I was really intrigued by Benedict Evans’ essay last week, Resetting Online Commerce, which discussed issues the current acceleration in online commerce will inevitably raise for the world of advertising.
Evans is the super-insightful venture capitalist, pundit and media and tech analyst who regularly writes on industry issues.
Essentially, he argues that we’re seeing a significant acceleration in the growth of online commerce. Further, this growth creates flywheel effects for physical retail: The more people shop online, the less they go to retail stores and malls; the less they go to those stores and malls, the faster those stores and malls go out of business; the faster those stores and malls go out of business, the more people need to shop online; etc.
Something is going to have to replace the customer acquisition role that foot traffic along the worlds’ main streets and shopping malls delivers for the physical retail world.
What does this mean for advertising? For sure, companies dependent on advertising from physical retail companies need to watch out. Even more interesting is Evans’ observation that scaled online commerce models won’t have the benefit of saving companies the money that would have gone into physical store rents and dropping it to the bottom line.
Any savings will almost certainly have to be spent on delivery and advertising.
Advertising? Yes. Something is going to have to replace the customer acquisition role that foot traffic along the worlds’ main streets and shopping malls delivers for the physical retail world.
So does this just mean more money for Google and Facebook? Maybe not. They are increasingly facing pressures from regulators on critical issues like market dominance and privacy, which could impede their growth here. And some of the benefits for online advertising could be blunted, since so much of it today is pinned on the use of cookies and some other unique identifiers that could be going away.
Could television win this shift of customer acquisition money from real estate to advertising? Evans poses the question at the end of his piece, but doesn’t answer it.
My point of view on the question is a big maybe. TV has certainly been resilient in the face of decades of digitisation of the media world. It still delivers unmatched audience and impact. And it has already proven itself to be an effective channel for many digital marketers and direct sellers.
Is TV ready to embrace — and invest in — the kind of improvements in targeting, automation and measurement that online commerce sellers will increasingly expect as table stakes? I don’t know.
However, TV also has some big challenges to overcome to win in an online-commerce-centric world. It operates under a wholesale business model, when this new market demands retail.
Just think about it. TV companies sell ad spots in bulk in advance to agencies who then work with the TV companies — in human-managed processes — to break up those big bundles of units into smaller bundles of units to be allocated to individual advertisers.
Since most of those individual advertisers are wholesalers themselves — selling pallets of soap to retailers, not bars of soap to consumers — those buyers aren’t that particular about making sure that those bundles of ads spots are super-targeted, that the buying and trafficking systems are automated and nimble, and that their measurement systems are tied in real time into sales systems with the capacity to optimize on the fly.
Is TV ready to embrace — and invest in — the kind of improvements in targeting, automation and measurement that online commerce sellers will increasingly expect as table stakes? I don’t know. What do you think?
This story was first published by MediaPost.com and is republished with the permission of the author.
Dave Morgan, a lawyer by training, is the CEO and founder of Simulmedia. He previously founded and ran both TACODA, Inc, an online advertising company that pioneered behavioural online marketing and was acquired by AOL in 2007 for $275 million, and Real Media, Inc, one of the world’s first ad serving and online ad network companies and a predecessor to 24/7 Real Media (TFSM), which was later sold to WPP for $649 million. Follow him on Twitter @davemorgannyc
