Since as early as 373 B.C., people have reported that animals have the ability to predict earthquakes—minutes, sometimes even days, before they happen. Today, it seems like some marketers, sensing that a seismic shift is about to happen in marketing, stand alert, awaiting the first tremor in much the same way.
The tectonic shift they sense is the movement of millions of people from ad-based to ad-free experiences. As I shared in my recent keynote at the Content Rising Summit, consumers are flocking to services like Netflix, which just announced that it has surpassed 65 million paid subscribers, where they can opt-out of ads.
From a brand marketer’s perspective, what’s more important than Netflix’s subscriber base is where those consumers are spending their time. Netflix subscribers consumed more than 10 billion hours of programming last quarter, all ad-free. That means there were 10 billion hours when marketers could not reach many of their most valuable customers.
But it’s not just Netflix that’s driving this change. HBO Now launched on the Apple ecosystem in April and is expected to end the year with 15 million subscribers. Spotify premium has 20 million ad-free subscribers. Apple Music recently launched, and analysts forecast it may end its first year of operation with 100 million global subscribers, all listening to music without interruption. Even ad-centric stalwarts YouTube and Hulu have changed their tune. YouTube announced it will offer an ad-free service later this year, and last month Hulu said it’s exploring a premium ad-free option, as well.
So what’s the rub? Why does this create tectonic stress in marketing? Well, this year brands will spend an estimated $574 billion dollars on interrupt advertising, according to eMarketer. That ad spend is expected to grow another $30 billion in 2016 alone. Yet increasingly, the people who have disposable income are spending it on subscriptions to ad-free programming. They are voting with their dollar and opting to entirely avoid that $600 billion in marketing messages.
The tension, then, is between the consumer’s desire for extraordinary stories, presented without interruption, and the brand’s desire to reach consumers in ways that connect with them emotionally.
At Skyword, we believe that the coming earthquake will realign consumer and brand goals and change how the two connect. In coming years, brands will begin to create the stories their customers love, instead of interrupting them. The market will swing back to the days when P&G introduced the soap opera. And when it does, brand marketers will shift an increasingly large chunk of their $600B marketing budgets to sustainable storytelling.
That shift will fundamentally change the resources available to storytellers—from writers and photographers to designers and sound engineers, to actors and editors. Why? In an ad-centric world, most of a brand’s marketing budget is focused on distribution. Brands spend a little bit of money creating a commercial, and then devote most of their financial resources to playing it over and over again on television and online.
Brand storytelling is different. To succeed in this space, brands must take a different approach and create the stories their customers need or crave. When they do that well, they will earn reach organically, leveraging the search and social underpinnings that drive discovery on the Internet. Extraordinary experiences distribute themselves in an interconnected world. For that reason, brands will focus on creating unique, remarkable experiences as a means to reach and connect with their customers. They will shift the bulk of their marketing budgets from paid distribution to extraordinary creative.
The numbers make sense. A few months ago I made the case that Coke should have bid against NBC for broadcast rights to the Olympics. But consider this: Even the most discussed television shows in the world, programs like Game of Thrones, cost just $6 million per episode to make. To a media company, that might be a breathtaking expense. To a global brand, it’s a rounding error, assuming they can demonstrate better ROI than advertising provides.
Why would content creation economics make sense for a brand but not a media company? Consider the customer connection. If a brand wants to reach consumers through advertising on a traditional media property, it must reach a massive audience with its ads. Well below 0.1 percent of that audience will click on the brand’s advertisements, visiting the brand site and providing the brand with an opportunity to engage. But if the brand produces that same content and offers it on a brand-owned experience, 100 percent of the audience lands on the brand-owned sites. In this model, the brand could then convert a tiny fraction of the visiting audience and still be well ahead of what an ad-centric solution might deliver.
When consumers love a story, it reaches a massive audience by cascading across the social infrastructure of the Internet. If the stories that a brand shares are worthy of its audience, those stories will cascade too, earning audience for the brand. If they are not, even massive ad spending will not build customer relationships. To the contrary, customers seeing ads and content they do not desire will reject the brand for interrupting the experiences they actually want.
For that reason, leading brands will become the next great patrons of the arts. They will shift much of the $600 billion in annual advertising spend to the creation of original stories that their customers need or love. With those kinds of resources available, they will create stories that even Hollywood never dreamed possible on studio budgets.
It’s hard to forecast when an earthquake will happen with precision, but it’s clear that the tension in this particular system is building day-after-day. With each new person that opts to spend a few dollars to avoid traditional marketing, pressure grows on marketers to change their approach. And one thing is certain—that earthquake is coming, and when it does, the marketing landscape will be changed dramatically.
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