Accurately quoted by my friend Mark May from a session at CES.

Digital Advertising Panel – Rob Norman, Chief Digital Officer of GroupM (WPP)

2016/2017 Themes

• It is hard to identify a single unifying theme from 2016, but the most significant development in Mr. Norman’s view is the advance of Artificial Intelligence. Looking at how AI will impact the Google, Facebook and Amazon ecosystems going forward will be key. For brands, this increases the importance of ‘relevance’. The reason for this is that AI is making relevance (rather than prominence) more important and this will require a change in approach from brands.
• Looking beyond big themes, it is interesting how approaches to segmentation are changing. While for some bigger brands there simply isn’t the need to segment into very small groups, there are some brands where it pays to be able to segment audiences into very small groupings. This is also relevant for SMEs. In this context, there is a lot of demand for targeted TV advertising. In this context, WPP/GroupM could have done 3x the billings had the inventory been available.

Amazon/Google/Facebook & Others

• The Amazon ecosystem is becoming more and more sophisticated. Amazon can be broadly conceived of as a ‘threat’ to a number of different industries. For advertising, the challenge for brands will be that products like Alexa will start to parse consumer requests. For example, in the future if you ask Alexa to buy brand A, it is entirely possible that Alexa might come back and advise another brand because it has more recommendations.
• Google is taking a horizontal approach to AI – using it across platforms. This is potentially just as disruptive because it will be able to link together different data points – e.g. it will spot you have a meeting in San Francisco in 6 weeks and will start suggesting when and where you buy flights.
• Facebook makes an enormous number of ‘decisions’ every day on how to best allocate inventory. In the case of Facebook, though, Mr. Norman was of the view that (1) we are approaching peak efficiency in terms of inventory management and (2) you don’t necessarily have the ecosystem of different platforms at Facebook that you have at either Google or Amazon.
• Mr. Norman highlighted the importance of Pinterest. Companies like Amazon and Google get a lot of credit in terms of attribution, but actually this is often driven further up the platform. Pinterest is an interesting player in this context: it is a platform for generating demand and ultimately this remains very important, even if fulfillment is also critical.
• Twitter is a business of tremendous social significance but it is difficult to pin down from an advertiser’s perspective. Overall user growth is stable. It has some interesting video content (cf. NFL) but Twitter will not always be the ‘best available screen’ to consumer premium content. This provides a challenging context in order to drive significant growth.

Ad Pricing and Media Trends

• Online there a number of competing factors. At its core, however, it is important to remember that the advertisers that make up the vast majority of TV spend, only represent 30%-40% of online advertising. It is a much more fragmented advertiser ecosystem and therefore more difficult to generalize about pricing.
• On Facebook Mr. Norman thinks there is still scope for overall ad load to continue to increase, despite Facebook’s own commentary. Part of the reason for this is that Facebook remains such an impressive operation in terms of creating new advertising mechanisms and then deploying it at scale.
• On video, there are some interesting debates about ad load. The reality is that there is more pushback on ‘forced video’ now than there was a few years ago. So once again this is partly about relevance: approaches like YouTube’s which allow consumers to skip adverts, puts primacy on brands to make messages that are relevant and then use YouTube to target them effectively.
• There is a hope that the roll out of new skinny bundles/OTT services will create more advertising inventory in due course but it does depend on take up and roll out.

Measurement

• An important issue near-term is the debate about quality of data from some of the online players, and in particular Facebook. From a WPP perspective this highlights the importance of having third party verification. Mr. Norman argued that GroupM broadly knew about the measurement failures before it was announced by Facebook because of their ex ante verification tools.
• For traditional media, measurement is also an important topic. There are some important innovations from the incumbent (Nielsen) in terms of creating ‘total audience measurement’. That said, it feels too early for this to be the basis for decision making in the very short term.
• The holy grail in measurement is to get what Mr. Norman call’s ‘glass level’ data. This actually records what is being seen on a particular screen at a particular time. In order to do this, measurement companies will need to coopt hardware companies. Existing panel/set-top-box/router based systems are not able to do this.

Implications

• Such is the importance of understanding on-platform behavior, GroupM is now having to do direct deals with companies like Amazon and Google in order to manage brands’ on-platform profiles. This is a question of getting the raw transactional data but also using these ecosystems as advertising platforms.
• Looking at the impact of measurement scandals, Mr. Norman doesn’t think there will be any specific impact because the measurement errors didn’t impact billing. But it has and will drive a change of approach. Previously advertisers were minded to spend first and measure afterwards and this may well be reversed.