George Orwell certainly produced some acute political observations in his time. But he failed to fully appreciate the commercial dimension to the surveillance society.
All this came to mind when I was on YouTube recently, watching a classic rugby league encounter between Warrington and Wigan from 1988. It wasn’t so much the course of the game that threw me off-kilter – two brawls, four players sent off and one sin-binned – but the sudden appearance of Robin Horsley, an independent candidate for my local seat of Mole Valley.
It’s not as if I thought that Robin Horsley was staring back at me through a telescreen, but the realisation that someone was attempting to influence my politics via the global positioning system made me feel a tad uncomfortable.
It may simply be the political angle that threw me. By now, everyone would have experienced the power of the algorithm. How many times have you searched online for, say, a holiday, only for your preferences to show up the next day on your work PC or mobile handset? Your consumer choices now follow you from the cradle to the grave.
But for advertisers, the main kicker is that digitalisation enables a far more targeted approach. In the past, agencies might have relied on demographic classifications (C1, C2, etc), but socio-economic factors are giving way to an individually tailored approach.
There are a growing number of ways that advertisers and other interested parties can target individuals online. Hardly surprising given that there are 3.5bn search queries on Google every day, but the industry has moved well beyond paying platforms to advertise commercial content on search engine results by utilising relevant keywords.
Amazon’s (US:AMZN) Alexa platform employs voice optimisation for searches, although it doesn’t allow targeted advertising through searches (at least for now). Products and services feature on Alexa through branded offerings when users access relevant content – think Spotify Technology (US:SPOT) – or when they require specific skills information. For example, US household products giant Procter & Gamble (US:PG) has a presence on Alexa through a service that gives step-by-step instructions for the removal of every type of stain. This service offering is branded under the group’s Tide laundry detergent product.
For advertisers, it’s a case of assessing the context in which consumers interact with a given product, but many established agencies have struggled to adapt to evolving commercial models. Traditional media remains the priority for most big brands, but enterprises – large and small – now look more closely at a targeted approach to advertising, which is where the likes of Amazon and Instagram excel. The platforms can instantaneously provide insights for clients on consumer traffic and engagement, while offering much greater flexibility.
It could make one question the logic behind the decision by agency heavyweight WPP (WPP) to sell a controlling stake in Kantar, its global data, research, consulting and analytics business to US private equity outfit Bain Capital for an undemanding multiple of eight times 2018 earnings. True, the involvement of Bain could drive near-term efficiencies, and the cash won't go astray, but Kantar’s capabilities in data analysis could prove invaluable at a time when the advertising industry is struggling to contend with the 'one-stop shop' service on offer by tech platforms.
Advertising services company Zenith’s Advertising Expenditure Forecasts indicate that the internet will account for 52 per cent of global advertising expenditure in 2021, exceeding the 50 per cent mark for the first time. By 2023, it should be worth in the region of $518bn (£398bn), representing a cumulative annualised growth rate of 16.25 per cent over the previous five years. That rate of growth is clearly unsustainable given the online advertising market is beginning to mature, but the only question is whether the likes of WPP and Omnicom (US:OMC) can successfully coexist with the algorithm.
