What advertisers has to learn from the latest pandemics?

This decade has started off pretty weird. Being it Black Swan or not, it has just sped up some of the social trends. I cover them in our new book. Here is first chapter:

Attention Economy

TL:DR

The machine harvesting human attention through algorithms and the online environment leads to an inability to distinguish between truth and lies. Unpaid media are being pushed into a battle for viewers and readers because ⅔ of their global advertising market has been taken away by the duopoly of Google and Facebook. As a result, the standard of what is considered relevant information or a story worthy of dissemination gets lower. And this effect was then only accelerated by the coronavirus pandemic in 2020, which has shown that it is not important to have the right information, but to keep obtaining new information all the time. Under the promise of increased security, most viewers have become information addicts. Companies no longer make money on products, but on harvesting people’s attention. And at the center of the attention there are the media and publishers as the ones who are supposed to show the truth.

Social implications: The truth is now the same as your opinion. This creates opportunities to form clans and their chieftains.

Marketing implications: Never-ending communication. Brands have to become media (broadcasters). If this crisis has tested anything, it is whether your product or brand has any added value for your customers. Even if it’s just a brand name. And right off the bat, the crisis has checked whether your brand was relevant. Not only for customers, but also for your employees. How has the people changed, what have they learned? Did they grow somewhere else? Consider this — create a new target group based not on demographics, but on the outcome with which the group of people has emerged out of pandemics and into the Russian war in Ukraine.

Long read

Attention is the currency of the 21st century. It is the basis of an economy and it will burst one day. And online advertising will die with it. You don’t believe me? Here is the story of the Attention Economy, the successor to capitalism.

For the entire 20th century, advertising was art, not science. But when Mel Karmazin, vice president of the media group Viacom, came to Google in 2003, its founders told him: “With us, advertisers pay only for what they earn. With every ad, we know if it works.”

Mel Karmazin looked at them, folded his arms and asked: “I sell $25 billion worth of advertising a year. Why would I want anyone to know what works?”

Thus began an era that many call the “.com bubble” after Internet giants Google, starting with Facebook.com, eBay.com, to Yahoo.com and many others.

You can create an account with each of these giants and start using their services. Free of charge. How many online accounts do you think an average person has? Research shows that there are around 90 online accounts per person. Just think back to the last time you converted a pdf and the site asked for your email or you logged in with Facebook. Each of these accounts is your one imaginary self that gradually refines the picture of what he or she needs. Google Maps to get you from home to work in the morning, Spotify to play music in the car, iOS to play that music through your audio system via Bluetooth, Calendly instead of a diary and, last but not least, a bank account to allow you to make payments with your credit card. We used to carry significantly more stuff in our pockets and purses..

And which of your online profiles do you think is the most important for you? McGuffin’s research has discovered that in fact WhatsApp, Google Translate and LinkedIn are on the top spots. Specifically, the researchers asked which of the online services people would be willing to pay for on a monthly basis. The three above-mentioned services reached the point where around 80% of people were willing to pay for them. And although YouTube didn’t make it to the top spots, people valued it the most — specifically at $4.20 per month.

When McGuffin compared people’s willingness to pay for online services, he also created a projection of how much those services would earn as fee-based versus how much they earn now from advertising. YouTube, for example, would grow by a whopping 1,900%!

Then why don’t they do it? YouTube and other services certainly have significantly better data than the McGuffin in the research sample. Even Mozzila Firefox, Google Chrome’s competitor, offers its service completely ad-free (ad-free internet) for less than $6 a month.

What is the main product or service of Facebook, Google, Amazon and other .com services? Connecting everyone in the world, finding the answer to every question or offering the right product to everyone? No, it’s not. The main product is you. We. Our data. And our attention.

An audience that won’t switch

And this is where the whole phenomenon called Attention Economy begins. A couple of years after the bosses of Google and Viacom met, after one of the worst financial crises, a photo of a thermometer in a classroom at Twin Rivers School in California appeared on Facebook. The thermometer read 44 degrees Fahrenheit, or 6 degrees Celsius.

Twin Rivers School, like the entire area, was hit hard by the crisis and couldn’t afford any heating. Just then, they were approached by a company called “Education Funding Partners” (EFP). It offered a solution to the school’s financial problem through “harnessing the power of business to support American education.” As a broker, the company promised to bring in half a million dollars a year to the district. And, as EFP pointed out, it won’t cost the school anything.

The school administration didn’t actually have to do anything to tackle the problem. All they had to do was understand that schools own one of the most lucrative assets. Their students. Those who, by the nature of secondary education, are obliged to attend and must not slacken in attention. It’s probably the best audience — the kind that won’t switch because they’re not allowed to.

Education Funding Partners was active in this way in multiple schools across the U.S. and eventually was able to come to large companies with even larger advertising budgets. “We open the doors of schools to enable access and powerful interactions with school-age audiences,” was their pitch to companies like McDonald’s and Coca-Cola. It was a unique opportunity to “educate the customer of the future”.

While Twin Rivers has accepted the offer, it has sparked much public debate in many districts. One thing is certain — attention is now a tradable asset.

Digital vegans

In the spring of 2019, a Kashmir Hill reporter conducted an experiment. She gradually blocked access to the big five tech companies — Google, Facebook, Microsoft, Apple and Amazon — on all her devices and accounts. She even had a special VPN programmed to prevent the companies’ servers from communicating with her devices. And how did it all turn out?

It turns out that during one week of blocking, Amazon and its AWS (Amazon Web Services, on which services such as Dropbox etc. are hosted) tried to contact Kashmir Hill smartphones and computers more than 95,000 times. In fact, Amazon’s revenue last year from data sales exceeded that from merchandise sales.

Data! Data?

The era of .com services has hit the advertising business hard and noticeably. But it seems that agencies or analytics companies actually do not know how to handle the data. For example, when I checked the databases to see what one of the analytics giants, Oracle, knew about me, it turned out they thought I was a woman and a man, interested in baseball merchandise and about to buy women’s accessories. I admit the last one is true, I tested it sometime just before last Christmas.

In fact, marketing globally uses one zettabyte (1 billion terabytes) of data, yet the vast majority of e-commerce stores do not exceed a conversion rate of 1%. That is, the ratio of how many people saw the ad and how many actually bought (saw the purchase transaction through).

Brands are producing three times more content in the online world year-on-year, but the overall volume of interactions remains the same. In fact, 90% of the interactions happen for 10% of the content. In other words, 9 out of 10 posts record almost no interactions. It seems that there is not an infinite quantity of attention and it is beginning to run out.

It was Facebook and Google who pushed the global media to fight for attention. This duopoly now controls 2/3 of global advertising budgets, forcing other media houses to drastically change their content to attract the most traffic. Even the click-bait king Buzzfeed laid off a thousand employees in 2018.

So while Business Insider is still chasing traffic to its articles for free, its revenue per user per year has dropped to 55 cents. Meanwhile, the New York Times has learned its lesson and started offering its content as a subscription again. The difference is huge.

A typical example of the Attention Economy may be the experiment that Steve Tadelis, an eBay economist and professor of economics at the University of California, sort of forced eBay to do. In August 2011, he joined a group of eBay ad sellers who suggested that they would jointly analyze individual ad campaigns.

Then it turned out that the sellers were merely hiding behind economic jargon they didn’t understand all along. Tadelis played their game with them for a while, but he quickly found out that it is perfectly normal at eBay and other tech giants to confuse correlation with cause.

In fact, eBay was buying advertising on search engines to get redirected to products sold by its sellers. Vendors pointed to statistics that said every dollar invested earned $12 in sales.

After a few months, a situation arose where eBay wanted to negotiate better terms with Bing and Yahoo! To get leverage on them, it stopped spending advertising budgets on the keyword “eBay” in their searches. Steve Tadelis picked up on this and started measuring the impact with the team. He argued that paid links in search engines have a minimal impact on eBay’s success because people who click on them would have clicked on an organic search link anyway, because they had already typed “eBay” into the search.

It turned out that their advertising budgets had absolutely no effect on eBay’s revenue. In fact, they were losing about 60 cents on every dollar they put in.

Steve Tadelis likened this to a situation where Luigi’s Pizza runs a big flyer campaign and hires three teenagers for the campaign. After a week, it turns out that one of them outperforms the other two by 90%. Looks like Luigi’s Pizzeria discovered a hidden marketing talent in him. But when asked how he does it, the answer is simple: “I hand out flyers to people already in line for pizza.”

Online advertising is not able to build a brand

And that’s not the only problem with the whole online attention economy. The hypothesis based on the psychological effects of Cultural Imprinting and Signaling Theory highlights the possibility that online advertising is not actually capable of building brands and helping them to be remembered in the long term.

A standard model of buying behavior would be something like this:

We see a Nike ad that communicates the association between Nike and athletic ability. As we see the ad more often, we gradually make the association between the Nike brand and athletic ability and adopt it as our opinion. And the next time we go shopping for sneakers, the Nike brand will be a little closer to us and we’re more likely to buy their product.

But when we incorporate the Imprinting effect and Signaling theory, the behavioral model changes:

You see a Nike ad that communicates the association between Nike and athletic ability. Gradually, you discover that everyone else has also seen the Nike ad and, like you, associates Nike with athletic ability. So, once you buy sneakers, buy Nike so you don’t have to worry about others thinking you have no athletic ability.

But now comes the online problem. In the online environment, you see the advertising yourself. You never know what adverts are being shown to you and your neighbor. Thus, the Imprinting Effect and the Signaling Theory cannot occur and if the advertising spot does work, it is only through correlation with other advertising activities outside the online environment.

Signaling has another major flaw for the online advertising model. If everyone is advertising on Facebook, they are definitely successful. Then we’ll advertise, too.

Yet Facebook, eBay, Google or Instagram are all just teenagers handing out flyers to people in the pizza queue.

Aren’t they? Two things are certain.

The whole .com bubble has a serious burst. But the tech giants can fix it if they stop trading people and start profiting from their own services. Only then will we know which of the “tech” giants has a real value.

Online advertising as such will soon begin to recede. Its function will be replaced by those big players who hold all the data — Amazon, Facebook, Google — who can pair ideal supply and demand. Marketers and advertising agencies have no choice but to return from science to art. To return to what has always been valued. To creativity, brand building and relationship building with its customers.

What happened?

In late 2019, a new type of coronavirus that causes a respiratory disease called covid-19 was discovered in China. As much of a surprise as it was to many of the world’s leaders, the reality is that we have been preparing for a similar situation for a long time. Barack Obama, for example, created a 40-member expert team which, during his administration, created a manual on how to fight the spread of an epidemic. Donald Trump disbanded it when he took office. Bill Gates pointed out the dangers of the rapidly spreading pandemic in his TEDx talk back in 2015. He pointed out that a large, rapidly spreading disease is clearly a security threat far greater than a military conflict. Try to compare the amount of spending on armaments with the amount of spending on health care. And try to compare them in Europe and in the US and you will understand who comes out better. Suddenly, the social system becomes a competitive advantage.

Was the corona crisis the dreaded Black Swan? No way. Those who consider it a Black Swan are actually trying to cover their own ignorance or dismiss the facts that have always been in front of them. These include governments and the management boards of large companies.

The economy has been heading towards a crisis for several years. Actually, it came surprisingly “late” compared to the expected rhythm. The German economy started to slow down in early 2019 and the massive drop in oil prices occurred largely in the spring of 2020 due to Russia and OPEC failing to agree on production limits.

The coronavirus has only triggered the financial crisis. But what fueled it with such force? One thing everyone overlooked. And its roots actually go back to the 1980s.

What’s going on?

Several times over the last few years, publishers wanting to start a new online magazine have come to me and asked me to help them come up with a brand or build a marketing strategy. I didn’t make them very happy at the time, because apart from not advising them, I told them that I thought it was the worst time to start a media outlet.

Actually, I was wrong. The worst time is now, and it’s not going to get any better.

To find out what really drives the whole corona crisis, it is necessary to look back by decades. Back when information (I mean in the form of news or media) was expensive. Information was only available to certain sections of society.

Media emerged as a positive externality of business in the post-war years. Producers needed a space to advertise their products to consumers. For many decades, thanks to this positive externality, we could buy a world-class, verified and balanced information stream for a few crowns, whether in the form of printed newspapers, or radio or television programs.

This has changed with the massive emergence of the internet in the noughties and in particular with two now global players. In fact, Facebook and Google have a 60% share of the global advertising market and have cut out much of the positive externality of the media business. The media are fighting for survival and instead of writing for “their audience” they are chasing the “website traffic” stats. Every digital marketer surely knows the difference between the two — while the “audience” is inherently connected with a common interest or historical interaction with a brand or product, “website traffic” is just the magnitude of people and fake profiles that make up the traffic on a particular link.

Very soon the media went into a death spiral. While chasing traffic, the media had to significantly reorient their content. They have moved from quality, balanced and international information to pure entertainment and infotainment. It was the number of clicks and views that has become important, and not the impact of their work and content. The real audience began to dwindle and soon there was nothing left for them to read.

Some of the media caught on early and are still profiting from it today. The New York Times, for example, has 5x more revenue per reader than Business Insider full of ads. Czech media include Respekt (a weekly magazine), Hospodářské noviny daily, and, last but not least, Deník N daily.

But as the digital transformation progresses, it also means that media will once again not be for everyone. Or rather — those who can afford it, will buy the information. The others will get entertainment free of charge, and they will pay for it with their attention and personal data.

Similarly as was the case with the industrial revolution, the digital one leaves behind a lot of useless people. This is also what Yuval Noah Nahari alluded to in his Davos speech and what research data from the UK confirm. Also David Graeber in his book Bullshit Jobs: And the theory shows that around 40% of workers think their contribution at work is useless. And not just the contribution of them specifically, but they believe that if the actual jobs were eliminated, nothing would happen.

Whether it is 10%, 20% or 40%, it is a significant part of our society. With the advancement of digitalization, we have more and more time. In this new arrangement, managers often prove their importance by resorting to “feudal” behavior. The more subordinates they have, the more important the managers are. This creates unnecessary jobs and professions.

Now imagine sending this 40% of the population home to work from home office for an indefinite period of time. You will only confirm their assumption. There can be several reactions to such a situation.

The first is that you surround yourself with fear and the world changes in your eyes. All you perceive is how the crisis is developing and how threatened you are. In the case of a disease spread by air, that means a lot to everyone. You consume too much news and too many products, which is a natural reaction to fear. You can’t choose between conflicting information in the media, so you usually consider the greater risk the more likely one, just in case. You pray that the world will go back to the way it was and that you can be useful in your work again. You will become a news junkie.

Another reaction is that in fear for your own self-determination and inability to fulfill it at work or in interpersonal relationships, you become a news creator. You are aware of your qualities and abilities, and so you get involved as an activist in every initiative that gives you a sense of purpose in these weird times. So many people have found out they are data analysts or doctors now, pushing out several thousands of words long facebook posts analysing today’s pandemic numbers and what exactly we should do. Like any activist, you live the cause and enjoy your newfound sense of purpose. They have one great quality — they show us how little we actually need the state.

The third option is to cocoon yourself and resign to one’s own usefulness. You become a consumer of entertainment, in the face of the possible end of the world you indulge in hedonism, whether physical or mental. The news, and all intellectual content, is your daily nourishment and a way to not think about being useless. If you make money, you only make money to be able to finance your lifestyle. You’re a viewer.

All three of them are the cash milking cows of a trend that has been emerging for the last few years. However, it is this trend that is both accelerating and sparking the crisis. I call it the Attention Economy. At a time when the media are divided into information and entertainment, a larger proportion of people prefer to save money. With their attention, they pay not only for free content (which doesn’t add much value) but also for using services that would normally cost a few crowns, such as online maps, search or YouTube. Your attention is what Google and Facebook sell to the producers of goods. And at the same time, the classic, non-paid media are fighting for your attention.

Unfortunately, in neither case will you get better. Facebook and Google filter information in an unbalanced way. We’ll start with an algorithm that is set up to show you primarily the content you’ll like. That is, content that is consistent with the views you have liked, commented on or searched for before. Then there’s the content filtering itself — while at the beginning of the pandemic Facebook erroneously blocked some posts regarding the coronavirus and later apologized for it, by May it had already actively blocked, together with YouTube, a documentary about a possible international conspiracy regarding the spread of the coronavirus. No matter how dubious and conspiratorial it may have been, as with other content, it was not really possible to form an opinion as to whether it was fake news or not.

If you turn to traditional media, you won’t help yourself either. In the daily news, you will get deeply moving human stories of taxi drivers and others who have been cured, which easily overshadow the everyday deeply moving human stories of those cured of cancer, cystic fibrosis or schizophrenia. Due to a lack of information, both the public and private media are spreading unsubstantiated information, which only adds to the appetite for new information, this time guaranteed to be true. Slap a coronavirus on it and you’re in the main prime time.

The economic crises of 2020 and 2021 were the first crises that were mostly the fault of the media. New media and the traditional ones, too.

If you’re a marketer, it’s now crucial to determine whether the service or product adds value to the customer. If not, and if the service or product can’t be cheaper, this is the best time to pursue the brand’s mission. An old rule I apply to myself and every brand is “be relevant or shut up”. At the times of the Attention Economy, to be silent is to be forgotten, so all you have left is to be relevant to your audience.

But how?

Necessity becomes a habit

The classical behavioral scheme of the human response to a crisis involves three phases. The first is the FEAR phase, where we disproportionately consume information and close ourselves in a cocoon. Our good friends junkie, viewer and creator live in fear. Some of them will change their world view forever, just as a certain part of the society has changed its view of Arabs after the attack on the Twin Towers in New York. For communication with these audience segments, the term disastertising has been coined. The brands that make use of it have long understood that their customers are in fact viewers and if you disappear from their field of vision, they will stop interacting, i.e. buying.

Then there are two more phases. The LEARNING phase and GROWING phase. During the former, we learn not to be in control, we learn to consume less information, we look for opportunities and make plans to use our time. For such audiences, a brand can offer a very valuable curated filter of information and entertainment, helping them to learn and really making them a better person.

During the GROWTH phase we learn to accept the new reality as it is. We plan less, we try to focus more on the spot of the moment. We realize that we cannot wait for the future to come to us
until the future comes. At this stage, we try to help others and feel more strongly about the brand’s mission and whether it aligns with our worldview. This is an ideal opportunity to offer your audience interaction with your brand and support CSR activities, for example.

You are unlikely to be able to create communication that is relevant to all three phases. Choose people in one of them and try to move them forward with your communication as a brand. Even if you sell ice cream, you can now communicate it as an opportunity to turn off the news for a while. For each of the phases you will find useful tips and inspiration in whitepaper by Canvas8.

No matter how many marketers may disagree, people really can learn. Especially when they have nothing else to do. A few months of duty will teach you a new habit. This is what we call #thenewnormal. It’s not a new, better world. On the contrary, the world will be rather worse and more complicated, as Michel Houlebecq has written.

Even those who didn’t want to, have now learned to shop online. If your store was built in a good location, you’re a lucky fellow. Because now you can turn visiting your store into an experience. Visits to the shops will become all the more of an experience and must stop being a necessity. After all, that’s why Apple’s biggest marketing investment goes in its temples of design.

People have learned to do many things at home. For example, according to Pulsar social network tracking the interest in community, the meaning of our dreams or cooking at home has massively increased. Conversations focusing on growing vegetables and fruit, food quality and ingredients, and superfoods have been a growing trend in recent months. People learn that their immunity is primarily dependent on what they do for a living.

If this crisis has tested anything, it is whether your product or brand has any added value for your customers. Even if it’s just a brand name. And right off the bat, the crisis has checked whether your brand was relevant. Not only for customers, but also for your employees. How has the people changed, what have they learned? Did they grow somewhere else?

Consider this — create a new target group based not on demographics, but on the outcome with which the group of people has emerged out of pandemics and into the Russian war in Ukraine.

It was the romanticized notion of the nuclear family, not the mass production of automobiles, that changed the topography of American suburbs. The world of work will forever be changed by changing notions of career and success, not the advent of laptops or post-metallic telecommuting.

Future-focused brands often tend to make technology the center of their strategies, not a broader idea, but as Tom Vanderbilt says, “When technology changes people, it’s often not in the way we expect.”

The washing machine had the potential to liberate housewives, but instead it liberated them from the work that maids once did. Although technology has changed, the idea of a woman’s role has not.

Futurologists of the 1960s, predicted online shopping, but not financial independence for women. They predicted e-mail, but not telecommuting. They predicted microwave ovens and other kitchen technologies, but they didn’t predict that fewer and fewer people would eat at the dinner table.

The future is most changed by ideas, not technology or inventions, and that’s what you should bet on.

The future is not in new technology. The future is in changed people. Your brand should bet on who we will become.

Adam Ondráček is a communication strategist and founder of KONTRA disruptive studio. You can find their work and more content at wearekontra.com.

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