Friday, August 8, 2014
Several decades ago I was an earnest young undergraduate student majoring in Economics. My favorite courses were History of Economic Thought and Economic History. One branch of economics that fascinated me was Austrian Economics. No, it was not the study of the small middle European country but the school of thought did originate in Vienna. Essentially, the Austrian school favored a pure free market approach with as little governmental intervention as possible. Their 20th century leaders were Ludwig von Mises and nobel laureate F.A. Hayek, both educated in Vienna. In America, a more strident disciple emerged named Murray Rothbard who called himself an Anarcho-Capitalist.
What intrigued me was that they saw economic theory as largely QUALITATIVE. They dismissed mathematical models on the basis that human beings and the general market were too complicated. With several billion people out there, all with different hopes and dreams, likes and dislikes, how can a model of an economy work and allocate resources properly? Also, planned economies such as socialist oriented command economies were doomed to failure. Mises called economics the study of human action and thus modeling was just not viable given behavioral issues.
Well, they were certainly right about socialism as capitalism won the battle by the 1990’s. In my career, I often thought of the Austrians when it came to media and marketing issues. People did scads of research yet most new products failed (and still do). Network programmers go through many levels of review and shoot pilot films yet approximately 70% of shows do not get renewed for a second season even though consumer testing is often extensive prior to the premiere. Each year, and 2014 was no exception, marketers and their agencies placed huge billion dollar bets in the upfront TV marketplace even though virtually all will admit that it is a (slowly) dying medium.
If you watch things carefully as many of you do, it is obvious that much of this failure is going to be lessened and soon due to our emerging era of Big Data. In the last week, several people wrote to me about the speed of change and what it meant. Two standouts were:
1) A senior media executive wrote “I had just been part of an “Addressable to the home” advertising experiment. A client’s mailing list was matched with an MSO subscriber list resulting in a matched target group. The viewing data from that list was aggregated from actual STB data. New ratings were created based on the value of those networks viewed and schedules were placed”.
2) A long time agency media maven said “Google and Apple along with Facebook are most likely the largest data gathering companies in the world. And, they are doing so to better target future revenue...with the greatest share from advertising. Google just recently purchased NEST, a programmable thermostat company. They are doing this so they can gather more info about your habits inside the home, as well as when you are reaching out to your home via your mobile device. This data ultimately will help them to sell more advertising”
There is no question that pin-point messaging is upon us. This has to improve marketing performance as clients as desperate for authentic accountability from their agencies and the media. There is definitely an element of “big brother” here and there will be some short term security risks with hackers breaking in to sensitive databases that can literally tell marketers where a prospect is.
Long term, however, there will be no more comments such as the time honored, “I know that half of my advertising is waste--I just do not know which half.”
All of this spells trouble for what is left of mass media. And, attentiveness, even in high priced and high profile sports, is declining. A young media supervisor wrote to me recently saying that no one appeared to watch a single commercial during a party he attended where his alma mater while trying for a bowl bid. “Everyone was on their smartphone looking up better statistics than ESPN could provide. I even noticed this at baseball games this summer where it seemed thousands were on their Smartphones in the stadium. We are wedded to our devices even at live events.”
As usual, change will not happen overnight. The rate of change, however, has clearly sped up. The old guard of 50-65 year olds who think that the status quo will stay in place for several more years are living in a dream world. Big data is coming, faster than we thought even a year ago, and it appears that nothing can derail it.
Finally, if we can forecast Consumer Behavior with Big Data, maybe economic forecasting will get a lot sharper and my beloved Austrian economics will be proven wrong about 21st century modeling.
If you would like to contact Don Cole directly, you may reach him at email@example.com