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How Digital Leakage is Redefining Marketing Services

2011 November 30

In the old days, you knew what you were.  Publishers printed. Broadcasters transmitted over the airwaves. Advertising agencies advised clients and developed 30 second ads. There was some trash talking, but generally everybody stayed in their lanes.

Not anymore.  Old categories are becoming defunct, while the new ones are still being defined, changing the basis of competition throughout the business world, especially in the marketing arena.
That’s the essence of what Rishad Tobaccowala calls digital leakage.  A pervasive, often unnerving trend that renders past definitions impotent.  Further, because the new reality doesn’t fit into old containers, some of the most important implications go unnoticed by conventional metrics, making them easy to miss.

The Importance of What You Don’t See

In his book, The God Particle, Nobel prizewinning physicist Leon Letterman explains how scientists discover things like dark matter and dark energy.

He urges us to imagine aliens who can’t see soccer balls watching a game.  At first, they would be puzzled by men running around a field for no apparent reason.  They would find no rhyme or reason behind seemingly random whistles blown by officials or goalies diving to to the ground while the crowd erupts in one massive cheer.

In order to understand the game, they would come up with classification schemes, charts and obscure calculations, all to no avail.  One day, someone theorizes about an invisible ball and starts searching for evidence.  With closer observation, a hemispheric bulge is detected at the back of the net that corresponds to the goalie’s dive, the officials whistle and the crowd’s cheers.

The puzzle is solved.

The Missing Media Money

In the marketing arena, we have our own form of dark energy.  It doesn’t show up in our conventional metrics, but we can be sure it’s there.  To see what I mean, take a look at the chart below:

The ratio of advertising expenditure to GDP has been, historically, remarkably stable (except in emerging markets where it tends to grow).  However, since 2000, measured media compared to GDP has been falling steadily throughout the economic cycle (the ratio usually rises slightly during booms and falls during busts).  

That type of consistency is never a coincidence.  Something is truly afoot and the shortfall currently amounts to about $65 Billion, making the missing money 2nd only to TV in overall expenditure.

One possibility is that after decades of consistent behavior, brands are slashing budgets. They’ve had an epiphany of sorts, seen the error of their profligate ways and decided they need to change.  That’s possible.  However, as I have not yet, in public or in private, heard any sign of marketers cutting long term budgets, I’m skeptical that’s the case.

The much more likely possibility is that an increasing amount of money is going to places not measured. In other words, digital leakage.

The New Competitive Landscape

We’ve entered a new era of paid, owned and earned media and that’s changed how businesses market themselves.  As I’ve noted before, we are in a post-promotional age where marketers have increased their focus on engaging consumers after purchase, increasing usage and enjoyment and driving cross-marketing efforts.

That’s, combined with digital leakage has changed the game considerably.  For example:

Multimedia/Multi-platform Brands:  It used to be that you published in print or broadcasted on TV or radio.  Now, media brands must be multi-platform.  It doesn’t matter in which media a brand has its roots, everybody competes on the Web, on tablets and smartphones and social media.

Media companies have used this new found breadth to offer marketing services to clients. Conde Nast has set up a new marketing services division.  Meredith has had one for some time that leverages its subscriber base for direct marketing campaigns in addition to its media properties.  The list goes on.

Content Marketing:  While media suppliers are branching out, so are marketers. They’re building their own web sites, videos and social media feeds to engage consumers. Companies like Federated Media and Demand Media offer marketers decent quality content tailor made to their consumers.

Alternative Media Agencies:  Agencies themselves have been innovating, setting up special divisions to develop unconventional campaigns that cross old boundaries.

Clearly, none of this falls into the ordinary categories of 30 second commercials, full page spreads or banner ads.  How do we measure spending on such things?  We don’t. However, we can be sure that it’s there, it’s huge and it’s growing.

A New Era of T-Shaped Competencies

Clearly, the new landscape offers a world of possibility to marketers. However, what’s unclear is who wins in the marketing services arena.  Media companies know how to engage audiences, agencies have brand and consumer marketing expertise, new content shops have focus.

What will determinant is the ability to integrate an array of competencies, both organizationally and culturally.  That’s easier said than done.  People with specialized skills have built up biases over the years and, after all, if all you have is a hammer, every problem looks like a nail.  With the past well established and the future nebulous, it’s not a hard argument to make.

Much like the aliens and the soccer ball, our past experiences can make it hard to see the opportunities ahead.  We can always find data that says that nothing has fundamentally changed.  Paradigm shifts are like that, they don’t exactly announce themselves or come with ready-made names.

Of course, the future doesn’t care.  It just marches on.

– Greg

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