By Simon Barnes, Group Commercial Director, tmwi
Why do brands spend money on advertising? That’s not a trick question. It’s ultimately to sell more stuff, isn’t it? They set aside some money to invest, and if they spend it wisely, with agencies who know what they are doing, they make a lot more back than they originally spent: a positive return on that investment. That kind of value is hard to argue with. And then again, maybe it isn’t…
In an industry that loves a buzzword, here’s one I’d like to erase from circulation: ‘transparency’. The idea that advertising and media agencies should justify every last penny of their margins to the clients who use their expertise. The notion that we might be expected to drive into the open every overhead and penny spent in consideration for providing success in adding value. The implication that as a professional services company we should open up our books and beg forgiveness for our industry’s business model, just in case, heaven forbid, we make a margin.
Try advancing that argument next time you buy a car: ask what it actually cost to provide you the vehicle; suggest that they might be doing a bit too nicely out of the deal; ask what they earn and whether, on balance, they couldn’t just do it for cost plus a minimum percentage? Never mind the business overheads of providing you with the safe and beautiful car you need. Negotiate by all means – that’s only good business practice. And then either buy it or don’t.
Then there’s the fact that not all cars are equal. Is it reasonable, for instance, to expect a new high-end car with the expected levels of R&D, quality and service for the same cost as an entry-level challenger brand? One size definitely doesn’t fit all.
Market forces drive pricing metrics. Generally, the more you expect out of a particular business or transactional relationship, the more complex this pricing metric is likely to be.
The advertising industry is being expected to flex and pivot around emerging market forces to maximise value and expected ROI like never before. Some of the greatest shifts in living memory have occurred in the last year. Traditional bricks and mortar businesses are shifting spend from commercial rents into digital platforms. Morgan Stanley has predicted an uptick of $40bn in combined ad sales for Amazon, Google and Facebook this year…
In a fast-evolving land grab, incredible sums are being invested by companies you may never have heard of to capitalise on this shift. AppLovin, the mobile games maker, spent $627m last year (three times the annual spend of Unilever, the UK’s largest commercial advertiser) and generated $1.4bn in sales. In the same period, Wish.com spent $1.7bn and enjoyed sales of $2.5bn. This is an intensity of spend not seen before, with significant returns, and I can guarantee it was made possible by incredible teams working on those accounts.
Current shifts also offer great opportunities for less high-rolling businesses to capitalise. Small business advertisers on Facebook have increased by 20%, carrying the social media giant across the threshold of ten million business advertisers.
Good advertising generates sales, and that is why the advertising industry needs to reconsider its estimation of its own worth. I can’t necessarily speak for anyone else, but as a company we are extremely proud of providing our clients with a professional, bespoke service that offers compelling returns on their investment, across multiple sectors and multiple verticals. Invest your marketing budget with us, and we will ably turn it into a positive ROI, because that’s what we do – time and time again.
The marketing industry’s collective self-esteem problem rears its head in other ways as well. When Google proposes to strip third-party cookies out of Chrome, that’s not an act of God, punishing us for our sins as an industry; it’s another company – granted, a very, very, very big one – making a commercial decision for its own benefit.
That means we don’t need to panic, and we don’t need to build an ark. For those who know their business, who understand the potential of first-party data, who believe in the logic of robust planning and targeting, in new and productive publisher and platform partnerships, this is very obviously an opportunity to show what we can do as an industry, and to exceed client expectations – no matter the size of the budget or spend.
I have faith in our industry. I think we are inclusive and creative and we do a great deal of good, and overall I also feel strongly that we, as an industry, are a lot better than some people – some of our own number included – seem to think.
As we all step into the blinding light of the new, post-pandemic landscape, we have to be cognizant of all the factors above, as well as the many others that have impacted businesses, if we are to drive and impact these emerging shifts. All budgets and spend will be forensically monitored, benchmarked, analysed and picked over. This takes us back to my ROI point. Every drop of money clients invest in our industry – or any other – will need to justify itself and provide a robust return. Those who deliver that value, that solid Return On Investment, are those who deserve to grow and to thrive for many years to come. After all, we all know there really is a difference between cost and price…