Australian companies are predicted to spend half their advertising budgets on digital by 2020 — But are we all in danger of missing the point?
In the conclusion of this two-part CMO Show special Mark Ritson, Adjunct Professor at Melbourne Business School, argues that the marketing industry’s obsession with digital metrics is driving it dangerously close to forgetting what matters most – audience.
“If you look at digital video, it is one of the most disgraceful acts of data misrepresentation and lazy journalism that we have ever seen in the history of commercial coverage, never mind marketing. It’s a disgrace!”
Thankfully Ritson also says that not all is lost for today’s marketers – we just need to get back to class for some 101 education. It’s not about research, it’s about market orientation he says.
“The reason you have to start with market orientation and not market research is [that] we all know brand managers that have got tonnes of research, but never pay any attention to it because they don’t have market orientation.”
Sit up straight with hosts Mark Jones and JV Douglas as Ritson breathes fire on industry-wide misperceptions, and gives a lesson in the fundamentals that all marketers should know.
Missed the first episode? Check it out here: Firebrand Mark Ritson on why digital is overrated
- Facebook miscalculation significantly inflated average video view times for years
- P&G refines targeting tactics
The CMO Show production team
Audio Engineer – Jonny McNee
Design Manager – Daniel Marr
Got an idea for an upcoming episode or want to be a guest on The CMO Show? We’d love to hear from you: email@example.com.
Mark Jones (MJ)
Jeanne-Vida Douglas (JVD)
Mark Ritson (MR)
JVD: What do we do now? You’re describing an industry which is pretty comprehensively broken in terms of how marketers are positioning themselves, what they’re asking for, what agencies are able to provide, what they’re capable of doing anyway, the level of dependency we’ve got on digital marketing, our understanding of metrics, it’s all broken. Where do we start, how do we fix it, who’s getting it right?
MR: Well, it’s an interesting one. As one of my mates, we used to see him, he’ll often point out, “We’re not curing cancer.” His point is this all may be true, but the point is who cares? If you do your job properly, either as an agency or as a client, it’s only opportunity for us. The fact that your competitors are sub optimally buying media or don’t have proper research or no clear idea about positioning, we can complain about if you want to take an industry view, but we never take an industry view. This is a competitive, capitalist market. Instead, what you do is you ask the capitalist question, which is, “How can I make money from this?” You know, and I think there are few organisations out there that are I think, in a better place. And I think we’re seeing a bifurcation of approaches to media now. I’m not close enough to enough big companies to know how it’s going to land, but if you look at that McDonald’s deal in the US, which I’m sure you guys must’ve talked about with…
Ah what’s the agency, it’s not BBDO is it? Anyway, forgive me, but the large very famous agency whose name I’ve forgotten based out of Chicago who got the McDonald’s deal right? McDonald’s are paying them essentially costs. Everything is based on performance-based pay. If you look at the way zero-based budgeting is coming in like the clappers into Coca-Cola you going to leave at Procter & Gamble. If you look at how Byron Sharp is ripping through everyone and consulting to all of the top consumer goods companies, it points to a return to some disciplined thinking, because we need it. We need a very badly.
And I think that’s, you know, if you want to take an industry point with you, we are in a bit of a – we’re in a bad place. There are organisations and changes afoot among some companies and marketers that I think can be seen as positive. But I’d encourage us not to worry about it. It’s an industry that the more stupid it gets, the more money you can make from not being dumb.
JVD: So were all staring at the naked Emperor and proclaiming his costume to be fabulous, yeah?
MR: No, that’s – that’s going too far. I think there is a tremendous place for digital and social media in most, but not all, brand plans. I just don’t think it’s anything like the proportions… I mean…
MJ: It just sounds to me like you’re saying, “Get your strategy right, spend wisely in the right areas for your target audience, and you’ve got a better chance than most.” Is that…
MR: There we go! That makes more sense! So here’s a good ratio for you, other than 4 to 1, which is a ratio that doesn’t sound appealing to me. A good ratio is PWC going to hit reckon around 2020, probably 2019, will hit 50 percent of our total advertising pie will be spent on digital. Of that, probably, you know, again, we don’t know yet, it’ll be at least 75 percent, but probably 85 percent of it will go to Google and Facebook, right, the digital duopoly. That can’t be good for anyone. It can’t be good for anyone. And so I think, what I’m keen to say is back to Mark’s point, yeah, back to strategy, back to, here’s a phrase from the past, media neutrality. And then pick the tools that best serve the strategy. But we can’t do that right now, because the game is being played significantly underhandedly by many players in this market. If you look at digital video, it is one of the most disgraceful acts of data misrepresentation and lazy journalism that we have ever seen in the history of commercial coverage, never mind marketing. It’s a disgrace!
MR: Well I’ll give you anyone you like. Here let me quiz you two for a second. I don’t have the channel 7 data, but you remember that NBC have the Olympics for the Rio Olympics that just passed. You remember how that was a big digital, a huge digital thing. Blah, blah, blah.
MR: What proportion of total Olympic coverage in America was watched digitally?
MJ: I’m going to say 15. Fifteen percent?
MR: JV, any further on that?
JVD: See I’m not a sports person, so…
MJ: Neither am I. I’m just guessing.
JVD: I’m assuming it’s going to be lower than we thought. But I’ll just play devil’s advocate again and say 30 percent Mark.
MR: Thirty percent! Awesome! It’s two. Okay? It’s two. Now that comes from NBC themselves.
MJ: That’s crushing. Hang on, is that NBC serving themselves?
MR: No but NBC had the digital rights and were actually spruiking the digital coverage as the salvation of their business, so there’s nothing in it for them. This is, and again, that’s Nielsen data. Imagine that. Let’s do another, because now I’m having lots of fun! Okay. And again I apologise if it’s too American, but do you guys follow the fact that Twitter are now broadcasting the NFL games?
JVD: Okay, yep. MR: The American football games.
MJ: We know now!
MR: Okay, it’s going to be harder to guess. Because of guess what proportion of viewers are currently watching the NFL on twitter versus TV?
MJ: Given your last example, I’m going to say point five.
MR: That’s even doing me down. No, it’s two percent again.
JVD: There you go.
MR: What I’d encourage you to do just to prove that I’m not making this up is Google search ‘NBC digital coverage’ later on and have a look at that coverage. It is spectacular. Google search ‘twitter NFL’ and have a look at how it’s covered by our lazy media. So the NBC data is 3.3 billion minutes were streamed from the Olympics at Rio. 3.3 billion. That’s no way to measure any form of audience, because it turns into two percent when you actually calculate it properly, which there’s no reason you can’t calculate digital video in exactly the same way you’d calculate any other video.
My favourite example of all-time was the World Cup, again in Brazil. ESPN had the digital rights and the TV rights. Again, the TV network are doing this. They’re trumpeting the fact that… I think they had 115 million digital views of the World Cup during the thirty day soccer tournament, but only a TV audience of 4.6 million. That’s just complete nonsensical comparisons. Digital views, as you know, involve three seconds and partial pixels and no sound. When Nielsen turned up the hundred and 15 million into an actual audience figure, it came out as 307,000, which interestingly is about six or seven percent additional to the TV. That’s a good number. Two percent, five percent, six percent. Clearly, getting bigger over time. Getting bigger over time.
MJ: That is what is going to say is that we don’t entirely discount it, but I think your argument is that our weighting is wrong. Is that right? MR: That’s right, and the speed at which the change is being predicted. I’m obsessed with marketers who are trumpeting this data. Hey I’ve got a pretty good idea of what 2017 looks like from a TV viewing point of view. It’s slightly down, but not much down from 2016. Why would any marketer care about anything except 2017? Why are they banging on about the stuff? My point is clearly I’d be an idiot to tell you that we’re not going to end up with more than fifty percent of dollars being spent on digital. It’s going to happen. Clearly that will come at the cost of TV, news media, and radio. That happens. It would be a ridiculous move to say it’s all emperor’s clothes. The point is it’s overstated. The speed with which it’s changing is incredibly overstated.
JVD: Just because I’m a glutton for punishment, I’m again going to play devil’s advocate. What about this sort of arguments that digital enables you to create really targeted advertising to target that long tail. You’ve been using examples like the NBL and the Olympics, which we know have a huge audience. What about niche marketing for niche audiences and the opportunity that digital suggests that gives to reach out to its specific targeted audiences with tailored content.
MR: It definitely does. And there’s no doubt that in the list of advantages as you cross compare one medium with another, one of the big advantages, and we should call a particularly Facebook even above Google here, is the extraordinary granularity of the data. If I wanted to be rhetorical, I would argue that what P&G have been up to recently demonstrate that in many cases you don’t want to be that granular, even though you can. But that would be an unfair counterargument. The point is on the bullet point list of advantages, niche, micro-targeting, these things have to go in against digital. I like those conversations where we are able to say what’s good about this and bad about that, apples to apples. I try mention it in all these talks I do, I do work for clients that are hundred percent digital in execution. Big clients. I think that’s cool.
It’s just that they didn’t start out with “let’s do digital”. They started out with “Where’s my audience? What’s my objective what’s our positioning?” And points like yours, which is “and for that kind of micro-targeting, we can only use Facebook or Google, et cetera.” So absolutely, it’s a big advantage. One that makes the traditional media look I think relatively weak in comparison.
JVD: Have we just forgotten to ask about audience? Is that what’s going on?
MR: Yep. We totally have. We are so obsessed with the bells and whistles of Thwako and the latest stuff that… There’s a great irony here, which I love, which is you can actually have too much measurement and not enough insight. If you look at Facebook, they’re a perfect example of that. So recently when they got in a lot of trouble with average duration views, they killed two metrics and replaced them with two new ones. That’s not what you do. If your maths is wrong, if you can’t calculate an average properly for two years, you don’t go, “Okay, well I’m changing that average duration to a new method called mean averageness and I’ll do the same calculation again, there’s too many calculations which actually obstruct insight. That’s what’s got in the way, people looking at a lot of valid but at the same time unrepresentative data and not looking at consumers themselves.
Again I’d like to come back to my 85 percent point. I love being referred to repeatedly as a quote unquote maverick, as a cat among the pigeons and I’m the one talking about 85 percent of video. I’m still waiting for someone to explain to me how 85 percent is a maverick point of view.
JVD: Can you just tease that out a little bit, when you say 85 percent? What is your argument there? MR: Today in Australia of every single moving video image of all forms including YouTube, all forms of anything moving in a video style way, 85 percent of that video will be watched on a television set. Not a laptop, not a phone, not on a PC. On a TV set. It’s decreasing ever so slightly year on year, but not at the rate we would think. And the so-called millennials, who don’t actually exist of course, if you look at that group in the Oz-Town data, they watch a lot less TV, but that is still the dominant source of video for them as well.
MJ: I could tell you anecdotally, actually, that I am aware of TV sales these days, and they are booming. It is a great time to be in the TV business.
MR: It’s true! There’s other sides. Unfortunately, I could tell you anecdotally, Mark, that there’s other media industries where they’re not booming, and it’s a shame. I’m more attached to news media at the moment because of what they’re going through. The tragedy of watching… News media’s readership has declined consistently now for ten years, but the advertising investment has declined at a roundabout double the rate of readership declines. Now that news media is flattening and in many cases growing, that decline continues. That is a really hard one, because without waxing lyrical, and I don’t want to see Google or Facebook, even though they’re both large international tax minimising operations, go not too well, I do look at the great brands of news from across Australia, and I do feel a sense of sadness that that’s happening.
MJ: In other words, the budget that’s been taken from those organisations is disproportionately high, compared to what’s actually happening.
MR: I would say somewhat.
MJ: In your view.
MR: I’d say it is. I’d say radio’s held on pretty well. If you look at the numbers, the first thing to say is in any country, including Australia, there isn’t more money to be spent. There is certainly more audience hours to spend on media, and we’re seeing that happening, but there’s no more dollars. It follows GDP pretty much one-to-one. So the pie itself will grow, but only with inflation and with general things. It’s not going to suddenly quadruple because we have four times as many media options. So yeah, there are certain media here we’re losing out on. You have to look at news media and where was in 1985 and where it is in 2016. It is a dramatic squeeze. The key question I think is, clearly now Google and Facebook have two options: they either go for TV or they go for each other. That’s the story of 2017.
MJ: That will be interesting. Going back to your comment about the UK research and the insights that we know on consumers, it seems to me that if we think about what’s going to happen next year, how do we make sure that marketers get access to the right data to make better decisions?
MR: That’s a great point. In fact I had a debate with a great guy today as a planner at Zenith, Richard who I adore, he’s a brilliant guy. He was making the same point that we’ve got to get more research into these marketers’ heads. I said to him, “No, I don’t think that’s the case. It’s not research, it’s market orientation.” Again, we mentioned it earlier, but literally the first week of an MBA course in marketing, you get taught market orientation, which means you don’t know anything because you’re not the consumer. If you can create that vacuum, then you can fill it with research. The reason you have to start with market orientation and not market research is we all know brand managers that have got tonnes of research but never pay any attention to it because they don’t have market orientation.
If you could wave your wand in Australia, the thing you’d wish for most is market orientation and the realisation that… Every time I talk about that 85 percent at a conference of marketers, I’m telling you every time without exception, someone will put up their hand and say that doesn’t fit with my house. I’m just like, “That’s because you don’t understand anything about marketing despite the fact that your marketer.” Whenever has a sample of one ever beaten an Oz-Town representative sample.
I’ll give you another good example. There are not many Australians in this country that understand a representative quantitative sample. You can pretty much sample, depending on who you’re going after 400, 450 Australians randomly selected will be a representative sample, confidence and do a confidence level 95, plus or minus five. Marketers don’t understand that anymore, because they don’t do any research like that. They just wander around listening to morons at conferences and looking at what their kids are doing when they go home. It’s amateur hour.
JVD: We need to go back to a statistics course, yeah?
MR: That’s not even statistics. That’s just how to do a marketers job. But you’re right, at the most basic level, if you ask most marketers how do you make sure your sample’s representative, I don’t think they know.
JVD: Absolutely. I think we’ve come full circle from cigar man down to statistical analysis, which is…
MR: Yes, we should get out of that quickly. Rewind! Rewind!
MJ: And plenty of food for thought, so thank you. I think we are almost out of time, so before we do go how about we do the 21 questions, which is a lot of fun. We enjoy doing this with guests. We reckon you’ll have a good crack at this. Are you ready?
MJ: What are you grateful for?
MR: My daughter, Roxanne. She’s only four weeks old.
JVD: Congratulations. Do you like rain?
MR: Yes, but I come from the Lake District in England, so you have to like rain.
MJ: In the movie of your life, who would play you?
MR: It doesn’t look anything like me, but I’m a huge Kevin Costner fan, so I would choose him. The old fat Costner, not the young beautiful one.
JVD: I can see Michael Lewis writing this book already. What’s your greatest career fail?
MR: I got so many to pick from, so many to pick from. I didn’t stop Ericsson from doing majorly stupid things 10 years ago in Europe.
MJ: That’s a good conversation for another day! Beach or mountain?
JVD: Best ever career advice?
MR: Treat everyone the same, even if they can’t do anything for you.
MJ: Summer or winter?
MR: Winter, yeah, winter.
JVD: Who is your hero?
MR: Again, so many people to pick from. I would say, one of my favourites, and it doesn’t get shouted out enough, is Bill Gates.
MJ: If you were a marketer, you’d be a…
MR: I’d probably be an octopus. I use the octopus as an example all the time of how we get, this question is a projective question, right? It’s a qualitative question?
JVD: I think that the best response we’ve ever got, but go on.
MR: I met a marketer once many years ago, very quick story, who had done this research and ask customers, “If you’d think our brand was an animal, what would it be?” I always remember he had a table, so he’d mention it quantitatively, and twenty-two percent of the market thought they were an octopus, and they were an industrial lubricant brand. I said, “What are you going to do with that data?” He completely didn’t understand the nature of projection. It’s, “Why would you pick the octopus?” He thought it was a quant question, and he was happily trotting out the fact that thirty percent thought we were lions and twenty-two percent thought we were an octopus. So I’m wedded to the octopus I’m afraid.
JVD: They’re actually extraordinarily intelligent, but let’s go on.
MJ: Very slimy!
MJ: Slippery, slimy.
JVD: Chocolate or strawberry?
MJ: What did you have for breakfast?
MR: I was up early with my young daughter, so I was eating hummus with taco chips.
JVD: What would you rather have had?
MR: Anything except hummus or taco chips, but there was nothing else in the fridge.
MJ: What was the last conversation you had with your parents?
MR: Oh, I was talking to my dad yesterday who’s back in England. He’s coming down here for Christmas, and he’s working on his health insurance, which if it was me would take me exactly point two seconds to book, but my dad is now I think on about the fourth week of debating how to do his holiday insurance. We were having the fiftieth instalment of the “here’s how my holiday insurance purchase is going”.
JVD: Scrunch or fold? MR: Fold, for sure.
MJ: If you could change one thing about the marketing industry, what would it be?
JVD: And only one, Mark.
MJ: Just one, that’s it.
MR: Media neutrality, I think if we had a media neutral industry, we’d still spend a lot on digital, but we also get a lot better return across much more appropriate investments.
JVD: Can you ride a bike?
MR: Yes, definitely.
MJ: What is your greatest frustration?
MR: Not having enough time. I never thought I’d have to work this hard. I chose this life of being a professor because I thought the quality of life was good, but you end up invariably getting up at five AM and getting home at ten PM just like everybody else. So yeah, lack of time.
JVD: Touch, taste, sight, hearing, or smell, which would you sacrifice to save the rest?
MR: It would have to be… I would sacrif… I can give up one, okay. Probably touch. I think touch is overrated. I spent many years working for a couple of the French perfume brands, most notably Guerlain in Paris, and John Paul Guerlain who was still working in the company when I started working there who’s the great great grandson of what many think it’s the greatest fragrance house of all, he would say, “Look, of all the senses, smell is the greatest gift. You can go forty years without smelling something, and you smell it again and those memories come straight back to you.” So yeah, I think I would give up touch. I would certainly keep smell.
MJ: Dogs or cats?
MR: Total dogs. We have feral cats near where I live and I have a couple of dogs, one of which is a dingo. So I’m a massive dog man.
JVD: What’s your favourite book?
MR: Catcher in the Rye is a bit of a cliché, so I will say Nobody’s Fool, Richard Russo.
MJ: Very nice, and the last question, if you had to change your first name, what would you change it to?
MR: I always wanted to be called Ford, actually. Don’t know why. I’d love to be Ford Ritson. That’s an awesome name. If I ever have a son, which is very unlikely at this point, I would probably call him Ford. I think Ford is an awesome name.
MJ: Or Model T? Mustang?
JVD: I’m thinking Ford Prefect, which just shows the nerd that I am.
MJ: Me too.
MJ: Ford Ditto. Professor Mark Ritson, it has been a pleasure talking with you today. Thank you for your insights, for stirring the pot and being the really interesting person that you are.
JVD: Firebrand, thank you so much for coming on, Mark. I’ve been looking forward to this for so long!
MR: Thanks, guys. I think I should deserve some credit for not saying fuck once throughout the whole broadcast.
MJ: You are a gentleman and a scholar. Thank you.
MR: Thanks guys.
JVD: We’ll let you get back to Roxanne now. Thanks so much!