The Death of Advertising, Sports Edition

The BBC World Service’s show Newshour had an interview yesterday with an advertising executive. The hook was the troubles US swimmer Ryan Lochte has been having with his sponsors. But along the way, he may have given away the entire masquerade. Here’s the interview. OBJ stands for Owen Bennett-Jones, the BBC presenter. PA stands for Pedro Avery, the executive in question.


OBJ: Warren Buffett once said, It takes 20 years to build a reputation, and five minutes to ruin it. And then, of course, the question comes, How long will it take to rebuild that reputation again? Well, the US swimmer and six-time gold medalist Ryan Lochte was dropped by four sponsors including ones that sound quite lucrative like Speedo and Ralph Lauren at the beginning of this week. But then 24 hours ago a maker of throat lozenges said, Yeah, we’ll take him on. Lochte lied about being robbed at gunpoint in Rio and that’s why his reputation is in such trouble. So, has the throat drops company got him on the cheap?

Pedro Avery is global CEO at Havas Sports & Entertainment, an expert in brands and sports.

PA: I wouldn’t say they got him cheap. I would say they probably paid the fair price for what he’s now valued at. I mean, in our business we spend a lot of time advising brands on what is the right price to pay for these types of endorsements and sponsorships where they work together. I would say that after the escapades in Rio recently, that his market value would have come down significantly. So I would imagine he’s just– They paid the right price for the man that he is now.

OBJ: When you’re putting these financial numbers on people, it works does it? They can bring that money to the company?

PA: Absolutely. We work, for example, with a number of football clubs, and we advise those football clubs on… even pre-transfer now, in terms of the commercial value (not just on the pitch and the performance there, but off the pitch), and you can very directly see the relationships between a particular athlete and endorsement, and the sales that come from it.

OBJ: And when you’re trying to work out that value, quite a difficult job, I’d think. You’re not just throwing darts at a darts board or sort of coming up with a number.

PA: No, you’re looking at, sort of, direct sales, but also you’re looking at some of the intangible values. One thing that I think is very interesting for sponsors is that the athletes themselves are probably held in higher regard, and more often more trust, than brands themselves. The reality is most consumers probably don’t really care much about a brand anymore, if truth be told. And our research demonstrates that if 75% of all brands were to disappear tomorrow most consumers wouldn’t care. {emphasis added}

OBJ: But they do go with the sports stars.

PA: They do go with the sports stars. Because the sports stars invariably have higher trust, have higher value. And they are a very efficient form of communication for a brand. So for a brand that’s looking for goodwill, and are looking for things that come from those associations, they work very hard.

OBJ: And you’re looking for charisma? Ability?

PA: Each brand will be looking for different things.

OBJ: Not lying about being held up at gunpoint?

PA: No, I don’t think so. And, you know, a lot of people are humans and we’ve seen relationships like Tiger Woods or even recently Maria Sharapova, etc., where those relationships have broken down with their sponsors. Each sponsor takes, I think, a very dim view on these.

OBJ: And that was Pedro Avery there, global CEO at Havas Sports & Entertainment.

More bumpiness on the road to utopia

Back in 2002, I wrote a post about an article in the New York Times and an interview on Fresh Air, both by Jefferey Rosen.

The main point was this:

“(I)t’s notoriously difficult to find parking (at Oracle’s headquarters), and the space (Rosen) finally found was far enough away from the door that he had to walk something like 15 minutes to get to the building.

Here’s the big question: If Oracle can’t even reliably predict how many people will park at their own building — which is presumably why they haven’t built adequate facilities, and not because, say, Larry Ellison is a cheap bastard who doesn’t care about his employees much — how reliable do you think they’ll be at predicting terrorists (which is what they were touting their software for as a tool)?”

So now it’s 13 years later… and the state of the art when it comes to using software to make large-scale complicated predictions hasn’t advanced very much. Or such is the implication of this story from the radio show Marketplace, which is all about how UPS is having a more difficult than usual stretch of predicting their delivery times… Which in turn is because they’re being handed bad predictions from their customers about how much product they’re going to be shipping to end customers like you and me for Christmas.

The really interesting part of that, when it comes to looking back up the logistics tail, is many of the companies UPS is delivering for are companies who are mainly or solely online. Which means all the “magic” Amazon, Google, Facebook and others use for their “targeted” advertising… isn’t very good at predicting what, and how much, you’re going to buy.

“The problem that challenges both online retailers and carriers is the increasingly unpredictable shopper. Now that people can buy anything, anywhere, on their phones, retailers and carriers are having a hard time figuring out their next moves.”

That’s a much more systemic criticism than it looks at first glance. Because it reinforces the idea that the relationship between these companies’ advertising and enterprise management tools to how people behave in the real world is fairly… well, random.

This is also reinforced by Facebook’s page for your Ad Preferences. This page, algorithmically generated, is a concise list of what Facebook thinks it “knows” about you, from scanning your posts. And for many, many people I’ve seen, it’s laughably inaccurate. Which means the ads Facebook sells, oh-so-targeted at just the right people to respond to them (or so they tell the people paying to place such ads), are also laughably inaccurate in their targeting.

Which is part of why UPS can’t get your package to you in time.

The Death of Advertising (Part Rx)

The New York Times is reporting that GlaxoSmithKline is both a) no longer going to use physicians to flack their drugs to other physicians, and b) will no longer tie “compensation of sales representatives to the number of prescriptions doctors write.”

This is perhaps the worst news I’ve seen yet for advertising.

How so? Well, first off, the doctors selling to other doctors was an instance of person-to-person word-of-mouth sales. No news, radio, tv, internet purchases as such. In other words, these were pitches that were unmediated and direct. And they weren’t generating enough sales to earn back their expense (presumably either fixed amounts or a cut of the sales, to the doctors doing the talking).

But the other thing is… The holy grail of Facebook, Google, Twitter, and Big Data in general is that they’ll allow very targeted ads. You won’t see “junk” anymore – you’ll only see items you should have a demonstrated interest in.

Tell me, can you think of something more targeted than doctors talking to other doctors about medicines? What does this tell us about the effectiveness of such an approach?

Nope, we’re not in an internet bubble… We’re in an advertising bubble. The evidence that advertising simply isn’t cost-effective at generating sales keeps adding up.

UPDATE: I originally heard about this story at KUOW’s The Record. Listen to Natalie Mizik, a professor of marketing at the University of Washington, and you can just hear how ineffective the whole thing was for GSK.