits.

China’s Tencent demonstrates this best, with hundreds of millions using its shopping and chat features. Ads can pop up based on real-time movements, making marketing both efficient and invasive. The power of mobility lies in its instant impact.

However, this personalization raises concerns about how much users unknowingly give away, creating ethical debates among privacy advocates.

Examples

• Tencent integrates shopping, chatting, and ads into a seamless experience.
• GPS data on phones allows businesses to know when a customer is near their store.
• Mobile apps track how long users spend on products, refining ad algorithms.

8. Advertising's power shift: the creative takes a backseat.

Creative "big ideas," once the lifeblood of advertising, are losing relevance. With the ability to predict customer behavior and customize messages, data-driven strategies now minimize the risk of failed campaigns. Personalized advertising campaigns rarely rely on risky creative leaps.

For example, while campaigns like Old Spice's humorous rebranding stand out, today’s success often comes from calculated targeting rather than pure wit. Data now informs both the strategy and the message.

Still, many argue creativity remains vital for branding. Coca-Cola, while using data, still succeeds because its creativity resonates emotionally, something data can’t replicate.

Examples

• Old Spice’s TV ads succeeded creatively but started using data for targeting.
• Revlon transitioned from overarching campaigns to smaller, customized ads.
• Coke blends its storytelling roots with audience behavior data.

9. The "frenemy" dilemma affects consumers and marketers alike.

Tech giants provide valuable tools for marketers but breach public trust by commodifying behavior. Platforms like Facebook help marketers segment audiences effectively, but at the cost of collecting and disseminating private data without full transparency.

Consumers find themselves in a double bind, enjoying personalized benefits while sacrificing anonymity. Meanwhile, marketers grapple with promoting trust while increasingly relying on tools with questionable ethics.

As advertising continues to evolve, this tradeoff between innovation and integrity will define public perceptions of the industry.

Examples

• Facebook categories users into “likely voters” or “gadget enthusiasts” for targeted ads.
• Google tailors ads based on its search conglomerate.
• Amazon's "recommendations" feel helpful but rely on constant monitoring.

Takeaways

1. Embrace digital marketing by learning how to target specific audience segments using data-driven tools.
2. Stay vigilant about privacy matters and educate consumers on what they’re giving away.
3. Blend creativity with analytics to craft memorable yet measurable campaigns.