Frenemies - A Book Summary

 frenemies

The Epic Disruption of the Advertising Industry (and Why This Matters)

KEN AULETTA

P.S: This blog post is a book summary I wrote in 2018 for bookbhook.com. an online reading app

Advertising means to give attention to. Advertising connects seller and buyer. Media is dependent on advertising revenue. The same is true of music and newspapers. But in today’s digital age, its survival is under threat.

The book gives us a ringside view of how former friends have become foes. The term frenemies is used to talk of companies that cooperate and compete. They are present everywhere.

Consumers are true frenemies because while they hate intrusive ads, they are dependent on them for free media. Advertisers do not know how to sell products on mobile devices without annoying consumers or how to reach a younger lot that skips ads. They do not know how to retain consumer attention. The consumer chooses from a multitude of options. A mass audience is rare.

Adding to this chaos is the disruption caused by Facebook and Google. Digital innovations have impacted the media industry economically. Newspapers, magazines, television and radio have witnessed a decline in their advertising revenue. This revenue is diverted to digital entities.

Earlier there were only 6 media channels to connect with the customer – television, print, radio, newspapers, outdoor advertising and direct marketing through mailers. Today, there are many different channels, and billions of smartphones, and personal devices with apps. These allow advertisers to both talk and anger people. Television viewing time has decreased because people are glued to their mobiles.

Facebook argues that data gives more information about each individual. Earlier, the brand would address an audience with a TV ad. They would not know who had been hit. It was marketing at people. Digital companies help them target individual consumers. Every digital platform assures the brand of this innovation. This is marketing for people.

Data has always been there but the difference is in the analysis of the data. The difference also lies in the consumers’ decision to choose what they wish to interact with and when. 2007 was a landmark year for consumer empowerment when Apple launched the iPhone, the first smart phone. Facebook also re-directed its attention from college students to everyone. Amazon launched Kindle.

Big data comes from 3 sources. First-party data comes from companies that interact with customers directly and retain their credit cards. It also comes from department stores, credit card and car companies, Amazon, magazines and newspapers and companies depended on subscriptions. Facebook and Google bank some of the richest first-party data. Second-party data is anonymous. It has a lot of individual information from different sources, like clients, and data companies like Nielsen. Third-party data is got from catalogues and stores. The task is to assemble all this data to match the products of its clients with targeted consumers.

A smart phone platform and its embedded GPS enable brands to track and engage with users. There are limitations to the mobile platform too. Ads on mobiles soak up battery. The small screens are restrictive. Consumers dislike the ads and install ad blockers to avoid the interruptions.

Clients want to introduce new products and build brand identity. But how can they do it when ads on mobile phones are not as effective? Also, consumers are scattered across several channels and social networks. How can they reach the mass audience critical to their business? Another issue is how to target the next generation. The millennials, in the age group of 21 to 34, are digitally savvy. The Generation Z, born after 1997, hate being sold to especially when people get an astonishing 5000 marketing messages every day.

Facebook and Google help advertisers build the brand business. They compete with each other in consumer data collection. This data is loaded with targeting information. However, they are adamant about not sharing the data with anyone. They are the new-age digital frenemies. With the help of marketing services like DoubleClick (Google) and Atlas (Facebook) they leverage the data. They are agency and platform rivals. Brands are petrified of Amazon too because Amazon has even better data. They know when a customer actually bought something.  

If people learn that their privacy is compromised, they will approach the government and demand protection of their data, leading to widespread protests against such companies. While data helps agencies with improved tools to target customers, it also helps clients know which of their ads sell and which don’t. Today, technology has demonetized information and given people more alternatives. They can easily skip ads, express their views, vote, and escape old media platforms. 

Frenemies

Facebook’s entire business is advertising. They claim they are only trying to help boost sales by helping brands think through real business problems and understand how mobile is impacting marketing. They will eventually gain because clients will invest more with them as they have the dominant platform.

Facebook sells under false pretences. They are not a technology company; they are just a platform, a media platform. It is a frenemy. It is competing for advertising dollars. It complements television because with TV viewing down among the millennials, it is great at finding that audience.

Fear about Facebook’s advertising ambitions is fueled by its size, and its refusal to share its data. By 2016, it collected $27 billion from ads and made profits of $10 billion. Of every new digital ad dollar, 85 cents went to Facebook and Google. Their digital dominance increasingly mattered. Facebook and Google have two-thirds of mobile ad revenue. They have first-party data on people. In a mobile world, it is the surest way to identify people. Its goal is to entice people to spend 100% of their time on Facebook. They want to become the Internet.

Since Facebook and Google protect their data from advertisers, clients cannot target consumers on other platforms or in their future ad campaigns. If the agencies can extract more information from Facebook about what their users like and do, their ad targeting would be more accurate.

Digital companies know much more about consumers than non-digital platforms. Facebook, Google and Amazon are the 3 digital giants. Advertisers want the data from all three. Facebook’s user data is based on their social interaction. Google’s data reveals a person’s intent because it is a search engine. Amazon has actual purchasing data. They all have a monetary incentive to safeguard their data. They claim that they are protecting the privacy of their users and assure them not to share names or personal information.

Facebook depends on selling ad space. It pitches advertisers. Mobile video is the new frontier of advertising, the new television. 100 million hours of video were watched daily on Facebook. No other medium in marketing has ever been as personal as the mobile. We carry it with us everywhere and all the time. We store personal information, pictures, and apps on it. We don’t loan the phone to others. Since it is so personal, ads have to be personal too and must not interrupt. It presents opportunities to communicate to consumers in new ways. Hence, clients divert ad dollars to Facebook to drive business results. Facebook boasts that it reduces costs and serves customers by eliminating middlemen.

Consumer - the Ultimate Frenemy

Consumers are against all advertising. Mobile technology has brought ads relentlessly into people’s lives. It has also given them tools to block them. To the consumer, it is a happy solution. Consumers are annoyed by pre-roll and banner ads. They are angered by lethargic ad page load speeds and troubled by unsolicited marketing messages draining their batteries. They are anxious that their privacy was being invaded.

Apple earns barely 1% of its revenues from advertising. It helps consumers protect their devices from ads. Apple prioritized the user experience.

But websites, media companies, marketers, and ad-dependent companies like Facebook and Google cry hoarse. They say that ad blockers adversely affect their ability to inform users and subsidize content. They allege that Apple and ad blockers are killing the industry. Apple and ad blocker advocates, on the other hand, say advertisers are committing suicide with their senseless, pushy ads.

Apple’s move was part of the tussle between Apple and Google for smartphone supremacy. Apple makes money selling hardware and software, Google by selling ads. Apple intentionally offered consumers something Google couldn’t. Apple knows that when an online service is free, you are not the consumer; you are the product.

Data has gained prominence in targeting consumers. Technological innovations are changing the landscape of consumer engagement.