Why We Need Another Digital Marketing Transformation

I’m posting this recent article from the New York Times – in which yes, I’m quoted – because it represents my area of study as a Fellow in Harvard’s Advanced Leadership Initiative: how to mitigate the negative impacts of digital technologies.

I’ve always been passionate about marketing due to its unique combination of art and science. Over the past 10 years or so, as “digital marketing transformation” (the replacement of traditional mass marketing with precision targeting using data and digital technology) tipped it toward science, I began to wonder whether this new marketing model was actually working to sell products, build brands, or create lasting customer relationships. But I also became concerned about the growing power of the digital platforms themselves (e.g., Facebook, Google, Amazon, Apple) and their broader impact on our relationships, our society, and our democracy.

The vision for digital marketing was so compelling. We would understand our customers better than ever before and reach more people, but only the right people, at a much lower cost. Our ads would be more relevant, more credible as they ran side by side with other content, and they’d allow more interaction, actual conversation, with our customers. Over time, companies would mine Big Data – enormous customer data warehouses – to draw patterns, make predictions, create customer profiles, and differentiate themselves with new products and services.

That’s not exactly how it played out. Web sites proliferated; meaning traffic to all but a few was highly fragmented (today, according to eMarketer, Google or Facebook collect 60 cents of every digital marketing dollar, though Amazon is coming up fast). Online advertising had miniscule interaction, measured by click through, and the quest for traffic and clicks as the basis of monetization induced clickbait and bots – fake content and fake people – as well as other types of fraud. As we automated ad buying and switched out buying space for buying eyeballs, we found our ads next to hate speech and objectionable content. Customers found our interruptive ad formats so frustrating, use of ad blockers and ad-free networks exploded. To keep up, we built adtech and martech stacks that put layers of technology between our customers and us (represented by the iconic Luma Scape in the attached article). Now it’s estimated that 50 to 60% of every marketing dollar goes to the intermediaries that plan, target, buy, and distribute ads (and then another 20% goes to waste from poor quality, fraud and brand safety issues). CMOs at the largest consumer marketing companies in the world refer openly to the “swamp” of the digital media supply chain and call out the need for greater transparency, verifiability, and quality content. And the big winners in Big Data were the digital platforms themselves, since they acquire and manage the largest sets of marketing data, and generally they keep it to themselves. No wonder, according to Kantar Research, less than half of advertisers (and less than 20% of their agencies) are sure of their ability to create insights from data.

But this isn’t just an industry thing – consumers are losing trust in brands, too: according to Edelman’s 2019 Trust Barometer Special Report, just released at Cannes, only one in three respondents said that they trust most of the brands they buy and use. Maybe we shouldn’t be surprised that according to Spencer Stuart’s 2019 survey, the average tenure of CMOs – generally the owners of companies’ digital transformation efforts – has been stuck at just under 4 years since 2010. It implies that all this data and technology are not actually transforming business results.

But that’s not the whole problem. The need to attract and hold users’ attention on marketers’ behalf led to platform design so captivating that screen time has been correlated with anxiety, loneliness, and the symptoms of addiction. Data-driven content personalization in the interest of relevance and engagement in ads enabled filter bubbles and echo chambers, helping to polarize our society and potentially distort our electoral process. And as marketers traded ad dollars (like for print ads or TV spots) for pennies (for digital clicks), we have lost nearly 1800 newspapers, since digital marketing transformation has also threatened the survival of local and legacy news outlets that relied on advertising in order to fund journalism.

We all wanted to believe in the vision for digital marketing, because in the face of our own business disruptions and shareholder demands we needed lower marketing costs, and our customers were moving away from traditional media. And there have certainly been benefits in terms of efficiency and precision. But I don’t think anyone could foresee the unintended consequences.

Now, in response to some of these dynamics, marketers in the U.S. will likely need to manage a new digital marketing reality: data privacy regulation. It’s been a year since the General Data Protection Regulation took effect in the European Union. Some early data suggest that, contrary to expectations, ad impressions in Western Europe are up, costs are down, and overall marketing spending has decreased. That’s good, since over 100 countries now have data privacy laws in place. Here in the U.S., the California Consumer Privacy Act becomes law on January 1, 2020, and there are efforts to enact some kind of privacy-related legislation in New York and several other states, as well as at the federal level. (These may or may not be successful, since the top five digital platforms spend an estimated $65 million in lobbying efforts, hoping for the simplicity of national – and modest – legislation.) Meanwhile, Google and Apple have announced plans to change the types of tracking they allow on their platforms, and Facebook has said “its future is private”. And some users are taking control of their own privacy by installing privacy browsers or extensions.

The spread of data privacy regulation and greater privacy controls by consumers mean marketers will once again need to transform. Our approaches to consent, data collection and management, targeting, content creation, attribution and measurement will all need to evolve, and will likely favor a focus on first-party customer data, as well as on contextual rather than behavioral ads. Done well, it has the potential to create the true customer intimacy, trust, and experience we’d been seeking all along. Done thoughtfully, it has the potential to mitigate some of the negative externalities of digital technology. I think this is a digital marketing transformation we should welcome.