Why 1to1 personalization hasn’t arrived (hint: media loses money)

The concept of 1to1 customer relationships, in which a marketer learns your needs and later gives you an offer tailored exactly to your whim, is tantalizing. Don Peppers espoused it back in the 1993 book “The One to One Future,” and brands as wide-ranging as Levi Strauss, Amazon.com, Zappos, PaineWebber, IBM and General Mills toyed with it. The idea was a clever counterpoint to the “Positioning” mass-communication strategies of the 1970s, and agencies and software companies, always ready to drink the Kool-Aid of customer focus, embraced 1to1 in the 1990s as much as they love social media hyperbole today.

Trouble is, the personalization idea never took off. No brand prepares your grocery list, picks out your clothing, or foresees what you’ll want for dinner at the restaurant Saturday night. The major impediment was not technology — true personalization requires vast inventories, efficient mass-customization of production assets, and brilliant algorithms, difficult but possible as Netflix has demonstrated with DVDs — but market incentives. Waste against the masses is usually a source of profit, and this is especially true in the media landscape.

Personalization kills media profits
Case in point: Cable television. With boxes in every home, you’d think advertising could be customized easily to every household based on your demographics, personal viewing history, even past shopping habits. It doesn’t seem hard to tie your cable box into an Experian data set to give dads with kids hitting mid-life 30-second spots for red convertibles (ahem), yet we’re not there yet. Experimenters such as Eyeview are beginning to combine audience data, advertiser assets and marketer products to personalize online video ads — in real time, showing snow or rain in the car spot based on your local weather. But that’s just a start. Personalization has become the Great Pumpkin of the ad universe, always almost here, and when it someday arrives it will be really, really big.

Personalization is a huge threat to old media empires. Truly targeting ads means you need fewer messages to get to your audience, and that efficiency is counter to what gives publishers and media giants money. Consider cable: The typical U.S. consumer watches 5 hours and 9 minutes of TV each day, enough to receive 166 30-second TV spots … and most of those are wildly off base. If advertising were truly targeted, you could receive only 10 ads a day for products you really want, and you might respond to 2 of them — enormous marketing success. But all the ad revenue from the 156 off-base spots would disappear. Online publishers, where personalization is much easier thanks to cookies that tag user computers, face similar threats as DSPs and ad exchanges begin allowing media buys that circumvent their high prices and audience control.

Most media is never seen. But advertisers still pay.
Put another way, the typical American subscribes to 130 television channels and yet “tunes” to only 18 of them (consumers no longer “surf” through channels and instead typically punch in 33 for CNN on their remote, “tuning” in to the channels they prefer). That 18 of 130 options means 86% of all programming, and its associated advertising, is never seen by each individual. The bloated waste of advertising is good for the media producers and transmitters, but not so good for advertisers who pay their bills.

Of course, consumers and advertisers want targeting. Media planners, direct marketers, and CMOs spend their careers trying to make their brands relevant; consumers rush to the malls each Black Friday looking for just the deal they crave. From the market efficiency view, personalization really is the Holy Grail — to spend production resources only against those consumers likely to respond. But it is worth noting that goal is diametrically opposed to what drives profits for the media intermediaries. Good luck, Eyeview, with those clever customized video ads; but don’t expect the marketplace forces to get behind your efficiency anytime soon.

(Bonus points: Don’t miss the 2000 press release for General Mills’ customized cereal.)

Ben Kunz is vice president of strategic planning at Mediassociates, an advertising media planning and buying agency, and co-founder of its digital trading desk eEffective.

6 thoughts on “Why 1to1 personalization hasn’t arrived (hint: media loses money)

  1. Great post as usual.

    I’m curious. Why do you think it is that no one ever suggests that if media could be made more efficient, you could charge more per unit of ad space for it? To use the example above, why couldn’t media companies charge the same price for the 10 efficient, targeted spots as they do for the 166 inefficient, mostly off base ones?

    The consumer/viewer gets less interruption and more relevant offerings, the advertisers gets a better ROI, and the media company doesn’t lose money.

    What am I missing? (Other than the obvious: greed.)

  2. As the previous commenter points out, if you increase the likelihood that a viewer will take up a call to action, the value of the advertisement goes up significantly.

    Take a look at the cost of a “click to call” add on the web vs. a generic text advertisement. The price points there are significantly different.

    The reality is that even in a 1:1 marketing world, you need to include a mix of predictable and unpredictable content, likely at different price points. There are the things I know I want, and there are the things I’m not aware of that I may want.

    1:1 will be realized, and it will be done via a mix of web, mobile, and contextual information (location, time of day, weather status) and demographic information.

  3. The flaw in this argument is that it assumes that demand for this higher efficiency marketing remains constant. In reality, demand would increase with increased efficiency, unless advertisers are looking for ways to waste money. If my ROI goes up and marketing spend becomes highly profitable, I will invest in it all day until that is no longer the case. Then I will develop new products for new segments that I don’t currently serve and I will market those with this new efficient mechanism. At a 20% response rate, I am confident that old media will still make available and sell their 166 spots. Advertisers would line up for them.

  4. I enjoyed following the whole entry, I always thought one of the main things to count when you write a blog is learning how to complement the ideas with images, that’s exploiting at the maximum the possibilities of a ciber-space! Good work on this entry!

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