Deep Dive

Latest analysis of SVOD growth rates from tech and telco analyst Telsyte proves one thing: fear of streaming services losing subscribers by pivoting to ads is overblown: They’re growing – though some more than others. MD Foad Fadaghi says ads, plus AI personalisation, integration and format innovation, will power the next cycle but streaming growth has peaked. Omnicom investment chief Kristiaan Kroon suggests Stan, Nine’s ad-free holdout, should heed that lesson because Nine has something globals like Netflix and others do not: “Sophisticated, at scale, sales infrastructure, which means they could make really good money.” That's crucial given the number of streamers selling ads is set to double within 12 months – and a market this size can't sustain all of them.

For anyone in ecom or performance marketing, it’s time to downweight ROAS and ROI and laser focus on unit economics, says former investment banker (her last big deal was the Myer float) turned entrepreneur Carla Penn-Kahn. She was early into ecom and left Credit Suisse to launch four of her own – Kitchenware Australia, A Gift Worth Giving, Everten and Buy My Thing. But she sold her last venture last year when she realised it had hit peak profitability. With performance ad prices doubling in four years, and Amazon reaching full speed, the unit economics weren’t going to get any better. Penn-Kahn thinks direct-to-consumer trailblazers now face the same dilemma, because they can no longer sustainably scale through advertising and VCs are sharpening their bottom line focus as much as the top.  Hence she’s cool on the outlook for many, but particularly the likes of The Iconic, Temple and Webster, Adore Beauty and Australian marketplaces like Woolworths-owned Catch, which last week put a $96m dent in Wesfarmers’ balance sheet. Loyalty programs and retail media offers a lifeline for some, per Penn-Kahn, but most DTC brands don’t have the latter option.

The effectiveness “revolution” is colliding with the AI-spawned efficiency uprising and it’s leapfrogging the early consensus on AI use cases in marketing around automating personalised content and communications. So much so Mark Ritson choked on his Wellfleet oysters when Jon Lombardo and Peter Weinberg told him they were leaving top jobs at LinkedIn-backed thinktank, the B2B Institute. Then they told him why. Ritson promptly joined their venture, along with what Weinberg calls “the advisory board to end all advisory boards”.  Thus the synthetically-enhanced AI marketing outfit Evidenza was born. The founders claim their new piece of “synthetic customer” tech – which starts with creating AI copies of target customers – creates 95 per cent accurate customer responses. I.e. it mimics company CEOs, CFOs, CTOs, CIOs, CROs and the rest with strong correlation to the real thing. Those customers are really hard to find within B2B markets, which is why research is so expensive and takes so long. EY’s CMO – and a long list of others – verify that claim, because they’ve tested it head-to-head. “It can imitate essentially anyone by gathering and synthesising massive amounts of data,” per Weinberg. Evidenza claims it can also synthesise marketing strategy, science and the “pantheon” of effectiveness gurus, like Byron Sharp, Jenni Romaniuk, Karen Nelson-Field, Les Binet and Peter Field. Which means marketers can ask them what they ‘think’ of their plans. Evidenza has already cloned Ritson to deliver “a finance friendly marketing plan that used to take months in minutes”, per Lombardo. “Well, maybe a day.” Weinberg acknowledges cussing is a challenge. But they are actively debugging.

Apple hobbled much of the digital ad industry in the name of privacy, conveniently kneecapping rivals like Meta in the process. But after Google, the US Justice Department is coming for Apple – and it alleges those claims of privacy are nothing more than “an elastic shield that can stretch or contract to serve Apple’s financial and business interests”. The DoJ pulls no punches, claiming: “Apple wraps itself in a cloak of privacy, security, and consumer preferences to justify its anticompetitive conduct … In fact, many alternative technologies that Apple’s conduct suppresses would enhance user security and privacy,” per the filing. “Apple is also willing to make the iPhone less secure and less private if that helps maintain its monopoly power. Similarly, Apple is willing to sacrifice user privacy and security in other ways so long as doing so benefits Apple.” A conga line of US states have joined the action, spearheaded by the same antitrust chief that convinced a federal court this month that Google is indeed a monopolist. Here’s what Apple’s accused of and must now defend against.

Part Two: After last week's instalment with S4 Capital's founder and former WPP boss, Sir Martin Sorrell – in which he explained why the market cap of his next generation marketing services firm had plummeted from £5 billion to £300 million in the past three years – he's back for part two. We cover the consolidation of the $700 billion global digital ad market down to a handful of global tech media players. Is that dangerous for brands and the broader marketing supply chain? Maybe, but Sir Martin thinks they're only going to get bigger. Plus, we go deeper into AI and mass personalisation – Netflix style – along with the dodgy, inaccurate, but thriving online user data trade that was revealed a month or so ago by UM's former chief privacy officer, Arielle Garcia (which is now Mi3’s top podcast and story so far this year). For the record, Sorrell agrees with Garcia: “Garbage in, garbage out ... There are some murky parts of the market, but that's our role to expose that, not to be a part of it.” Either way, he thinks the platforms will only get closer to marketers at the expense of intermediaries – and there is little agencies can do to stop it. Plus, he says OpenAI chief Sam Altman, who reckons AI will displace 95 per cent of advertising jobs, is “directionally right”. The timeframe? “Three years,” per Sorrell. “It’s going to be uncomfortable.” Conversely, Sorrell says the big platforms won’t be shrinking any time soon. On a GDP basis, “these are countries, they are not companies anymore.” He thinks that means regulation, unless co-ordinated globally, is ultimately powerless.

Part One: It's been three years since Sir Martin Sorrell was last on the Mi3 podcast – he declared then a mea culpa of sorts: he didn't, and couldn't, transform WPP, the giant marketing services holding company he founded in the 1980s, fast enough because it was listed, hampering transformational efforts that would likely spook the investment community. At the time in 2021, Sorrell’s next generation digital holding company, S4Capital, was firing with a market cap of circa £5 billion (AUD$9.6bn), just three years after a street fight with WPP’s board saw him exit and build WPP 2.0. He was bleak on the future of his old British firm, along with WPP’s French and US-based global holding company rivals. But since then S4Capital’s market cap has plunged more than 90 per cent to £300 million (AUD $582m) as the tech sector, representing 45-50 per cent of S4’s £1bn in revenues, slashed their own marketing budgets globally. But there’s more to it – another mea culpa even – and more of Sorrell’s scorecard on his big holding company competitors along with Accenture Song’s dive into media, a move peculiar to Australia, he argues.  

B2B buyers across 515 brands – including Tesla, PepsiCo, Delta, Pfizer, Hyatt and Comcast – add heft to a growing body of evidence that B2B marketing is literally missing half of decision-makers and losing trillions of dollars in deals annually as a result. The Bain-backed study, by LinkedIn-funded think tank The B2B Institute, suggests “hidden buyers” influence half of the buying process and have very different requirements from target buyers. They don’t care about features, it’s all about downside risk management, AKA backside covering. It means lead generation, measurement, KPIs and fundamentally, brand-performance strategies are all wrong. Those that flip the model and think of B2B marketing as “buyer group marketing” and brand as “deal risk insurance” will unlock massive upside, fast, say B2B Institute founder Jann Martin Schwarz and EMEA and LatAm lead, Mimi Turner. Schwarz is staking his reputation on it.

There’s little contention today that the pro-consumer privacy lobby is winning the war over industry on privacy reform – they’re informed on industry techniques, loaded with compelling consumer research and aligned entirely on the need for a clampdown on the collection and use of an individual’s online data trail. Former NSW Deputy Privacy Commissioner and Salinger Privacy boss Anna Johnston and Choice Consumer Data Advocate, Kate Bower, unpack what and why they expect a series of hard, industry-challenging privacy reforms to land in parliament next month - that’s less than six weeks away. Just how deeply the $25bn-plus marketing supply chain and tens of thousands of practitioners will be impacted will become clear as the reforms are tabled in Federal Parliament. Johnston and Bower think the updated Act will go harder than anywhere in the world. Hashed emails will be classified as personal information. Trading of geolocation data will be out. Trading of loyalty scheme data – the stuff that powers retail media and a vast targeting-attribution industry – will require companies to prove they have lawful consent to do so and they won’t be able to deny services to those that say no. But consent, says Johnston, is a very fragile thing – and companies might actually be best off concentrating on one of the legislation’s central tenets: Fair and reasonable use of data. In other words, says Choice’s Bower, does what you are doing with customer’s data pass “the privacy pub test?” If it does, meeting a very high consent threshold doesn’t apply. Right now, most are badly flunking the test. 

Former UM privacy chief Arielle Garcia knows the $700bn global digital ad industry is founded on trading “useless, garbage data” because a) she spent a decade in media ops and compliance and b) she’s accessed her own profile from adtech vendors. The result? 500 laughably contradictory audience segments where she is simultaneously woman and man, below and above the poverty line and works in food service and defence contracting. Now director at ad watchdog Check My Ads she’s going all out to prove to marketers the “fallacy” of the “precision illusion”, shine a light on warped priorities and incentives between advertiser, agency and big tech – and the industry associations she says have been “captured” – and help publishers survive an extinction level event as Google pushes deeper into AI powered search and ad placement. Garcia says everyone else – including holdco bosses – are “afraid” to speak out. She also wants some help on one tracking-specific question that nobody seems able to answer.