September 25, 2018
Bloomberg Intelligence Director of U.S. Research Paul Sweeney welcomed guests to the first Outlook On… breakfast in New York last week, which explored “The Race to Control Content.” The event included a briefing from Sweeney, who is also Bloomberg Intelligence’s Senior Analyst, Media & Internet, as well as a leadership conversation with Laura Correnti, Partner, Giant Spoon; Nikki Mendonça, Global President, Accenture Interactive Operations; and Jennifer Rie, who leads antitrust analysis for Bloomberg Intelligence.
As a media company analyst since 1991, Sweeney said “Netflix is the biggest disruptor I’ve ever seen in the business. It has forced the entire media ecosystem to rethink their models.” The growth of new technology platforms and the changing consumption habits enabled by those platforms has created an unpredictable environment. And if it’s confusing to Wall Street, Sweeney noted, it’s also confusing to brands who want to make meaningful connections with the most relevant audiences.
In fact, Sweeney said, citing research from Magna Global and Bloomberg, the forecast is for a full 65% of ad budgets to go to digital media by 2022 – with companies that can offer the broadest audiences and the best capabilities for targeting in the best position to grab those dollars.
The response among many media companies has been to get bigger, he added. “They’re saying, ‘I don’t know how to play this, I don’t know how to compete. But I do know one thing – I need more scale, more programming.’” That has driven mega-mergers such as AT&T and Time Warner or Disney and Fox, with more to come.
“Media companies aren’t doing this to compete with each other,” Sweeney said. “They see technology companies as their competition. That’s who they believe their competition is for mind share and wallet share over the next ten years.”
The expert panel that followed Sweeney explored what that means for marketers in a wide-ranging discussion that illuminated the challenges and opportunities this rapidly changing landscape presents.
“I don’t know that anybody’s ready to make all-in decisions,” Correnti said. “There’s a lot of education going on in the market. Entertainment isn’t necessarily where technology companies make their money – but they’re spending billions of dollars to acquire storytelling, programming. And then you have telecom companies who have a tremendous amount of data, but haven’t been able to sell that against specific programming.”
The convergence of those two sides of the coin, she added, may allow marketers to “get down to device level, and start to understand true consumption behavior.” And that in turn could drive new, interesting opportunities for brands.
Along with that, said Mendonça, a host of pressures are pushing brand marketers to evolve how they speak to the people they most want to reach. First, she said, there’s been a rapid pivot to globalization – in tandem with the emergence of powerful technology platforms that can be activated globally. Second, the pivot to direct-to-consumer models – “led by Netflix, when you think about it,” she observed – is radically changing the way companies think about how they should be connecting with customers.
Finally, it’s imperative for marketers to be able to put data to work for them. “That’s put incredible pressure on clients to understand how to leverage data, but also to leverage the technology that goes with that data,” Mendonça said. “We’re seeing almost a bifurcation between those that really get data, and those who don’t.”
Against that backdrop, “We’re encouraging our clients to think audience-first,” she said. “You have to ascertain which audience cohorts are going to grow your business,” she said. “A lot of data analysis and marketing analytics is going into that first and foremost. And then it’s a case of: how do you get to those audiences, in a very channel-agnostic way.”
That means the delineation between digital and non-digital is disappearing, she added. Mendonça believes that all media will be digitized and programmatic by 2025 – meaning a platform-based view is increasingly irrelevant as that landscape shifts.
These shifts, especially in reference to data, haven’t gone unnoticed by regulators. In the EU, the result has been the General Data Protection Regulation (GDPR) introduced this year. Antitrust analyst Rie said changes are afoot in the U.S. as well – although they may take longer to play out.
“There is a massive assault coming from academics, think tanks and economists against antitrust law and what they say is a failure to properly police entities – particularly the big internet platforms,” Rie said. Regulators such as the Federal Trade Commission (FTC) and Department of Justice (DOJ) are currently holding hearings, she added, to address whether antitrust law needs to be fixed in the face of a rapidly changing economy and digital ecosystem. “They’re asking questions like: Do we need to think about data differently? Do we need to think about competition vis-a-vis data differently?”
For now, regulators are focusing in three big areas with respect to use of data, Rie said. “One is transparency, another is protection, and the last is deterrence.” That could lead to developments such as requiring companies to be more transparent about how they use data, or the ability for regulators to impose fines for violating data privacy. In the US, however, such changes may be much slower to happen than they have been in Europe.
Correnti, who also co-hosts the advertising industry podcast Adlandia, has a different vision for the future of programmatic advertising – one that’s less about how data can drive efficiency than about how it can enhance experiences.
“What I’m excited about is where tools like AI and machine learning could take us in the future,” she said. For example, rather than retargeting, marketers can bid on experiences in the anticipation economy: “When I get up in the morning, what can my home assistant tell me because it’s learned my behavior? Could it offer me a choice of what I want from Starbucks, and then have it waiting for me?”
And there’s other technology out there that could be even more powerful, she added: Blockchain, the secure database tool that powers cryptocurrencies like Bitcoin, but has many other uses as well. “What happens when the blockchain starts to ingest creators and media? It could completely democratize what value and premium means. As that starts to take off, it could disintermediate everything we’re talking about right now.”
These trends and possibilities mean that “the future is fundamentally more strategic at the core,” she said. “Clients are looking to agencies to not just make campaign decisions, but business decisions.”
Mendonça agreed. Because of advances in data and technology, marketers are able to link their activities to business results in ways that simply haven’t existed in the past. “Marketing transformation is now inextricably linked to business transformation,” she said.
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