The New Mad Men of Advertising

Written on August 1st, 2013

Anyone else notice that some of the biggest names in tech are really just modern advertising companies? Google’s search-driven ad business is by far the largest and then there is Facebook’s rapidly growing targeted social advertising. But even Amazon is really just a smart marketer (with logistics) and many of the other big Internet names like Twitter are also advertising driven. About 22% of global advertising is now digital according to eMarketer and this is expected to grow significantly.

So how is the old advertising world coping with the arrival of this new threat? Judging by the $35 billion merger we just saw announced of advertising giants Omnicom and Publicis, it is scrambling to cope with the rapid changes.

Let’s contrast the new world and old world: If I want to sell dishwashers, I can use the old world to come up with a nice jingle and place a some spots on television or in print and hope for the best… or use the new world to make sure my website is the first link that comes up when someone searches “Dishwashers” in Google. Which one to think is more effective?

Or if we are trying to pitch a new affordable sports car to young men, I can use the old world to run a broad campaign on TV, Print and Radio … or in the new world I can use a social networking tool from a company like Appinions (one of our private investments) to identify the major sports car influencers on Facebook and Twitter and target a campaign to reach them.

If I want to sell high fibre cereal to the health conscious, I can use the old world to hire William Shatner to pitch it on TV … or in the new world use the “real time bidding” technology of a company like EQ Works (another of our investments – EQ.TO) that enables me to place online targeted adds only on web pages being viewed by people that have looked at other health food or diet sites (and/or other criteria) and measure which adds are the most effective. As much as we love Billy and the “snap, crackle and poop” line, which to you think is more cost effective?

While the above examples are a little simplistic and there will always be a role for “marketing“ and traditional media, the new world of tech-driven-advertising brings tools to the sector that we could only dream of a few years ago. This is the kind of disruption that we seek out at Difference and look for investment opportunity.

Tom Astle, CFA, P.Eng, Head of Investment Strategy, Difference Capital

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