Advertising “In Structural Decline”: NYU’s Scott Galloway
As new technologies change the way companies interact with customers, NYU Stern marketing professor Scott Galloway has predicted advertising’s death as the value chain upon which brands are built is reshaped, and capital re-allocates from traditional media into product innovation, discovery and distribution.
In arguably the best presentation at Cannes this year, Galloway stated – a belief he has since repeated – that the sun has passed midday on the role of traditional brand as a function of broadcast media.
He said the traditional channel-customer relationship managed by a push approach in communication, where an average product with great advertising was the brand building algorithm, is over.
“Simply put you want to be a builder, not a brander – great products breakthrough,” Galloway said.
“It is not that brands do not matter – it is they just don’t matter as much.”
According to Galloway, traditional brands as we know them are declining in value due to digital “diligence tools”.
He said the tools of product discovery have turned from broadcast to Amazon, TripAdvisor, social media and search, and therefore consumers now no longer need to defer to a brand.
“Their favourite brand is going to be whatever Google tells them at that moment it matches their exact needs,” Galloway said.
In fact, the percentage of consumers that can identify their favourite brand across key categories has declined by somewhere between 30 and 50 per cent, Galloway added.
Consequently, the traditional media industry is on the wrong end of this change in consumer diligence, and TV specifically is ripe for disruption, he said.
Galloway noted that TV has raised its prices faster than inflation but with no underlying increase in productivity, innovation or effectiveness.
“There are going to be more people with Amazon Prime subscriptions than cable in the US in seven years’ time,” he said.
“The people who are cutting cords are young and wealthy, so effectively they are exiting the platforms where they can be exposed to traditional marketing.”
Galloway said innovation, as well as the young and rich, are going to non-ad-supported programming where the storytelling is not interrupted by ads.
He said that these over-the-top platforms are growing 30 per cent year-on-year, while all the ad-supported media is in decline.
“You pay a price to effectively exit the advertising ecosystem,” he said.
“I think advertising has become a tax that only the poor and technologically illiterate pay.
“Anyone with any money is going to have the technology and the ability to start avoiding most advertising out there.
“Advertising is not a great business – it is in structural decline.”
Galloway predicts this will put a strain on advertising industrial complex as capital re-allocates from traditional advertising into product innovation, and also into direct-to-consumer retail.
He noted that Apple spent almost 50 per cent less of its revenue on advertising, compared to Samsung, who dominates digital advertising and has chosen to re-allocate its capital into stores.
“Samsung may come out with a better product in the next few months, but it will take them about ten years to match the brand of Apple,” he said.
“Apple has taken about $4 billion in a year and allocated it into 450 retail stores such that no matter how cool Samsung’s VR is, it is never going to match the brand capital that Apple has invested in their unbelievable purchase temples to the brand that Apple calls their stores.
“But with Samsung, you are still going to have to walk into a Verizon or AT&T store and talk to someone with a name badge on who does not really know how to sell the product.
“Apple’s core competitive killer product is not their iPhone – it is their stores, and they are the most productive retail stores in the world.”
Galloway said retail stores dying and going out of business is a myth.
“That is bullshit,” he said.
“The middle class are dying. Stores in wealthy neighbourhoods are doing just fine.
“Show me a middle-class neighbourhood, and I will show you all businesses are going out of business, including stores.
“General Growth Properties and Simon [Property Group] are the largest mall developers in the US. Moreover, their stocks are at an all-time high. Why? Because they own malls where rich people live.”
Galloway said the brands that are doing well, with the most visibility, are those that re-allocate capital from broadcast advertising into product innovation, innovative product discovery and distribution.
“How much does Tesla spend on traditional advertising? Zero,” he said.
“The big idea in the auto industry 20 to 30 years ago was ‘let’s have Cindy Crawford talk about Cadillac’ or ‘let’s call the Volkswagen a lemon’.
“Now all the big ideas in the auto industry are around product innovation like self-driving cars and self-parking cars.
“It is the reallocation of advertising dollars into R&D.
“If you look at the companies that are winning, they all spend a disproportionate amount of capital on products trying to make a better product, because better products break through the algorithm.”
Galloway said the death of advertising will also hurt companies who have built great businesses on traditional media, specifically consumer packaged goods (CPG) brands.
“CPG is the house that advertising built,” he said.
“Of the top 100 CPG brands in America, 90 per cent lost share and two-thirds of them lost revenue.”
Galloway attributes this to every aspect of CPG being attacked by a well-financed player who is exiting the advertising ecosystem and investing in subscription models.
“If you look at Google Search – a great proxy for brand equity – you will see the Honest Company has more searches than Pampers or Huggies,” he noted.
“Moreover, you will see the same thing with Dollar Shave Club versus Gillette, which used to have an 80 per cent market share.”
Galloway argued that subscription is a better business model because it creates a sufficiently large lifetime value that enables a brand to invest into customer acquisition.
He said recent behavioural research supports the idea people have limited bandwidth to make decisions. Moreover, the more daily decisions people have to make, the greater the likelihood they will make a bad decision.
“I think the reason we are moving towards a subscription-based economy is young people are figuring out if you take every non-critical decision in your life and move it out, you can focus your limited bandwidth on decisions that matter,” he said.
The top advertisers in the world have not changed much in 50 years, and according to Galloway, data analysis reveals the world’s biggest advertisers are losing share of revenue relative to GDP.
In a bid to reverse this trend, some of the largest brands are moving towards new business models to recapture market share.
“P&G are now investing in Amazon dash trying to make CPG products with recurring revenue,” Galloway explained.
“They are reducing their ad spend as a percentage of sales in the last three years.
“The writing is on the wall – the biggest advertisers in the world are reducing their ad budgets and reallocating capital out of traditional marketing.”
Latest News
Sydney Comedy Festival: Taking The City & Social Media By Storm
Sydney Comedy Festival 2024 is live and ready to rumble, showing the best of international and homegrown talent at a host of venues around town. As usual, it’s hot on the heels of its big sister, the giant that is the Melbourne International Comedy Festival, picking up some acts as they continue on their own […]
Global Marketers Descend For AANA’s RESET For Growth
The Australian Association of National Advertisers (AANA) has announced the final epic lineup of local and global marketing powerhouses for RESET for Growth 2024. Lead image: Josh Faulks, chief executive officer, AANA Back in 2000, a woman with no business experience opened her first juice bar in Adelaide. The idea was brilliantly simple: make healthy […]
Is Meta’s New AI Chatbot Too Left-Wing?
Meta's chatbot accused of being left-wing after being caught wearing a Che Guevara T-shirt & listening to Billy Bragg.
TV Ratings (23/04/2024): Why Did No One Tell Angela That Farmer Wants A Wife Is Set On A Farm?
As wonderful as this headline is, let's face it, we all know an 'Angela', don't we?
PubMatic Unveils New AI Partnership To Turn Social Posts Into Ads For Any Digital Channel
Here's some nifty tech for turning social posts into ads. Assuming said posts aren't one-star character assassinations.
Intuit Mailchimp Makes A Splash With Its First Australian Brand Campaign
Ever laugh along at a gag you didn't get so as not to appear dumb? Get ready for more feigning with this new work.
GumGum’s Rob Hall: Advertisers Can No Longer “Rely On Binary Descriptions” Of Consumers
If anyone's got their finger on adtech's pulse, it's Rob Hall. He also avoids using the good paper in the office printer
Mastercard Nabs Florencia Aimo From Marriott International
Marriott International's Florencia Aimo jumps from the hotel business to the exploitative credit card one.
Bastion Agency Appoints Cheuk Chiang As New ANZ CEO
Cheuk Chiang takes the reins over at Bastion Agency. But not the rains down in Africa.
Spotlight On Sponsors: Major Sponsorship Wins After A Disappointing Week In Sport
B&T continuing our deep dive into local sport sponsorships & that's despite not a single offer of a free ticket as yet.
Macca’s Marketing Director, Samantha McLeod On Big Mac Chant: “What Was Once Old Is Now Cool Again”
Macca's using the power of nostalgia in latest Big Mac campaign. Well, only for those who've ever eaten one sober.
World Premiere Of Midnight Oil: The Hardest Line To Open Sydney Film Festival 2024
Oil's biopic to open Sydney Film Festival. Here's hoping Molly Meldrum will take his pants down at the premiere.
Entries Are Now Open For The 2024 Brandies, IntelligenceBank’s Annual Brand Marketing Awards
The Brandies are, of course, a prestigious marketing gong and not the mystery tipple favoured by nannas everywhere.
The Fred Hollows Foundation Appoints Ardent For PR
Yes, we all like to have a joke at PR's expense. But sometimes it does important work, like this.
AI, eCommerce & Marketing Specialists Are In Increased Demand By Businesses, New Data From Fiverr Shows
Has your philosophy & anthropology degree left you with nothing but a huge HECS debt? Here's what you should've studied.
Perth’s First 3D Anamorphic Billboard Arrives Courtesy Of oOh!media
Do you love a buzzword? Now you can add anamorphic to the list as it relates to billboards, not a colleague's ears.
MasterChef Australia & Crown Resorts Launch Unique Dining Experience With ALUMNI
A pop-up restaurant staffed by MasterChef contestants! That's fine dining prices for first-year apprentice chef cuisine!
Amanda Laing Announces Resignation From Foxtel Group
Foxtel's chief commercial & content officer heads for the exits. Read nice things the bosses said about her right here.
The Lost Letters From Our Diggers: News Corp Unveils ANZAC Day Special
It's nice when brands respectfully acknowledge ANZAC Day.
Howatson+Company Acquires Akkomplice
Large indie acquires a slightly smaller indie. Much like a shark eating a tuna, just with less thrashing and blood.
Google Delays Third-Party Cookie Deprecation Again
In good news for the sale of picture library biscuit photos, Google continues to tease over the end of cookies.
Education A Low Priority For Aussies More Concerned With Cost Of Living Forethought Study Reveals
Study finds Aussies cutting back on education due to cost of living. Booze & Uber Eats sales remain largely unaffected.
“I’m Still The Same Person That I Was”: Rikki Stern Says “Fucc It” To Cancer Stereotypes
B&T always happy to promote the anti-cancer cause. Even brands that massively overdo it with the hot pink.
The Unapproved Climate Certification Allegedly Causing Mass Greenwashing
Are you left flummoxed in the canned tuna & free range eggs aisle? Just wait till this green certification gets up.
TV Ratings (22/04/2024): Fans Mock “Over The Top” Reaction To New MasterChef Judges
MasterChef returns for its 2024 season. B&T stands by putting peppercorns in Gravox & no one will be any the wiser.
Dentsu Restructure: Muddle, Harvey & Johnston Take Leadership Baton As Bass & Yurisich Exit
A large broom has swept through Dentsu's local ops this morning, taking with it some big names & the air con's cobwebs.
Industry Shares Trends Shaping The Industry This International Creators Day
B&T's asking adland creators to reveal their top trends. And it's not good news for your Jenny Kee cardigan collection.
Mable Extends HOYTS Sensory Screenings Partnership
Mable has extended its HOYTS sensory screening partnership. Vigorously defends its two-star Oppenheimer review.
Orphan Launches ‘They Need Our Help. We Need Yours’ For Children’s Cancer Institute
Anything to do with childhood cancers has B&T's 110% support. That said, we do ignore the red meat & alcohol warnings.
Smile Team Orthodontics & Keep Left Collaborate On Smile-Inducing Campaign
As parents would attest, given the cost of orthodontics you'd expect this campaign to be a lavish production indeed.
Opinion: How Video Calls Neglect Learning Diversity
Need an excuse to duck out of a video call this arvo? Show this to your boss.
DoubleVerify Achieves First-Of-Its-Kind Responsible AI Certification From TrustArc
DoubleVerify receives responsible AI certification. However, not its robotic vacuum that's been seen menacing the cat.
Smile For A Good Cause: The Social Media Campaign Giving Back To The Community
Are you known as the office Austin Powers? More for you teeth than shagability? Get snappy new fangs with this news.
Elon Musk Mocks Albo After ESafety Wins Court Injunction Against X
Albo's 2024 from hell continues - Rabbitohs in crisis, down in the polls and now feuding with world's richest man.
Real Estate Developer In Hot Water Over “Sexually Exploitative” OOH Campaign
Real estate agents again tops in the 'least trusted profession' polls, nudging used car salesmen & ad creatives.
Epsilon’s Shane Hanby: Post-Cookie Era Relies On “Teamwork” Between Brands, Marketers & Tech
This pro predicts more "teamwork" in a post-cookie era. Which spells bad news for the uncooperative or plain stubborn.