QUERYCLICKPRESENTS

© COPYRIGHT QUERYCLICK 2018

QUERYCLICK.COM

© COPYRIGHT QUERYCLICK 2018

Businesses are thinking long and hard about their ad spend. Some are taking their activity in-house; whilst many others are turning to smaller, independent agencies who can offer more transparency. Our latest survey of 150 Chief Marketing Officers (CMOs) for UK consumer brands with a revenue of over £150 million explores the concerns CMOs have today including a lack of transparency and confidence in the performance their advertising spend delivers. The report reveals a profound shift in the way that CMOs are engaging agencies and spending their marketing budgets.

QUERYCLICK.COM

© COPYRIGHT QUERYCLICK 2018

Increasingly, businesses are thinking long and hard about their spending with the network agencies that have dominated the market. Some are taking more of their work in house; many others are turning to smaller, independent challengers.

That’s not just bluster from smaller rivals: Recent analysis of media billings across 21 markets by researchers Comvergence shows that independent media agencies took £2.1 billion of the £11 billion tracked in the first three quarters of 2017 – almost a fifth over the period. One-third of the accounts analysed in the first six months moved to an independent agency.1

The big agencies themselves admit they’re in trouble; there’s little hiding it. Leaders accept they face long-term problems, and are cutting growth forecasts in response.2 And a big part of the reason is the shift to digital channels. As the head of one large network agency put it, the performance is down to “the long-term impact of technological disruption” – even if he did discount the impact of disintermediation of agencies by Google and Facebook and digital competition from consultants.3

A CHALLENGING MARKET

1 https://www.campaignlive.co.uk/article/publicis-top-me-dia-agency-group-2017-report-states/14646072 https://www.campaignlive.co.uk/article/sorrell-admits-crea-tive-hurting-media-wpp-shares-plunge/14583863 https://www.cnbc.com/2018/03/01/wpp-2-point-6-billion-mar-ket-value-wiped-off-worlds-largest-ad-agency.html

19OF MEDIA REVENUE IN THE FIRST THREE QUARTERS OF 2017 BELONGS TO INDEPENDENT AGENCIES.

PERCENT

“ADVERTISING MAY BE DESCRIBED AS THE SCIENCE OF ARRESTING THE HUMAN INTELLI-GENCE LONG ENOUGH TO GET MONEY FROM IT,” CANADIAN HUMOURIST STEPHEN BUTLER LEACOCK ONCE JOKED. PERHAPS THE SAME HAS BEEN TRUE WHEN IT COMES TO THE GIANT AD AGENCIES AND THEIR ADVERTISING BUYERS. BUT NOT ANY MORE.

QUERYCLICK.COM

© COPYRIGHT QUERYCLICK 2018

A DIGITAL FUTURE

Digital channels already account for a large majority of all new advertising spending. By 2020, total spending on digital is forecast to match offline ad spend.4 It has already overtaken TV spending 5 as big brands like Adidas switch to engage with an audience viewing much of their media on their phones.6

Indeed, mobile is a key source of growth for digital and advertising spending as a whole. Already the second-largest ad channel globally, it’s forecast to rise almost a third (32%) this year by the World Advertising Research Centre.7

As the sums grow, scrutiny of the sector – long overdue – is increasing. Big brands, such as Unilever and Procter & Gamble are concerned about fraud, waste and reputational risks from inappropriate placements have re-evaluated their programmes, making big changes to their spending.8

Problems with advertising fraud are well recognised. The World Federation of Advertisers forecasts it will cost brands more than $50 billion a year by 2025.9 There are also particular challenges around programmatic advertis-ing.10

But, as our new survey of 150 Chief Marketing Officers (CMOs) for UK consumer brands with a revenue of over £150 million and an e-commerce offering shows, the concerns are more fundamental and wide ranging. It found a lack of transparency and confidence in the performance their digital advertising spend delivers. They want assurance it is bringing results. And they’re turning away from the big ad agencies in droves.

4 https://www.cnbc.com/2017/12/04/global-advertising-spend-2020-online-and-offline-ad-spend-to-be-equal.html

5 https://www.recode.net/2017/12/4/16733460/2017-digital-ad-spend-advertising-beat-tv

6 https://www.cnbc.com/2017/03/15/adidas-steps-away-from-tv-advertising-as-it-targets-4-billion-growth.html

7 https://www.warc.com/newsandopinion/news/global_ad_market_to_grow_at_fastest_rate_since_2011/39922

8 https://www.adweek.com/brand-marketing/when-procter-gam-

ble-cut-200-million-in-digital-ad-spend-its-marketing-became-10-more-effective/

9 10 https://adfraud2017.queryclick.com/

QUERYCLICK.COM

© COPYRIGHT QUERYCLICK 2018

Almost all CMOs surveyed for this report – an astonishing 95% of those responding – said they were planning to switch to an independent consultancy for their digital marketing. Over half planned to do so within a year. In the retail sector, where businesses are suffering from the squeeze on the high street, there’s even more urgency. Three quarters of respondents in that sector intended to move within a year.

Of the few who weren’t planning on moving to an independ-ent agency, half were taking their digital marketing in-house.

ARE CMOS CONCERNED THAT THEIR CURRENT DIGITAL MARKETING,

ADVERTISING OR MEDIA AGENCY IS FAILING TO DELIVER TRANSPARENT RESULTS?

SECTOR

PROFESSIONAL SERVICES

HR

IT & TELECOMS

FINANCE

ALL CHANGE

95OF CMOS SAY THEY WILL BE SWITCHING TO AN INDEPENDENT CONSULTANCY FOR THEIR DIGITAL MARKETING.

PERCENT

VERYCONCERNED

SOMEWHATCONCERNED

NOT AT ALLCONCERNED

RETAIL

CATERING & LEISURE

MANUFACTURING & UTILITIES

ARCHITECTURE, ENGINEERING

& BUILDING

TRAVEL & TRANSPORT

EDUCATION

25% 38% 25%

0% 0% 100%

55% 43% 2%

29% 57% 14%

50% 36% 14%

0% 100% 0%

20% 67% 13%

33% 33% 33%

40% 40% 20%

0% 100% 0%

The shift is profound, and reflects deep-seated concern about industry practices that have gone unchallenged too long. That concern has been growing since the Association of National Advertisers report in 2016 exposed a wide-spread lack of transparency in the industry. 11

Today, they remain as fresh as ever. In our survey, 86% said they were either very concerned (39%) or somewhat concerned (47%) that their agency fails to deliver transparent results. Just 13% said they weren’t worried.

QUERYCLICK.COM

© COPYRIGHT QUERYCLICK 2018

A lack of transparency significantly impacts advertisers’ ability to identify and prevent fraud. Indeed, there’s already some evidence that demands for greater transparency recently have helped reduce the amount of traffic from bots artificially boosting traffic to websites.12 Our previous survey, meanwhile, found only four in ten CMOs confident that humans, rather than bots, accounted for at least half the views of their ads.13

The issue of fraud is just part of a wider problem, however: Many CMOs can’t tell if their advertising works. “Nine-ty-nine percent of advertising doesn’t sell much of anything,” David Ogilvy famously said. Businesses don’t even have that level of certainty when it comes to their digital spending.

About one in five of those we surveyed couldn’t say their brand used online conversion data as an effective tool to translate the customer journey into meaningful insights for their digital marketing strategy. Of those who cited it as an issue, 21% said their marketing agency didn’t have the ability to use this data as a key metric, while 47% said there was a lack of consultative expertise from third party suppliers. The same propor-tion said they didn’t have the knowledge in house.

Asked if their attribution model was effective in identifying sales and conversions across multiple customer touch points, meanwhile, more than a third couldn’t say it was. Almost one in five (18%) didn’t even have an attribution model.

A VOTE OF NO CONFIDENCE

ONE IN FIVE OF THOSE SURVEYED COULDN’T SAY THEIR BRAND USED ONLINE CONVERSION DATA AS AN EFFECTIVE TOOL.

It is hard to overstate the challenge this presents to the industry. To put it simply, without conversion data and effective attribution businesses have little idea what value their digital advertising brings. The challenge is not just around the difficulty in determining value generated by programmatic advertising either. Businesses cannot, for instance, accurately determine the impact of other (offline and online) brand promotion on returns from paid search, and therefore the return on that investment.

Given the substantial budgets now dedicated to digital, this lack of clarity isn’t sustainable.

DO CMOS HAVE AN EFFECTIVE ATTRIBUTION MODEL IN PLACE TO TRACK CONVERSIONS?

17% SAY THEIR CURRENT ATTRIBUTION MODELLING TECHNOLOGY FAILS TO IDENTIFY AN ACCURATE REFLECTION OFSALES AND CONVERSIONS ACROSS MULTIPLE CUSTOMER TOUCHPOINTS

13% SAY THEY DON’T HAVE AN ATTRIBUTION MODEL IN PLACE, BUT HAVE PLANS TO INVEST IN ONE WITHIN THE NEXT 12 MONTHS

30% SAY THEY DON’T HAVE A FUNCTIONING ATTRIBUTION MODEL IN PLACE

1

2

3

11 https://www.wsj.com/articles/ad-business-full-of-nontransparent-practices-study-finds-1465303654

12 https://martechtoday.com/ad-fraud-due-advertisers-demands-transparency-new-report-says-212536

13 https://insights.queryclick.com/

QUERYCLICK.COM

© COPYRIGHT QUERYCLICK 2018

It is at least partly understandable, however.

One cause is a lack of appreciation of the problem – no doubt in part because of some of the complexities involved. That’s exacerbated by the lack of skills in-house and within agencies identified by respondents. In any case, the fact that eight out of ten respondents feel their online conversion data provides an effective tool for digital marketing is probably a case of misplaced confidence – not least because the proportion saying they have effective attribution models is significantly lower.

Even those using the current market leading solutions for attribution could be little better off; for many businesses these have been shown to be provably wrong due to their failure to accurately forecast performance impact caused by media spend adjustments. Current market leader Google 360 uses a relatively short lookback window to derive its attribution model in an attempt to reduce data processing challenges when offering a solution at scale that ultimate-ly results in failure to capture a true picture of common customer purchase consideration timelines – which includes time spent being influenced by advertising before you consciously start the decision making process. For even small purchases this consideration timeline is significantly longer than 90 days – and in QueryClick studies channel behav-iour extends beyond two years – making effective attribution the domain of custom, highly configured data proces.ing rather than off the shelf solutions that can ‘plug & play’.

It all means that the landscape for advertisers is constantly changing.

BARRIERS TO CHANGE: TECHNOLOGY TROUBLES

Efforts to address the issue are also complicated by the pace of change. Businesses are investing in a wide range of areas, including social media (whose demise has been greatly exaggerated), video content and voice search. In relation to the last of these three quarters of CMOs say they’re changing SEO strategies to respond to the rise of voice-led searches.

Other technologies, too, are attracting significant attention in particular sectors. Almost two-thirds (63%) in retail, for instance, said they would be investing in influencer marketing within the next 12 months; for finance, the figure was 86%. Other technologies seem to have fallen out of favour, meanwhile. Chatbots, which attracted significant investment in recent years, are now near the bottom of most firms’ priorities.

OUT OF THE CMOS WHO CITE CONVERSION DATA AS AN ISSUE (16%), 21% SAY THEIR AGENCY CAN’T USE THIS DATA AS A KEY METRIC WHEN PROPOSING STRATEGIES & CAMPAIGNS.

QUERYCLICK.COM

© COPYRIGHT QUERYCLICK 2018

There are practical challenges in addressing the problem of attribution, too, with regulatory concerns prime among these. Legislative worries are cited as an explicit barrier for 16% who are not using online conversion data.

Worryingly, only 7% in the survey said that they have GDPR compliant storage in place, even though more than three quarters recognised this was a problem. Most were either very (33%) or somewhat (45%) concerned that they don’t have a compliant solution in place.

These problems are only going to get more pressing. The EU ePrivacy Directive is currently being revised by the European Commission, and is expected to challenge the way brands use cookies to target consumers, with the same level of regulatory fines introduced by GDPR for breaches. Even if the UK following Brexit is not committed to applying the rules, it’s almost certain big business will need to if it wants to serve European customers.

Again, the survey finds few prepared for the requirements, and widespread worries. Three quarters say they’re concerned about the new directive. As with the GDPR in the past, businesses worry the lack of clarity from the European Commission, as well as the impact on audience segmentation and tracking.

REGULATORY WORRIES

WHY DO CMOS FEEL UNPREPARED TO MEET THE EU EPRIVACY LEGISTLATION REQUIREMENTS?

47%

46%

45%

40%

THEIR CURRENT PRACTISES TO REACH SPECIFIC AUDIENCE SEGMENTS THROUGH

PROGRAMMATIC PROCESSES WILL BE IMPACTED BY THE EU EPRIVACY DIRECTIVE

A LACK OF CLARITY FROM THE EUROPEAN COMMISSION AS TO WHAT THE FINAL

DRAFT LEGISLATION LOOKS LIKE

THE TRACKING TECHNOLOGY THEIR BRAND USES TO DEVELOP MORE PERSONALISED

AND TAILORED SHOPPING EXPERIENCES ACROSS THEIR BRANDS DIGITAL PLATFORMS

WILL BE IMPACTED

39%

A LACK OF CONSULTATIVE EXPERT KNOWLEDGE AND EXPERTISE FROM THIRD PARTY

SUPPLIERS TO NAVIGATE THE LEGISLATION AND PREPARE THEIR DIGITAL MARKETING

STRATEGY

A LACK OF LEGAL KNOWLEDGE AND EXPERTISE INTERNALLY TO PREPARE THEIR

DIGITAL MARKETING STRATEGY

Whatever the impact, it won’t be the last word in regulation either. As online channels dominate, regulatory interest grows. The UK House of Lords Communications Committee recently called on the digital advertising industry to enhance its oversight, for example, noting concerns over transparency.

“[T]he market for delivering digital advertising to consumers is notoriously ‘murky’: businesses which buy advertising services don’t know how their money is being spent, whether their advertising is being displayed next to content which is obscene or which supports terrorism, or whether their ads are being viewed by a human being at all,” said the Committee chairman. 14

14 https://www.marketingtechnews.net/news/2018/apr/11/uk-lords-call-action-digital-advertising/

QUERYCLICK.COM

© COPYRIGHT QUERYCLICK 2018

OF RETAILERS STRUGGLE TO IDENTIFY THE SAME BUYER ACROSS MULTIPLE TOUCHPOINTS.

40%

37%

35%

None of these concerns are misplaced. The need for proof that money put into digital advertising is adding value is self evident; so, too, it can be argued, is the inadequacy of many attempts to provide this assurance.

There are also obvious and genuine regulatory challenges involved in attempting to make better use of conversion data and improve attribution. The lack of GDPR-compliant storage among CMOs’ businesses offers an insight into the problem: Advertisers are unable to analyse data and draw out meaningful insights in a compliant way. At the same time, they cannot just outsource the task to agencies, who would then, under the regulations, become the data controller. Firms lack the in-house expertise to do the task of attribution themselves; and they lack the legal right to get others to do it for them.

The problems are real. But they are not insurmountable.

The regulatory issues are, in fact, relatively easy to overcome through anonymisation of the data. Personal identifiable informa-tion such as names and addresses, which are protected by the regulation, is not necessary; all that’s required for attribution is the ability to identify the same buyer across the various touch points with the business. It is tracking the customer journey that’s important, not their name.

Of course that’s where many businesses still struggle: A recent report15 by PwC found more than a third (35%) of retailers struggling to implement a single view of their customer, and another third (31%) saying there was room for improvement.

Again, a solution is possible with new technology. Machine learning, particularly, can help businesses draw on all their data sources across channels to obtain a complete picture of the customer journey – enabling more accurate attribution to inform the marketing spend.

In this respect it’s encouraging to see many CMOs investing in artificial intelligence (48%), attribution modelling (40%) and machine learning (37%). However, that investment is taking place more in some sectors than others: Two thirds in retail; just one in five in professional services.

LETTING THE LIGHT IN

0

20

40

60

80

100

EDUCATIO

NRE

TAIL

PROFE

SSIO

NAL SER

VICES

FINANCE

MANUFACTU

RING &

UTIL

ITIES

CATERIN

G & LE

ISURE

ARCHITE

CTURE

, ENGIN

EERIN

G & BU

ILDIN

G

IT & TE

LECOMS

TRAVEL

& TR

ANSPORT HR

PERCENTAGE OF CMOS SURVEYED INVESTING

IN MACHINE LEARNING (BY SECTOR)

CMOS ARE INVESTING IN ATTRIBUTION MODELLING

CMOS ARE INVESTING IN MACHINE LEARNING

QUERYCLICK.COM

© COPYRIGHT QUERYCLICK 2018

More importantly, the transparency is likely to require even more businesses to break free of the big network agencies. Unbundling digital spending is a necessary first step to assessing its performance. You can’t manage what you can’t measure, but equally it’s difficult to measure what you don’t manage.

It is not only that there is little incentive for the big agencies to bring transparency to this area – where there is a mystery there’s a margin; it’s also that their ability to do so has to be questioned. Digital advertis-ing remains, for too many, an add-on, to the offline activity. Independent agencies are more likely to have both the agility to address a rapidly changing market; and the expertise born of focussing on digital channels to meet the challenges involved.

INDEPENDENT AGENCIES ARE MORE LIKELY TO HAVE BOTH THE AGILITY TO ADDRESS A RAPIDLY CHANGING MARKET.

MORE INDEPENDENCE

15 https://www.pwc.com/gx/en/advisory-services/assets/customers-are-calling-the-shots.pdf

QUERYCLICK.COM

© COPYRIGHT QUERYCLICK 2018

QUERYCLICK.COM

7 Castle Street, Edinburgh, EH2 3AH | 0131 556 7078

1 Mark Square, London, EC2A 4EG | 020 7723 6768

QUERYCLICK

QUERYCLICK.COM