Is the US ad business about to collapse?

April 21, 2017

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Sure people have been saying that for years.

But that does not mean it couldn’t happen.

In the US, there was almost triple the amount of sports content there was ten years ago but fewer people are watching.

On top of that, Tech giants are buying the digital rights to sporting events. Amazon recently purchased NFL streaming rights for $50m (quintupling the bid from last year from Twitter.)

Facebook has also obtained the rights to begin streaming Major League Soccer matches and is in talks to buy digital rights to major league baseball games.

In the next 24 months we can going to have one of the big four – Amazon, Apple, Google or Facebook – buy the rights to the Olympics or the Superbowl.

One critic said: “This is one of the last bricks to fall from the wall protecting the industrial ad complex.”

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Adidas just made a colossal bet that could be a game changer, or a catastrophic mistake

April 10, 2017

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Last week, Adidas announced they were going all-in on digital advertising.

Chief Executive Kasper Rorsted said he was going to ditch TV ads and instead spend 100% of his budget on digital to capture younger consumers, a crucial demographic for the sports clothing line.

This way, he said, Adidas would quadruple e-commerce revenues by 2020.

“All of our engagement with the consumer is through digital media and we believe in the next three years we can take our online business from approximately one billion (euro) to four billion (euro) and create a much more direct engagement with consumers,” he said.

Predictably, the internet exploded.

It was a hell of a time to bet all your chips on digital marketing, said critics. Digital ad giants Facebook and Google are now embroiled in full-blown scandals and a quick glance at today’s CampaignLive reveals a headline which screams “Marketers must tell their boards 60% of programmatic spend is wasted.”

Critics have also pointed out that Adidas may also have its sums wrong. Just six per cent of Adidas’ current sales are online. (Adidas annual sales are about $17b, about $1b of which is the result of e-commerce.) Do they really want to spend 100% of their advertising money to support 6% of their sales?

Nay-sayers also pointed out that retailers would not be happy about Adidas spending all its money to support its own online store sales and provide no money to support theirs.

These are important points.

But to me, this debate centres around something even more fundamental than TV vs digital. It’s brand versus customer relationships.

For the rest of my article go to Smart Insights.

 

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With this latest move, Amazon declares war on Walmart

April 9, 2017

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Amazon.com Inc. has invited some of the world’s biggest brands to its Seattle headquarters in an audacious bid to persuade them that it’s time to start shipping products directly to online shoppers and bypass chains like Wal-Mart, Target and Costco.

Executives from General Mills, Mondelez and other packaged goods makers will attend the three-day gathering in May, Bloomberg has learned. Attendees will tour an Amazon fulfillment center and hear a presentation from Worldwide Consumer chief Jeff Wilke, who reports directly to Jeff Bezos.

Meanwhile, US retail stores are closing faster than ever this year.

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Grocery stores shed 34,700 jobs in the US this March and e-commerce is to blame

April 9, 2017

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Digital is hurting the grocery store, which as predicted by Furthr, is taking its turn to be disrupted by digital.

General merchandise stores shed 34,700 jobs in the US this March.

“E-commerce and technology have absolutely changed the rules of the game and given massive amounts of power to the consumer,” said Simeon Siegel, a retail analyst at Nomura.

“There is a self-help mentality now. People walk around with their phones in their hand to tell them the best model and the best price. You don’t need as many people walking around trying to convince you to buy a sweater.”

And this is troubling for the US economy. Whilst General Motors was once the single largest employer, today Walmart is.

According to Diane Swonk, the chief executive of DS Economics in Chicago, “Retail is one of the largest employers in the country, and it’s going to go through a pretty massive secular restructuring.

“We shop differently now, and no one has the right model.”

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UK electrical energy use is in decline

April 9, 2017

This summer, National Grid estimates that maximum and minimum energy demand from utilities is likely to fall to an all-time low (paywall). Peak demand is predicted to be 35.7 gigawatts, compared with 37.5 gigawatts in 2015, and minimum demand to be 18.1 gigawatts, compared with 18.4 gigawatts in 2015.

Meanwhile, on March 11  more than half the power needs of the entire state of California came from solar power for a few hours that day, according to the US Energy Information Administration (EIA).

Just 15 years ago, the state produced almost no power from solar at all.

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Big consumer brands are losing; small artisanal brands are winning. Here’s why

April 7, 2017

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Of the top 100 Consumer Packaged Goods brands, 90% lost share and two-thirds lost revenue in 2015.

These declines are in the face of overall category growth.

What is going on?

While the short tail dominates in tech, with more spoils going to fewer firms (such as Amazon, Apple, Facebook, and Google), in consumer the so-called  long tail of specialist goods has life.

Estée Lauder and L’Oréal commanded a 53% share of the luxury skincare market in Q1 2015.

Today, consumers are only a few searches and reviews away from discovering the specific product that matches their exact needs, foregoing the need to defer to the traditional brand.

Why trust your pores to Nivea, when there is JeJu Sparkling Mud Foam Cleanser.

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What do successful long-tail brands have in common?

Long-tail brands are typically found in growth channels. In beauty, these are Amazon, Ulta, and Sephora.

Long-tail brands are really, really good at Instagram. The correlation between beauty brands’ performance on Instagram and revenue growth is strong.

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Amazon’s plan for taking Google’s ad revenue

April 7, 2017

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Amazon has a new strategy for its advertising business.

It promises advertisers the chance to target Amazon buyers who are ready to purchase something.

The promise of higher conversions makes Amazon a potentially more compelling option for advertisers than Google.

Sellers can promote their products through advertising, customers get relevant ads for products they’re likely to buy

Locked in a price war with Walmart, Amazon  is betting on a strategy of using ads as an additional revenue stream to further lower the price of the goods it sells.

 

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