Advertising, once a creative industry, is now a data-driven business reliant on algorithms. The implications are deeply sinister – not only for the consumer but for democracy itself
The advertising industry is currently enthralled by a prophet of its imminent demise. Scott Galloway is a professor at New York University’s Stern School of Business, and founder of a marketing consultancy. In a much-shared YouTube video, he delivers a talk entitled “The Death of the Advertising-Industrial Complex” to an audience of young marketers. In it, he argues that businesses can no longer rely on advertising to compensate for mediocre products.
Until the 1990s, says Galloway, the path to success lay in taking “an average beer, average car, or average suit” and wrapping it in appealing associations – this one makes you feel more elegant, this one makes you feel younger. Now, we live in an age in which the intangible haze of soft-sell is no longer necessary, and the battle for market share comes down to the raw strength of your product. “The sun has passed midday on brand,” he says.
Galloway, lean of frame, dresses in the austerely casual manner of technology entrepreneurs. Glasses with thick black frames perch on his shaven head. He begins his lecture, disarmingly, by warning that he can get things wrong: he once predicted Amazon would decline in value right before its stock began a record-breaking ascent. But there is nothing equivocal about his presentation. Traditional advertising is unforgivably wasteful, he says. “Nothing resembling targeting takes place. Ninety-eight per cent of what you see in broadcast media is irrelevant to you as an individual. I find that the advertising on Facebook and Google sucks less.”
These days, consumers are less likely to have favorite brands, since “their favorite brand is going to be whatever Google tells them at that moment is going to match their exact needs”. The brand getting the most buzz in the car industry is Tesla. “What’s different about them? No advertising. Innovation in the car industry is not about putting Cindy Crawford in a TV ad. It’s about building a better battery.”
Galloway closes with a cruel assessment of the ad industry’s relevance. “When’s the last time you saw an ad agency executive on the cover of Business Week? No one cares what they think. Don Draper has been killed, drawn and quartered. The big idea in advertising is a small idea nobody cares about.”
Until recently, it was possible to identify somewhere called “Adland” on a map. In New York, advertising agencies clustered on or around Madison Avenue, near the big department stores. In London, the action was in Soho, among the film and TV production houses. The industry was a small world, with all the collegiality and parochialism that implies. In both cities, ad agencies are now dispersed randomly around town, as if an earthquake had destroyed their habitat, forcing them to scatter in different directions. Once so sure of their place in the world, they now seem a little lost.
The earthquake, of course, was the internet, and the subsequent seizure of the ad business by technology companies. Between them, Google, Apple, Facebook and Amazon (about whom Galloway has written an acclaimed, critical book, The Four), have transformed advertising’s terms of trade. Clients pour billions into a digital ecosystem that revolves around Google and Facebook in particular. The ad industry, run by people who pride themselves on creativity, is being displaced by the ad business, which prides itself on efficiency. Clients are spending less on the kind of entertaining, seductive, fame-generating campaigns in which ad agencies specialise, and more on the ads that flash and wink on your smartphone screen.
The ad industry views itself as a field of applied artistry, a next-door neighbour to the entertainment industry. Though it often fails, it aspires to surprise, charm, move and delight people on behalf of its clients. The ad business is obsessed with data science, and distrusts the messy stuff of story, image and idea. The ad industry thinks of itself as the custodian of a brand’s meaning in popular culture. The ad business could not care less about such fluff. Instead, it seeks to identify the precise moment that a consumer needs something so that it can trigger a sale. Shopping, on its model, is essentially an engineering problem to which a satisfyingly logical solution has finally been found.
The ad business is largely automated. Clients only have to decide how many people they want to reach, and how much they want to spend; algorithms do the rest. In the milliseconds before a page loads on to your screen, a virtual auction takes place. Advertisers bid for the chance to place their client’s ad on it, based on data about your online behaviour: where you live, whether you’re young or old, recently shopped for shoes or searched for a car brand. The advertiser might create multiple ads and serve different executions to different slices of its audience. Some companies, such as Cambridge Analytica, claim to be able to target personality types using this method. The more valuable your particular profile is to the advertiser, the higher price its algorithm will pay the publisher to get an ad in front of your eyes. In this way, every scintilla of attention is transformed into money.
The ad business is insanely profitable. It has turned Google (worth $750bn) and Facebook ($600bn) into bloated zeppelins of cash. It is also the engine of the free internet, providing the funds for most of what you read and watch online. But the ad business has problems. Algorithms are poor at making judgements that seem obvious to humans, like whether or not a soap brand will be happy having its ads run next to an Isis recruitment video. Consumers have proved ungrateful for the increased “relevance” of the ads that pop up on their screens, partly because so many of them are bafflingly irrelevant. Tiring of the aggressiveness with which online ads insert themselves between them and the content they wish to see, more and more people are using ad-blockers to combat what they regard as infestation.
Clients have even started to question the ad business’s claim to efficiency. The model I described above is a simplified version of a dizzyingly complex system whose details few can fathom, involving multiple companies taking multiple fees. Unsurprisingly, fraud is rampant. It is estimated that at least a third of the audience for online ads are bots: criminal groups make millions of dollars selling fake clicks to advertisers and their agencies. Nobody can say for sure how well advertising on Facebook works, since Facebook refuses to share data with industry bodies. Because of concerns such as these, the world’s biggest advertiser, Procter & Gamble (P&G), cut its digital marketing budget by $200m in 2017 and reallocated the money to other media, including television.
Rather than recovering lost ground, the ad industry is paralysed by an identity crisis. Most agencies are owned by a handful of global advertising groups, such as Omnicom or WPP, founded by Martin Sorrell, which have moved their operating firms out of homes in expensive parts of town and into anonymous office blocks, partly to disguise the deterioration of their core business. The groups have made a half-hearted attempt to transform themselves into data-driven technology companies, but have succeeded only in legitimating the overblown claims of their competitors, and disappointing the stock market.
Ad agencies no longer seem to know what they are for. Their executives like to declare that they don’t work in advertising, since “ads” are associated with a pre-internet world. Yet when asked to say what it is they actually do, they become vague (“communication”) or grandiose (“create culture”). The industry is Balkanised, the engineers talking a different language to the storytellers. Scott Galloway’s lecture articulates the worst fear of the latter: that there is no need for them any more. Yet not everyone is ready to accept redundancy.
“Flowers are ads. Peacocks’ tails are ads.” Rory Sutherland, vice-chairman of Ogilvy & Mather, and the ad industry’s most vigorous defender, is in full flow over lunch at his agency’s offices in Blackfriars. “One reason I’m not predicting the death of advertising any time soon is that you can see how important it is in nature. A flower is basically a weed with an advertising budget.”
Sutherland believes that something in the mindset of technologists makes it hard for them to see or admit the value of advertising. Peter Thiel, one of Silicon Valley’s more unconventional thinkers, once observed that “nerds are sceptical of advertising, marketing and sales because they seem superficial and irrational. But advertising matters because it works. It works on nerds, and it works on you.” Engineers tend to conceive of advertising – insofar as they think about it at all – as a mere conduit for information about the product, which in their mind should speak for itself, without the superfluous operating system of a brand. Rory Sutherland argues that efficiency is overrated, and that excess and superfluity are weapons that marketers surrender at their peril.
“Knowing that the seller has faith in their product is a hugely valuable piece of information,” he says. “In luxury goods, for instance, the ad says almost nothing; the cost of the ad almost everything.” Biologists regard the peacock’s tail as an expensive and so unfakeable signal of fitness – a sexual status symbol.
Similarly, an ad can emit a powerful signal about a brand, regardless of information content. Online ads are cheap and easy to make, but the problem is, they look it. “You don’t invite people to your wedding by email,” says Sutherland.
Sutherland is somewhat peacockish himself, his generously proportioned figure clothed in tweed and red corduroy, his speech bubbling with jokes, analogies, and asides on Austrian economists. What the ad industry brings to the corporate world, he says, is something it cannot afford to do without, even if it doesn’t know it: absurdity. Successful marketing must not be too rational because, as in military strategy, it depends on surprise. “In battle, if you’re always efficient, you’re predictable. In marketing, you have to do something slightly absurd in order to be distinctive – in order to avoid making competition a kind of race to the bottom.”
It isn’t enough for a signal to be costly or surprising, of course; it has to resonate with an audience. An axiom of the data-driven ad business is that an ad should be as tightly targeted as possible. Why waste money reaching millions of people when most of them are not in the market for your product? P&G’s top marketer, Marc Pritchard, a critic of Facebook, is nevertheless a devout believer in what he calls “one-to-one brand building”.
But the doctrine of micro-targeting has a major lacuna. It is only by being visible to everyone at once that advertising can perform its most valuable role: shaping the cultural meaning of a brand.
Before Christie’s sold Leonardo da Vinci’s Salvator Mundi in 2017, it staged high-profile public exhibitions of the painting around the world, and made an expensively produced video to showcase it – in effect, an ad. On the face of it, all this activity was a flagrant waste of money: almost nobody who consumes the marketing for a da Vinci is in the market for it. Christie’s salespeople knew all the potential buyers personally. They can, and did, visit them in the privacy of their penthouses.
Yet Christie’s realised that those buyers would pay an extra few million for the privilege of owning a painting that was “iconic”. This isn’t some quirk of billionaire art collectors; it’s human nature. We value things more highly when we know that others value them.
In his 2001 book Rational Ritual, the academic Michael Suk-Young Chwe argued that advertising solves what economists call a “co-ordination problem”. It helps us to see the world as others see it, and adapt our behaviour accordingly. If I know that a particular beer brand is associated with “quality” in the eyes of most people in the bar, then I will find it easier to drink it in public, regardless of my own personal preference, presuming I even have one. That wouldn’t be the case if I didn’t know that those people have seen the same ads as me. Being able to solve a problem like that is highly valuable for a brand, which is one reason why the cost of Super Bowl TV advertising has risen so steeply in the era of the internet: a 30-second commercial in 2018 cost about $5m, up from $1m in 1995. Messages can be microtargeted, but meaning has to be mass-produced.
Trust, too. The very act of advertising in public tends to make a brand more trusted, since people can see it has a social reputation to maintain. When ads are invisible to people outside their target audience, it is easier to send messages that would fare badly in the light of public scrutiny – for political actors, Facebook is a dog-whistler’s paradise. Researchers have consistently found that ads in broadcast media are taken more seriously than online ads: one reason for this is that people can see that other people can see them too. Even Mark Zuckerberg understands this at some level. Seeking to restore trust in Facebook in the wake of the Cambridge Analytica scandal, he ran full-page ads in newspapers.
The need to have a meaningful brand forces a company to reflect on how it wishes to be perceived by society at large. Once that imperative disappears, all that is left is the battle for attention.
All gravy: Lynda Bellingham’s Oxo family were on our screens throughout the 1980s and 1990s
It’s weird,” says Tom Goodwin, a prominent advertising executive and author of a new book, Digital Darwinism. “Adverts have never felt less significant, ad agencies have never seemed less important, but the advertising business has never dominated more aspects of modern life. Mostly in a bad way.”
In a recent article for the New York Times, the sociologist Zeynep Tufekci recounted how, during the 2016 presidential campaign, she watched videos of Donald Trump’s rallies online, and noticed that YouTube started recommending and “autoplaying” videos of white supremacist rants and Holocaust denials. Curious, she set up another YouTube account and watched a lot of Hillary Clinton and Bernie Sanders rallies. She was soon being directed to conspiracy theories about 9/11 and secret government agencies.
Tufekci found the same pattern on non-political topics: videos about vegetarianism led to videos about veganism; videos about jogging led to videos about ultra-marathons. The stakes were always being upped. YouTube, she concluded, was a “radicalising instrument”. That isn’t, she says, because YouTube’s engineers are zealots. It’s because Google (YouTube’s owner) is selling attention to advertisers, and its algorithms have learnt that the best way to keep people hooked is to push ever more extreme material on them.
Attention was always important to the ad industry, but so were entertainment and storytelling, since what makes a person laugh, think or cry is more likely to be remembered. Historically, ads in broadcast media needed to be memorable, because they were not going to be seen very often, and would be absent at the point of purchase. It was important, therefore, to “build a brand” – a set of visual and emotional associations easily recalled to mind when deciding between options. At the supermarket, a shopper was more likely to reach for Oxo than other stock cubes, because its long-running TV campaign, featuring Lynda Bellingham, was funny and acute enough to have forged a link in the public imagination between Oxo and the consoling rituals of a British family meal. Oxo was instant gravy wrapped in cultural code, or perhaps cultural code disguised as instant gravy.
Now that people carry media around with them everywhere, advertisers have less incentive to create memorable brands. Instead, they concentrate on forcing our attention towards the message or offer of the moment. The ad business doesn’t care about the future of its audience, only its present. That has had far-reaching consequences.
In 2016, Facebook in effect charged the Trump campaign lower rates than the Clinton campaign, because Trump’s ads made people angrier and thus generated more clicks. Nobody took a decision to charge Trump less. It was the logical outcome of the ad business’s core principle: the more attention you win, the more you get paid. Since negative emotions are more likely to win and hold attention than positive emotions, the system has an incentive to spread fear and loathing. Russia’s entire propaganda campaign relies on an advertising model that rewards paranoia and spite.
Meanwhile, we stoop over our phones when we should be doing almost anything else. A senior analyst at the Bank of England recently published an article making a case that one of the causes of Britain’s poor productivity is the spread of smartphones. A comprehensive US study, sponsored by the National Institute of Mental Health, identified a strong association between social media use and depression. It’s not just Facebook: every app on your phone is engineered to hook and hold your attention, at the expense of your work, sleep, family and mental health. Every app with ads, that is.
Scott Galloway is only the most eloquent exponent of the view that brand-led advertising is a vestige of a less rational world, to be superseded by a more scientific system (at the now legendary congress of Online Marketing Rockstars, Alexander Nix, then chief executive of Cambridge Analytica, gave a presentation entitled “From Mad Men to Math Men”). But if there is a bug in the software, it is the human mind. The way we choose what to buy, like the way we choose how to vote, will never be logical. Trying to make it so has created an environment in which our basest impulses are relentlessly stimulated and amplified.
The philosopher Gilles Deleuze once remarked, “It is not the slumber of reason that engenders monsters, but vigilant and insomniac rationality.” If ever there was a creation of insomniac rationality it is the 21st-century advertising business. Its monsters roam the planet.
Ian Leslie is a writer who also works as a strategist in the advertising industry. He is on Twitter @mrianleslie