Digital is reshaping the world of advertising

Originally posted on Financial Times

When Heineken USA was preparing to launch Desperados, a tequila-flavoured beer, in the southeastern US in 2014, the importer tried out two advertising campaigns.

In some states, Heineken bought traditional television commercials, while in others it ran ads only on mobile phones at specific times of day.

In the states that received the digital campaign, awareness of the millennial-targeted drink reached 23 percent well above the rate in states that only had TV ads. “We were reaching millennials in pre-party occasions,” says Nuno Teles, Heineken USA’s chief marketing officer. “On Friday at 9pm, they are not watching TV. They are checking their phones and social media.”

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One of Heineken USA’s main motivations for investing 30 percent of its ad budget in digital platforms this year – up from 20 per cent in 2014 – is this ability better to align marketing spend with outcomes. “We can impact the business significantly through digital,” Mr Teles says.

Thanks to the proliferation of providers from Netflix and the BBC’s iPlayer to Facebook and Snapchat, consumers have greater access to more media on more devices than ever before. That is allowing advertisers to tap user data to target their messages precisely to the right people at the right time in their digital campaigns and, increasingly, through traditional media such as TV.

“The way consumers are consuming content is becoming more digital,” says Jeff Green, chief executive officer of The Trade Desk, an advertising technology company that automates ad buying.

“Ultimately, every advertising format will become digital, whether it’s print, TV, radio,” he says. “The most efficient way to operate is [by being] somewhat electronic and market-driven. And the primary way marketers look at it is: I want to have the most effective marketing that I’ve ever had.”

The way advertising is bought, sold and created is being reshaped by the enormous volume of data from set-top TV boxes, credit card purchases, online profiles and retailer loyalty card programmes and by the technology that allows marketers to access, analyse and implement that data. IDC, the market research group, predicts chief marketing officers will boost the amount they spend on marketing technology to $32.4bn in 2018 from $20.2bn in 2014.

Nearly half of marketers surveyed recently by research company Forrester plan to increase their digital budgets this year. Forty percent said they would spend more on data analytics.

This investment comes as big advertisers face a challenge in “digesting all the different pieces of data they’re getting: loyalty card and customer relationship information, a blitzkrieg of data from social channels, clicks, Facebook,” says Drew Panayiotou, chief executive of BBDO Atlanta, an advertising agency owned by Omnicom, a global communications company.

He asks: “How do marketing data intersect with data coming internally through the company, through the chief information officer, or the chief technology officer, or the ecommerce group? We’re seeing clients trying to sort that…out internally to make the data useful.”

While the rise of targeted advertising has been enabled by data and technology, its proliferation reflects marketers demand for evidence that the money they spend is really influencing customer behaviour.

Simulmedia, an advertising technology company, is so confident that targeted TV advertising can have measurable business impact that it is guaranteeing that any advertisers who spend $1m for a month on ads aimed at specific viewers will have better results than they would have achieved using their current TV plans.

Dave Morgan, chief executive of Simulmedia, says: “We’ve been measuring the outcome of TV campaigns for years. Did they actually deliver? If you measured TV the same way as digital, how would it do? We find it’s doing really, really well.” Companies such as Choice Hotels International, owner of the Comfort Inn and Econo Lodge brands, have worked with Simulmedia to target potential clients.

Targeting is also valued by marketers as they are under great pressure to show efficiency and make sure they are not wasting valuable ad dollars on people who are unlikely to be customers.

“To some extent, the non-targeting is more important,” says Mr Green of The Trade Desk. His company advised a fast-food restaurant chain to stop advertising to anyone who lived more than 10 miles away from its 10,000 locations. “That eliminated 40 percent of America,” Mr Green says. “Then we focused on reaching those within five miles. We were trimming the fat, so to speak.”

The chain agreed to start with a five-figure budget to test it out. It ended up boosting the campaign to more than $10m, Mr Green says, based on its success. “It was exponentially more effective advertising by customising messages based on time of day and proximity [to one of the chains locations].”

Those in the industry also say that closer targeting can improve consumers’ experiences watching TV or browsing the web by making sure they are seeing ads that are relevant to them.

“With targeting, a lot of what we do is focus on the negative space the suppression of advertising messages to people who are inappropriate,” says Jonathan Nelson, chief executive of Omnicom Digital.

However, research suggests there are limitations to how far marketers should take targeting. Lisa Barnard, of Ithaca College, has found that online ads tailored to specific consumers do increase their intent to purchase items. But she also found a negative effect from what she calls “the creepiness factor” of targeted ads that reduces the likelihood to buy by 5 percent.

“Even digital natives were bothered by this. They know theyre being marketed to. And they dont like it,” she says. “Marketers have made blanket assumptions that the more data we have, the more we should use,” she adds. “But just because we have that information, it doesnt mean you should just go ahead and use it all the time in all cases.”

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