Economist Special Report
What Would David Do?

Ogilvy POV | Natalie Lyall, ogilvydo Publishing Director:

Nat_ogilvydoWhen The Economist makes a call, the leaders of the world, in business and elsewhere, tend to listen. When they delve deeply into a topic to produce one of their Special Reports, doubly so. Which makes Ogilvy extremely proud to have the opportunity to sponsor The Economist’s Special Report on Advertising and Technology, a subject that’s very close to our hearts – and those of our clients.

The Economist’s team of writers and researchers have interviewed thought leaders and investigated the truth behind many commonly-held industry beliefs, to bring a succinct and insightful overview of the state of the advertising and communications business. And it’s a great read. Not only are we sponsors but our legendary founder, Sir David Ogilvy, is name-checked as well. Not for the first time, his philosophy on reaching consumers with marketer’s messages has been found to be prescient. In fact, it appears as though technology has finally caught up with Sir David, allowing many of his disciplines and approaches to be put into common practice – albeit at a speed that even the great man himself would find astonishing.

It’s an old saw but one The Economist’s team has discovered to be truer, and sharper, than ever for our industry: the only constant is change. And the biggest change now appears to be the rate of change. The potential of extreme audience personalisation, the ubiquity of mobile, the power of social and the seismic shift caused by real-time programmatic media buying are all identified in the report as fundamental drivers of change in the game we used to call advertising.

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It would come as no surprise to those who work with Ogilvy that we’ve been building global capabilities – and some amazing work – around these drivers for some time. As the technology that underpins (and continually re-shapes) these disciplines continues to evolve apace, we find that it is another of Sir David’s maxims that helps us to continue to understand and benefit from this new landscape: “We pursue knowledge the way a pig pursues truffles.”

Thanks to our partnership with The Economist, there’s no need to stick our noses in the mud – they’ve done the digging for us. From the privacy implications of big data to the looming friendly war between publishers and advertisers being fought on the battlefield of content, this report takes a business-eye look at the winds guiding our industry right now. It’s no coincidence that these are exactly the sort of topics we’ve been delving into on ogilvydo since our inception just over two years ago. We hope you enjoy – and profit from – these exclusive extracts from The Economist’s Special Report on Advertising and Technology.

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Reprinted from the Special Report with permission from The Economist  | Little Brother 

Technology is radically changing the advertising business, with profound consequences for both consumers and companies.

In 1963 David Ogilvy, the father of Madison Avenue and author of a classic business book, “Confessions of an Advertising Man”, wrote: “An advertisement is like a radar sweep, constantly hunting new prospects as they come into the market. Get a good radar, and keep it sweeping.”

Half a century later advertisers are at last taking him by his word. Behavioural profiling has gone viral across the internet, enabling firms to reach users with specific messages based on their location, interests, browsing history and demographic group. Ads can now follow users from site to site: a customer who looks online for flights to Frankfurt will be inundated with German holiday offers.

Extreme personalisation in advertising has been slow to come, except in search advertising, where Google, Yahoo and other engines have been serving up ads tailored to users’ interests for years. But now it has arrived in earnest. According to one poll by Adobe, most marketers say they have seen more change in the past two years than in the previous 50.

In the classic advertising model, firms used to place ads with media that brought together the audiences they were after. They would go for business executives in the Wall Street Journal, for example, or youngsters on MTV. But now advertisers no longer have to rely on media as proxies for consumers because they have more tools and data to target precisely the people they want to reach.

The world wide web turned 25 in March, and the first banner ad on it ran 20 years ago, but until a few years ago advertising on the internet did not add up to much. That has changed. Last year online advertising made up about a quarter of the $500 billion global advertising business, and it is rising fast. Some of the 21st century’s most powerful companies, including Google, emerged on the back of it. Companies that used to flourish in pre-digital advertising have struggled to keep up.

By contrast, online advertising space is unlimited and prices are low, so making money is not as easy as it was in the offline world, even for digital natives such as Yahoo. All the same, new entrants continue to join the fray, enticed by the big opportunities they see as well as by the falling cost of starting digital-media businesses. According to eMarketer, a research firm, Americans spend over 12 hours a day consuming media (sometimes concurrently), and digital media account for around half of that total.

Digital advertising is being buoyed by three important trends. The first is the rise of mobile devices, such as smartphones and tablets, which began when Apple introduced the iPhone in 2007. Now more than 1.7 billion people (around 20% of the world’s population) use smartphones.

Mobile devices, which are intimately connected to their owners, have changed the way in which people travel the internet. Users now prefer apps (self-contained programmes on smartphones) to websites’ home pages, and in America they are spending less time on desktop computers. “It took 150 years for the newspaper industry to contract,” says Meredith KopitLevien, head of advertising for the New York Times. “The desktop industry will contract because of mobile in a tenth of that time.”

The second, related trend is the rise of social networks such as Facebook, Twitter and Pinterest, which have become an important navigation system for people looking for content across the web. “The convergence of social and mobile has given an addressable audience online that’s 100 times bigger than ever before,” says Jonah Peretti, the founder of BuzzFeed, an online news and entertainment site. Social networks hold rich data about their users, who volunteer lots of information about themselves. Facebook and Twitter can also see where else people go online, which can help them sell their users’ attention to advertisers.

The third big development has been the rise of real-time bidding, or “programmatic buying”, a new system for targeting consumers precisely and swiftly with online adverts. Publishers, advertisers and intermediaries can now bid for digital ads electronically and direct them to specific consumers at lightning speed.

Real-time bidding will spread further as more screens, such as televisions and billboards, become connected to the internet. The lines between established media businesses are becoming blurred. Media companies are producing more content on behalf of advertisers, dubbed “native advertising”. At the same time some companies have taken to hiring their own journalists to produce stories, websites and videos. The new advertising technology industry is making inroads into the business of traditional advertising agencies.

Consumers are dividing their time among many screens, and ever fewer of them are watching TV programmes live. Even so, television advertising has kept its dominance for now because it is one of the few ways to reach a wide audience, especially during live shows and sporting events. But advertisers worry that they could fragment their brands by having to come up with lots of different ads to reach consumers across many media, says Keith Weed, chief marketing officer of Unilever, the world’s second-largest advertiser.

This special report will show that technology is profoundly changing the dynamics of advertising. Building on the vast amount of data produced by consumers’ digital lives, it is giving more power to media companies that have a direct relationship with their customers and can track them across different devices.

An entire industry has sprung up around targeted ads. Third party tracking companies gather information on browsing habits and online purchases, often invisibly.

The race is on to have the best data and become the “intelligence broker”.

Consumers may gain from advertising tailored to their particular needs, and so far most of them seem content to accept the ensuing loss of privacy. But companies are sensitive to the potential costs of overstepping the mark. As the head of one British advertising firm puts it: “Once people realise what’s happening I cant believe there won’t be pushback.”

Click here for The Economist’s Special Report on Advertising and Technology.

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