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Why CMOs Need To Shift Ad Budgets To Connected Intelligence Now

The emergence of Alexa, Siri, Okay Google, Cortana augur the end of advertising as we know it, says Forrester's James McQuivey and Keith Johnston.

It’s time for CMOs to face the facts that digital advertising has not worked when it comes to engaging consumers and that the emerging role of voice-activated digital assistants and the connected intelligence that powers the devices by Amazon, Apple, Google, and Microsoft will lead to only further breakdown of traditional marketing models.

That’s the thesis of The End Of Advertising As We Know It? by Forrester analysts James McQuivey and Keith Johnston. The analysts discuss a “great unraveling” of advertising that’s coming with the new models taking as much as $2.9 billion away from display advertising in the next year.

Some of the report’s topline findings include:

  • 38 percent of U.S. adults have installed an online ad blocker
  • 0.35 percent is the average clickthrough rate on display ads
  • 47 percent of consumers avoid mobile in-app ads
  • 67 percent of global consumers trust customer reviews, while only 47 percent trust ads next to search results

Lean Forward-Plus Experiences

The lack of tolerance for interruption and disaffection with current ad formats have always been part of the online experience.

It’s become one of the most cliché ideas of contemporary marketing: The distinction between the “lean back” form of traditional media, where messages can be pushed one-way towards consumers, versus the “lean forward” experience consumers have online (interactive conversations that has users set the agenda by searching for specific information).

That lean forward experience will only be accelerated by the further mainstreaming of connected intelligence agents like Alexa and Siri and the devices they run on.

“Mobile devices put a brand within a customer’s reach 24×7,” Forrester says. “Now, voice interfaces are making those devices even more practical and more apt for building ongoing relationships.”

Even in these days of connected intelligent agents, 33 percent of U.S. online adults say they use early intelligent agents like Google Now or Cortana, Forrester notes.

More than 6 million U.S. homes have an Alexa-enabled device, and Forrester estimates another 20 million will have one or something like it by the year’s end. Ultimately, 16 billion Internet of Things devices will send data about customers and their environments by 2021, offering marketers much greater insight and point of connection than ever before.

“These tools will make it possible to interact with customers more frequently and at a lower cost for both customer and company,” the report states.

Advertising Is Changing, Not Disappearing

While online display and even search ads have their troubles, Forrester is careful to note that while intelligent agents might be hastening the end of advertising as its been traditionally practiced, it’s not the “end” in essence.

The ad spending that CMOs are advised to focus on are forms that involve relationship building and maintenance and personalization. Think of it as a merging of customer relationship management and placed messages aimed at promoting product and place discovery and engagement.

The use of branded content and developing entertaining and informative communications will give a brand’s consumers a specific reason to engage. Those ideas will become necessary attributes of marketing in the near term.

As gatekeepers and guides to online information, intelligent agents like Alexa will be able to provide the introduction between consumers brands — without interrupting the experience the consumer has chosen.

For example, both Domino’s and Starbucks saw the value in creating “skills” for the Amazon Echo platform. While neither probably saw any appreciable store lift from their respective experiments, by starting early it allowed them to get a head start and learn from the data they collect.

Furthermore, Forrester identified three models Domino’s and Starbucks have developed as a result of aligning with Amazon on Alexa: a skill translates into openness, partnership, and autonomous, depending on the brand loyalty, digital commitment, and data skills a company has.

The bottom line is that these intelligent agents and IoT sensors, supported by cloud-based Artificial Intelligence and delivered through multiple user devices, will enable 24×7 support, Forrester’s analysts write. These digital assistants “will access your data from every possible source – calendar, email, search history, media use, etc. – and will eventually have permission to monitor your conversations, your surroundings, and your well-being to anticipate moments where you need its help.

“This is what Alexa and Siri aspire to be, but it’s just as likely that WhatsApp or WeChat will scale up a PPA service,” Forrester adds. “When the dust settles, only a few digital platforms will have the power to make PPAs real and no brands will have the power to create their own PPAs.”

There’s Even Hope For Retail

The value of trusted, preferred brands will be given even more power as intelligent agents take center stage in consumers’ online-to-offline lives. After all, just as there is only so much room for apps on a user’s smartphone, there will be only so much interest to allow brands onto their connected devices.

But here, too, a level playing field is possible, Forrester notes.

The role of “data-driven recommendation” engines will serve as what Forrester calls matchmakers, suggesting brands and places to go that fit with a consumers’ expressed and proven interests.

“Some brands will make this matchmaking service a primary role of their brand, the way Trunk Club matches clothing to customers,” Forrester says. “xpand that service to include any product a customer could want, put AI behind it, and you have a matchmaking service of the future.”

Even retail, which has experienced destabilizing pressures in the face of on-demand and e-commerce, has a chance to regain its footing in this new digital environment.

Forrester predicts that the “Uber-model,” despite that company’s own travails, points the way for both big box brands and mom-and-pop SMBs. Success will depend on delivering personalization and immediacy.

“The corner store of yesteryear, where local entrepreneurs served their communities with local knowledge and personal care,” will find a resurgence, Forrester says. “Tomorrow’s mom-and-pop store will use cloud-based intelligence to continuously analyze the needs of individual customers, spitting out targeted recommendations and connecting via APIs to manufacturers and distributors to order product, manage deliveries, and handle customer care concerns.

“A new kind of franchisor will arise that equips these stores with the right tech, while letting them manage the look and feel of their own store,” the report concludes. :Just like Uber lets drivers own their cars and manage their lives, this new model will do the same for thousands of small, community- focused retailers across the country.”

About The Author
David Kaplan David Kaplan @davidakaplan

A New York City-based journalist for over 20 years, David Kaplan is managing editor of GeoMarketing.com. A former editor and reporter at AdExchanger, paidContent, Adweek and MediaPost.