A marketing discussion being led by a chief marketing officer
A marketing discussion being led by a chief marketing officer PHOTO: Shutterstock

The modern CMO is under more transformation pressure than any other C-suite role. Between spending more on technology than the CIO office and having the shortest tenure of any c-suite executive, CMOs are trying to generate as much immediate leverage as possible through tech and in-housing capabilities.  

But many CMOs are in for a surprise in the near-term when it comes to the role of their adtech investments. They have focused on investing millions of dollars into technology stacks, in-house programmatic operations, and targeting tools to both generate a competitive edge in getting in front of their customers, while opting to leave many content initiatives in the hands of agencies or piecemealed throughout the organization.

This tradeoff makes sense in a world where better targeting can generate quick returns relative to investment, and organic content creation and distribution does not. This has traditionally been the case for most large brands — it’s easier to dial up digital or linear campaign spend in the short term, but building high quality content and growing an audience often is a longer-term investment with more uncertainty.

A decade ago when I was trying to help brands make sense of how their content creation and distribution could be optimized across all channels, I expected that the focus and technology mix would change over time — after all, the only constant about marketing tactics is that advantages quickly get arbitraged away and winners continue to find new ones.

However, throughout the first half of 2018 I’ve seen this shift accelerate with four key market factors that are rapidly changing the tradeoff decisions that brands make between focusing on targeting optimization vs. investing in audience development:

  1. Adtech Commoditization: The mass proliferation of adtech means that every other brand has the same technology, the same tools, and the same digital talent — and it’s reached a saturation point. The space is now crowded with an almost-unbelievable 6,829 martech solutions — a 31 percent increase from 2017.
  2. The Digital Duopoly: The continued growth of the Facebook and Google duopoly means that the majority of the addressable market is widely available to anyone bidding on ads with similar data sets. The duopoly now accounts for more than 60 percent of ad spend.
  3. Paywalls Limit Ad Exposure: Audiences are continuing to fragment across platforms and the addressable amount of time spent in front of ad-supported media is going to shrink dramatically. People are already spending just 44 percent of their media time in front of ad-supported content — the lowest percentage ever. Publicis’ Rishad Tobaccowala predicts exposure to this ad-supported content will drop by 30% over the next five years.
  4. Restrictions on 3rd Party Data: The tightening of restrictions on how brands can collect and use data — most prominently due to GDPR— are squeezing the way marketers are able scale with programmatic. For example, programmatic accounts for roughly 81 percent of total display ad spend today, and projections are that by 2019, programmatic spend could reach $45.72 billion. However, with ad demand volumes plummeting between 25 percent and 40 percent in Europe with the arrival of GDPR enforcement, those projections may change.

So it’s time to face the hard truth: Unless you’re the most prominent brand with the largest budget in your space, or you’re sitting on a significant first-party data asset, you have no competitive edge when it comes to targeting or tactics. You can’t win on tech, data advantages, or the ad targeting game anymore. You have to rethink your digital marketing strategy entirely. And even if you are the 800-pound gorilla, you’re going to continue to see your digital ad costs rise substantially.

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How Do Brands Differentiate in this World

By investing in tech, tools and capabilities to create unique, high-quality content that consumers want to engage with and will seek out.

Without being able to just buy audience reach, brands will need focus on developing their creative and storytelling as a core asset. Those that haven’t yet been serious about content marketing will have to start.

Here’s how it will play out — and what marketers can do to get ahead.

Lessons From Innovation in Ecommerce

For a glimpse of what this future looks like, take a look at upstart ecommerce brands. Just three years ago, these brands could gain traction with one tactic alone —  hyper-targeted Facebook direct response ads — that had enormous ROI, even on small budgets. Startups like Casper, Warby Parker and Hubble generated hundreds of millions in revenue in their first years using this strategy.

The space quickly became saturated, however, and Facebook algorithm changes made ads more expensive as organic reach dwindled. In fact, there was a 171 percent jump in Facebook CPMs in the first half of 2017 alone — and that was before the recent Facebook “algorithm apocalypse” where organic reach was severely curtailed.

For retail brands, there is one new opportunity — Amazon product ads, which just reported 60 percent growth in its ads business. This is one of the only platforms that has the data, traffic volume and ad capabilities to match the duopoly. But just like with Facebook and Google, this space will inevitably become crowded and with its focus on commerce only, most brands are going to have to look elsewhere to differentiate.

That’s why many new ecommerce brands are skipping Facebook entirely and beginning to find alternative ways of reaching their audiences, predominantly by leveraging content-based and other alternative strategies. MVMT and Glossier partner with micro-influencers on platforms like Instagram. SeatGeek runs podcast ads with promo codes. MeUndies produces live-streamed events on Facebook. And The Black Tux and Breather take a tools-as-marketing approach with products like the wedding hashtag generator and the “NOPE” Chrome extension that helps you brush off chatty coworkers.

To be clear, this isn’t about a race for virality. Some brands like Dollar Shave Club get lucky with millions of views from one YouTube video. But the truth is that high-quality content is a long-term investment in gradually building trust and loyalty with an engaged audience that returns to your own channels on a consistent basis. Select e-commerce brands have shown that they understand this, but it’s a lesson all marketers must learn from and use to fuel future content-driven strategies.

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What This Means For The Future of Marketing

Brands will have no choice but to accelerate their investments in high-quality content. We’re already starting to see this happen — brands like Mastercard, Marriott, and Pepsi have started to bring their creative in-house and open up their own media studios. Unilever is also bringing more marketing functions under its roof and “pivoting to focus on fewer, high-quality ads.” Deloitte’s new CMO even named “fostering creativity and undertaking inspiring creative” as one of his top goals going forward."

This isn’t to say brands will halt tech adoption completely. They’ll actually increase their investments in tech --  it’s just going to be creative tech instead of simply ad tech. Like Coca-Cola who wants to start leveraging AI for advertising content creation, brands will invest in artificial intelligence and machine learning tools that will allow them to create interactive experiences across new platforms. We’re already seeing early contenders generate significant traction in providing point solutions for specific channels, such as Persado, which uses AI to help brands write engaging copy for emails and texts. We’ll likely see other approaches that use data-mining to generate creative ideas.

Eventually a new, widespread technology or platform will start to hit critical mass and this cycle will begin all over again. Early adopters will see major returns, inspiring others to jump on board. Opportunities and arbitrages will level out, and reactionary CMOs will be left scrambling to reinvent their strategies.

Brands with long-term vision however will continue to invest in the timeless aspects of content — high-quality stories and immersive experiences — but powered by digital technology.

While much of the content and media world changes daily, there are certain timeless principles that don’t. As David Ogilvy, the father of modern advertising said, “What really decides consumers to buy or not to buy is the content, not its form.”