In 1994, then Procter & Gamble president Ed Artzt predicted that consumers would someday be in control and shun advertising altogether unless the industry changed. He warned that based on the trend that technology was taking, “if we don’t influence [changing technologies] – and if we don’t harness them – loyalty to our brands could suffer in the long term…If user fees replace advertising revenue, we’re in serious trouble. New-media suppliers will give consumers what they want and potentially at a price they’re willing to pay.”
20 years later, his portent is coming true. In 1994, 35% of content was viewed through subscription services that contained zero ads, and today that number has nearly doubled, with 60% to 65% of all content coming from such paid services. These statistics are cited by Rishad Tobaccowala, chairman of Publicis Groupe’s DigitasLBi and Razorfish, who says that for $60 per month (the sum of subscription costs for ad-free services such as Netflix, HBO, Showtime, Hulu, Spotify, or Pandora) more and more consumers are paying to view “the best content in the world without ever seeing an ad.” Even technology giants Google and Facebook are having trouble finding advertising formats that work for both advertisers and customers. Moreover, except for a short upswing from 1994 to 2000 during the dot-com rise, ad spending fell over the past decade and hasn’t recovered from the 2007-2009 recession, according to Zenith Optimedia.
So what’s an advertiser to do amid these troubling trends for the industry? P&G Global Brand Building Officer Marc Pritchard advises that “you have to follow the consumer, who has all the power,” and so “we’re trying to make sure our content is really tailored toward the brand promise and the people find it interesting as opposed to creating the entertainment content we did in the past.” What does this mean? Mr. Tobaccowala argues that “marketers, agencies and everyone else now have to think of new ways of engaging with people,” where advertising must not just entertain consumers, but connect meaningfully with their needs. It seems Artzt’s forecast in 1994 has indeed become an industry truth: consumers are the ones in control, and they are spurning advertising in the process.
This trend seems to underscore an increasingly strong phenomenon that businesses are facing today: the rise of freedom. As the findings of the Freedom Report show, businesses that offer consumers “freedom from” hidden charges and misleading contractual conditions, and confer the “freedom to” flexibly fulfill their needs and to exercise new forms of power, gain a significant competitive advantage over peers that do not. And it’s precisely this trend that the advertising industry seems to find itself caught up in, where ad-free subscription services such as Hulu and Pandora are offering consumers the freedom to enjoy their content whenever they want, wherever they want, and without the restrictions of traditional advertising.
The new challenge facing the advertising industry, then, is finding ways to promote the freedom of consumers that has become a difference-maker for businesses today. At a time when advertising is seen as something that we want to be free from, doing so may require that the industry undergo a brand makeover of its own.
This article is informed by an article from AdvertisingAge that can be found here.