Volume 157: Weaponizing The Wanamaker Paradox.

Weaponizing The Wanamaker Paradox.

tl;dr: An end to the emasculation of marketing? Maybe. 

Somewhere around 20 years ago now, marketing began a fundamental slide into emasculation driven by the weaponization of what is commonly referred to as the Wanamaker Paradox, which states that “50% of my advertising is wasted, I just don’t know which 50%.” 

In a self-serving and ultimately wildly successful attempt to accelerate the shift of advertising budgets from hard-to-measure "traditional” channels, such as TV, radio, and print, toward easily surveilled, “digital” channels, such as search, social, and the web, the exploding world of digital, including the platforms, the AdTech and MarTech vendors, the data brokers, the digital agencies, the management consultancies selling “marketing transformation,” and the VCs funding it, all beat the same drum: Waste is the biggest problem in marketing, and digital the only solution. 

The net result some 20 years later has been the transformation of marketing from a Big Number game to a little numbers game, and now we’re reaching the inevitable endgame.

Marketing was once a Big Number game. It dealt with customers, products, competition, strategy, growth, and business performance accelerators we call brands (thank you, Jonathan, for this definition) that directly contributed to the Big Number of enterprise value. Then, digital came along, and marketing began shifting toward a new and tactical existence as a little numbers game. Instead of top-line impact, marketing had a new master, bottom-line efficiency. Instead of growth, it was now obsessing over budget protection. Instead of strategy, it became mired in operational efficiency. Instead of the Big Number goal of increasing enterprise value, it found itself drowning in little number goals like impressions, attribution, ROI, and ROAS. 

To illustrate the state of where this has pushed us, ROI has been driven so deeply into the modern marketers’ psyche that few understand that it’s a measure of efficiency rather than effectiveness. In order to grow a business, advertising ROI will go down. Why this happens is simple. Growth means attracting customers who aren’t already inclined to buy from you, and customers who aren’t already inclined to buy from you are more expensive to attract than those who are. It’s really that simple. However, those few marketers who know this aren’t going to take it to a CFO who knows precisely zip about marketing yet demands ever greater efficiency. Why? because their world is dominated by little numbers, and they’d rather have a job than not.

Wanamaker weaponization has been wildly successful for three reasons. First, corporate boards are dangerously lacking marketing representation(Only 2.6% of board members of the Fortune 1000 are marketers), so there was little pushback from the top. Second, non-marketing leaders in the C-suite have always viewed marketing budgets through jealous eyes, so the waste narrative played straight into existing prejudice and presented an opportunity to reallocate those precious resources...to themselves. Third, FOMO, the shifting of eyeballs toward new screens, and a fear of being left behind by technology drove a huge shift in that direction.

This then led to the serial picking apart of the marketing function. If, at one time, the 4Ps (Product, Price, Place, Promotion) represented the marketers’ dominion, it does no longer. A slew of new C-level titles - Chief Customer Officer, Chief Digital Officer, Chief Experience Officer, Chief Brand Officer, Chief Transformation Officer, Chief Product Officer, Chief Design Officer, Chief Revenue Officer, etc., have chipped away until all that’s left is the promotional P, and sometimes not even that.

In addition to dangerously fragmenting and siloing an experience that should be completely integrated from a customer perspective, it was inevitable that as others picked over the choicest cuts at the marketing charcuterie, it would change how the function is viewed, not just by other members of the C-suite but by the people attracted to work in the field.

Here, I’d observe three interrelated issues. First, marketing is attracting an ever-weaker flow of talent. As its influence within the C-suite wanes, fewer of those with CEO ambitions choose marketing as a track, weakening bench strength across the economy. Second, as marketing delivery becomes more technical, it’s attracting more inexperienced technical talent to the field (more on that in a second), and third, as marketing becomes ever more about budget efficiency, tactics, and operations and ever less about strategy, business growth, and enterprise value, executive-level competence in the discipline has fallen off a cliff.

In the US today, less than 30% of people working in marketing are trained in the subject. That’s an absolutely stunning statistic. Imagine, for a second, if less than 30% of finance hires had any training in finance or if less than 30% of legal hires had any training in the law. It’s ridiculous, right? But seemingly, we think it entirely acceptable to have untrained marketers. Why? Well, the only reason I can think of is that we’ve decided it isn’t all that important. 

What’s particularly concerning about the direction we’ve been headed in is that the primary skills most marketers have today are in what we used to refer to as direct response advertising and its sibling direct mail. It’s the exact same thing; it’s just that today, we mediate it with technology and deliver it digitally, and call it sexy things like “performance marketing” and “growth marketing,” and its shady little cousin, “growth hacking.” Why this is worrying is that DR/DM was never historically in charge. It was always a tactical and transactional practice that followed the strategic lead of others. In my own career, we used to shudder when talking to the DM team when doing brand identity work because their first inclination was always to atomize the old and new identity systems into their component parts and then A/B test every single element (logo, color, type, image style, etc) independently, before jamming it back together into a Frankenstein’s monster based on minuscule differences in response rates. Sound familiar? 

So, the dog caught the car. And now marketing is dominated by a skillset that failed in the physical world because the economics didn’t really work very well when response rates began plumbing the depths of 0.3-0.5%. The irony isn’t lost on me that we weaponized waste as the biggest problem in marketing and then handed the keys to the people whose core competence was doing stuff that 99.7% of people completely ignored. Yeah, we really did that. And that’s why today’s web sucks as badly as it does. Websites being little more than technically advanced shells for the delivery of direct mail. Only we don’t get to throw it in the garbage, and it’s surveilling our every movement.

Net, net, we now have deeply inexperienced and untrained marketers who simply don’t know how to tackle the Big Number stuff.

I once had a CMO client who presented himself as having a background as a growth marketer. In conversation, he said he was an engineer who’d entered marketing “when it became a technical discipline.” The problem was that while he knew inside-out how to run direct response campaigns, he’d only ever done so for large brands, where “growth marketing” really means “leveraging the brand.” Now, he was staring down the barrel of loss-making campaigns because he didn’t have any brand strength to leverage, and it was his job to build it; only he hadn’t the first clue where to start on that journey because he had zero experience, training, or resources. Was he smart? Absolutely. Was he appropriately trained, experienced, and philosophically suited for the task? No, not really. Not at all. 

But wait. There’s a glimmer of light at the end of this grim tunnel.

For the first time in a long time, we’re starting to see pushback against the waste narrative. Suddenly, the folks doing econometrics and marketing mix modeling are saying, “Hold up, wait a minute. Maybe letting Google and Meta grade their own homework wasn’t such a good idea after all.”

Consistently, we see that the most expensive things the likes of Meta will sell you - highly targeted media focused on driving sales, tend to perform much better on a Meta dashboard than they do in an independent MMM analysis. Hmmmm, I wonder why? In simple terms, the way it achieves these amazing-looking sales results is to target the people it knows are most likely to buy from you already. That’s right; you’re paying a premium to sell to someone who will buy from you anyway while completely ignoring the fact that growth requires an incremental sale to someone who wouldn’t have otherwise bought from you at all. Why? Because your CFO is hammering the table for ROI efficiency rather than the CEO hammering the table for business growth. 

If I boil the econometrician perspective down, it goes something like this: We know how to be effective at marketing irrespective of whether it’s a “traditional” or “digital” channel, and we know what we should be doing to grow the business and impact the enterprise value of the corporation. As a result, our analyses show that the biggest problem in marketing isn’t waste; it’s a lack of resources focused on doing enough of the right things often enough, artificially constraining the growth of the business in the process.

In other words, they’re saying that the Wanamaker Paradox is no longer the biggest problem in marketing, assuming it ever was. Instead, the little numbers game of marketing is the biggest problem because it’s ineffectual. As a result, we need to return to the Big Number game, where, bonus, we now know more about what works and why than we ever have.

However, change will be exceptionally difficult, not least because advertising behemoths like Google and Meta have business models that explicitly create dependency, meaning they look suspiciously like drug dealers, with advertisers as their addicts. And no dealer willingly lets their addicts fly the coop without a fight.

And marketers increasingly act like addicts because of the intense efficiency pressures they’re under, frantically checking their dashboards, obsessing over an array of largely irrelevent metrics, and running around like headless chickens without direction, desperately seeking something, anything, that might work. Why? Because we put tacticians in charge of strategy and then under-resourced them and told them their primary goal was to be efficient, with a secondary goal of doing it as fast as possible. And just like addicts, marketers are largely in denial.

If you’re a marketer, what looks better when asked about how your latest campaign is performing? 1. Stating that you’ve driven a million impressions in the past week, that you’re seeing through-the-roof campaign ROI, and that the new blog is seeing unprecedented levels of engagement? Or, 2. That a million people or bots (we’re not sure which) saw your ad for at least one second, that even though campaign ROI is exceptional, you’re yet to see any impact in incremental sales, and that your blog seems particularly attractive to bots, as proven by the distinctly weird comments they’ve been leaving. 

It doesn’t take a rocket scientist to see why your average marketer has little or no interest in rocking this boat. 

Looking at the longitudinal data, marketing budgets as a percentage of overall GDP have remained remarkably steady over time. They essentially track economic growth. However, the makeup of how that money is spent has transformed remarkably. Today, technology makes up approximately 25% of marketing budgets, which is higher than that spent on creative agencies.

The net effect of a flat budget, with a relatively new line item taking up 25% of it, is that we’re left trying to fit 10lb of shit into a 5lb bag. Recently, we’ve become acutely aware of the impact of this on creative agencies. Whether it’s deeply sad tales of people being worked to the bone for little reward or massive holdcos like WPP desperately merging failing agencies, the evidence is all around us. However, there’s another impact of such changes, namely, that creative quality declines as creative agencies become an ever worse place to work. And this matters quite a lot because quality creative is the most important variable in whether a campaign performs highly or not. Yet, System1, which ranks ads in ascending order from 1 (worst) to 5 (best), highlights a very worrying statistic, namely a high incidence of 1-star ads. And this isn’t just a consumer brand problem. Research by the LinkedIn B2B Institute reached an even starker conclusion about how deeply ineffective B2B advertising has become.

On the media side, efficiency pressures have pushed marketers toward ever worse inventory quality as the sheer complexity of the digital advertising ecosystem kicks in. In much the same way that George C. Parker had a bridge he wanted to sell you, the digital advertising world continues to peddle the myth of a “long-tail” of consumer attention. This is a fairytale. Real consumers don’t spend their time visiting a smorgasbord of websites nobody has ever heard of; the bots do. And the fraudsters have done an amazing job of making those bots look really attractive. In pretty much every analysis I’ve looked at on the subject, the conclusion is that you’re better off buying reach than you are buying a highly targeted audience unless your first-party data is bulletproof. Why? Because the targeting is highly inaccurate (gold standard 3rd party data vendors are about as accurate as a coin flip at accurately targeting male/female. It gets worse from there), it’s expensive (meaning your money is going to intermediaries in the form of fees, rather than media a prospect will see) and the more narrowly you target, the more likely you’re only being viewed by bots rather than actual people. (As an aside, while estimates vary, there’s widespread acknowledgment that digital ad fraud is a huge problem. Some estimate it as being the 2nd most lucrative line of business for global organized crime after drugs. And at vastly less risk). 

So, how do I wrap all this up?

First, we’re currently suffering from the entirely predictable endgame of the AdTech industrial complex weaponizing the Wanamaker Paradox for its own gain, leading to corporations accidentally constraining their own growth.

Second, it’s becoming increasingly apparent that waste is no longer the biggest problem in marketing, assuming it ever was. Instead, it’s a lack of resources and expert human capital doing enough of the right things to increase the enterprise value of the business commensurate with its potential.

As to how we should get back to Big Number thinking and tailor it for the world we’re in today, rather than 20 years ago? Well, that’s the subject of a future edition.

Thank you for sticking with me for so long this week. More to come.