WSJ – What’s Next for Facebook’s Ad Model?

From CMO Today:

Here are some thoughts I shared with Lara at WSJ:

Now that we’ve had time to digest Mark Zuckerberg’s trip to Capitol Hill, how are advertisers reacting as the Cambridge Analytica scandal continues to unravel? We heard last month that a handful of brands suspended advertising on Facebook. Ad Age reported 20th Century Fox also canceled a planned Facebook Messenger Chatbot launch for its “Deadpool” brand, fearing users may be concerned about the data they were sharing in light of recent headlines. Despite the smattering of small holdouts, overall, advertisers aren’t pulling back. Data from media planning and buying platform 4C suggests ad spend on Facebook increased 7.2% week-on-week from March 17 (when the Guardian’s first Cambridge Analytica article dropped) to March 23. Facebook ad spend from March 24 to March 30 rose 14.5% week-on-week. “As long as ROI (return on investment) is there, advertisers won’t stop investing in Facebook altogether,” 4C Chief Marketing Officer Aaron Goldman said. Indeed, Facebook Vice President of Global Marketing Solutions Carolyn Everson said Thursday at The Wall Street Journal CEO Council in London, “We are not anticipating major changes to our overall revenue and business model.”

—Open Heart Surgery—

But might the Cambridge Analytica fallout cause Facebook ad revenue pain in the long term? Dean Crutchfield, a New York-based independent branding consultant, likened the Capitol Hill hearings to “open heart surgery:” While the patient (Facebook) will be closed up and there might not be an immediate impact on its business, there will still be a scar, which eventually could find its form in regulation or a dent in perception of the company among consumers. One of the biggest issues for the advertising community is that the data-driven business model of digital advertising has become a dinner-table conversation and some consumers are now actively checking and reducing the amount of data they share, Mr. Crutchfield said. (Ms. Everson said Thursday that users largely haven’t changed their privacy settings in the past four weeks.) One senior ad buyer, speaking to CMO Today’s Alex Bruell, said questions still remain around whether lawmakers pass restrictive regulations on tech companies, “If indeed the U.S. adopts a Euro-like law, that’s bad news for advertisers with limited information about their own customers. No more shortcuts via third-party data. Advertisers who have invested a lot in CRM (customer-relationship management) efforts will fare best.”

Sears Stopped Buying National TV Ads in Critical Holiday Season

Here’s my main concern about this strategy that I shared with Suzanne Vranica @ WSJ

The holiday season is typically a time for retailers to blanket the airwaves with commercials. This year, one company was noticeably absent: Sears Holdings Corp.

The struggling parent of the Sears and Kmart stores hasn’t run paid national television commercials since late November, according to ad research firm iSpot and a person familiar with the situation. The Kmart brand has been absent from national TV networks since Nov. 24, iSpot said, while Sears hasn’t run a paid national TV spot since Nov. 25 — the Friday and Saturday after Thanksgiving.

That compares with about $8.4 million the Sears brand spent on national TV ads in December last year, while the Kmart brand shelled out roughly $6.5 million during the same period, according to iSpot estimates.

Sears Holdings Chief Executive Edward Lampert has championed the use of digital marketing over traditional TV and print advertising, arguing that digital is more cost-effective and quantifiable, according to people familiar with the situation. And at first, other Sears executives agreed the company needed to rebalance its marketing to focus more on digital, these people said.

But many executives have come to believe the company has gone too far and the retreat from traditional forms of advertising is hurting the business, these people said.

Sears said in a statement that it is always “evaluating the effectiveness” of its marketing channels. “This ongoing evaluation has meant we have made significant shifts over the past few years in where we’ve allocated our resources, including less traditional print and television, and more digital and social channels,” the statement continued. It pointed to recent marketing efforts including having its Kmart brand integrated into the late-night talk show “Jimmy Kimmel Live.”

For a retailer to back off of TV ads during the holidays is a highly unusual move, ad experts said. “Retailers establish their value and relevance with consumers during key shopping times,” said Dean Crutchfield, a corporate branding expert.

Indeed, retail rivals such as Macy’s Inc. and J.C. Penney Co. spent tens of millions of dollars during the final month of 2017. Macy’s shelled out some $32 million on national TV ads during the first 29 days of December while Penney spent roughly some $27 million during the period, iSpot estimates indicate.

Struggling Toys “R” Us Inc., which filed for Chapter 11 bankruptcy protection in September, spent about $13.3 million on TV ads during the period,according to iSpot.

Sears Holdings, of Hoffman Estates, Ill., has been slashing expenses as it struggles to turn its business around.

Sears lost $565 million in the nine months ended Oct. 28, bringing cumulative losses since 2011 to $11 billion. Revenue for the period fell 23% to $12.33 billion as the company closed stores and sold less from existing locations. As of the end of October, it operated 1,100 Sears and Kmart stores,down from 1,500 a year ago.

In December, the cash-strapped retailer extended the terms of a $400 million loan and announced new planned borrowings to cover pension contributions.

As its business has shrunk, Sears has scaled back spending on measured media. Sears spent $285.1 million on paid advertising in 2016, down from $664.2 million in 2011, according to estimates from Kantar Media, an ad-tracking company owned by WPP Plc; the estimates don’t include some forms of digital advertising.

While Sears cut its spending on TV and newspaper ads by roughly two-thirds during the period, it ramped up spending on digital marketing. By 2016, digital had surpassed newspapers and was second only to TV in terms of Sears’s spending ,according to Kantar.

In meetings over the past year or two with Mr. Lampert, Sears executives produced data showing that the deep cuts to TV and newspaper advertising had hurt sales, particularly since the majority of Sears’s revenue still comes from brick-and-mortar stores where commercials and circulars are particularly effective at driving foot traffic. According to retail research firm eMarketer,11% of Sears sales come from e-commerce.

But the executives were overruled, these people said.

Consumer Distrust Cost US Brands $756B

..Did you switch brands last year? 41% of consumers did costing U.S. brands $756 billion! The main reasons were poor personalization and lack of trust. 

According to this study by Accenture, it’s catch-22 because consumers 
are frustrated when brands fail to deliver relevant shopping experiences but are also concerned about personal data privacy.

Here’s the article in Mediapost.

 

What Should Be On CMOs Minds?

Do you ever wonder what your CMO is thinking about? What issues and trends are keeping your marketing leader up at night? We know CMOs play a big, powerful role, leading the company’s efforts to win market share, boost revenues and gain profits. The job sounds exciting but the top marketing job in the business is a minefield with the highest turnover in the C-suite.

Talented executives crash and burn unless they look at the CMO role in a bigger picture. CMOs need to have strong beliefs, be an exceptional expert in matters that are important and a visionary obsessed with pragmatic outcomes. Apart from the obvious areas of focus including marketing budgets, ROI, rising responsibilities, the dearth of talent, ever-increasing capability needs and the shift to digital, there are other areas to understand that are critical to success for the CMO. I think these stand out:

  • The importance of establishing a passion early
  • Dealing with competing in an “always” on era
  • Directing the story of the brand
  • How to learn from traveling the world
  • Enjoying family as a place for creativity at work
  • How to determine where people fit on a team
  • How to get your people to buy into a larger vision
  • How to inspire Millennials
  • How do you get your game face on when a marketing campaign tanks.

The customer is changing, which in turn is driving changes to marketing itself, and to the role of the CMO who needs to be remarkable, measurable and distinguished with unique value. Hell has no fury than the second rate. Hold on.

Brands are not owned they’re borrowed from the customer

Equifux…143M Consumers Hacked

Equifax, a consumer credit reporting agency, has reported a cybersecurity incident that may affect approximately 143 million U.S. customers.

In a statement, the company said “criminals exploited a U.S. website application vulnerability to gain access to certain files. Based on the company’s investigation, the unauthorized access occurred from mid-May through July 2017. The company has found no evidence of unauthorized activity on Equifax’s core consumer or commercial credit reporting databases.” Whoopee do

Lego. Everything is Not Awesome

From CNBC: World famous toy manufacturer Lego is set to cut its global workforce by eight percent in an attempt to simplify its business model, the Danish firm announced Tuesday. Despite the surprise announcement, the company’s chairman, however, expects these layoffs to be a “one-off”.

World famous toy manufacturer Lego is set to cut its global workforce by eight percent in an attempt to simplify its business model, the Danish firm announced Tuesday. Despite the surprise announcement, the company’s chairman, however, expects these layoffs to be a “one-off”.

“We’re very focused on making a smaller and more simple organization and also do a cleanup of our inventory positions in some markets. So ultimately for us, that has been the aim and we will conclude all of that within this year,” Jorgen Vig Knudstorp, chairman and former CEO of Lego Group told CNBC Tuesday.

“We will, of course, this year and in future years, continue to be focused on our cost base and seek constant opportunities for optimization as we have done over the past 15 years.”

“However, this is a sort of one-off, big move that really relates to ‘do we operate in a simple way or as simple way as we should’ and it is, what we’re announcing today, is the totality of the effort addressing that problem.”

At present, the Lego Group has approximately 18,200 people working for the company; however, the toymaker expects to see most of the layoffs – a total of 1,400 positions – to take place by the end of the year.

The news of the layoffs come as the toymaker posted a five percent decline in revenue for the first half of 2017 – its first sales drop in more than a decade.

Here are some of the highlights:

  • Revenue fell 5 percent in the first half, to 14.9 billion Danish crowns ($2.38 billion), compared with 15.7 billion Danish crowns in H1 2016
  • Net profit came in at 3.4 billion Danish crowns, compared with 2016’s H1 figure of 3.5 billion Danish crowns
  • Revenue declined in markets such as the U.S. and parts of Europe, while it grew double digit in places like China.
Lego to cut 8 percent of its staff as sales drop  6:00 AM ET Tue, 5 Sept 2017 | 00:51

Commenting on the overall performance for the first half of 2017, the chairman explained how it wasn’t the changing landscape of retail or media that was the key problem, but rather the business as a whole had become “too complicated”.

“The way we do business, the way we do our marketing, the way we do our market management, but also how we run the whole administration of the company, unfortunately, has become too complicated as we’ve grown the company massively over the past 12 to 13 years.”

“That’s what’s really hindering us in executing in a strong way – as we used to – and therefore we are finding it harder to grow in some of our very well penetrated and established markets.”

‘Person to blame for these poor outcomes is me’

Less than a month ago, the Lego Group announced that it was appointing a new chief executive, Niels B. Christiansen, just eight months after they appointed Bali Padda as the company’s boss.

As market speculation emerged over the leadership change, Knudstorp – who was Lego’s CEO for over a decade – said that the problems that the company needed to address was really his responsibility, rather than Padda’s or anyone else’s.

“Bali Padda came in in the past eight months and has prepared what we are announcing today. It’s under his leadership that made these drastic decisions. I’m announcing it today, as I was the CEO for the prior 13 years and the fact that we have these problems that we need to address is really my responsibility.”

“I feel 100 percent accountable for that, having created those problems over the earlier years. Bali has done a tremendous job of addressing that, he has completed that task.”

Reflecting on the appointment of Danish industrialist Niels B. Christiansen, the chairman said the company was “very happy” to find somebody who could take a long-term view on the toy-making business and who was “appropriate” for the obstacles that the firm currently faces.

“Niels Christiansen is a very tenured, a very experienced CEO with an impeccable track record from running global businesses and we think he will be a great fit and do really well here. So we’re actually satisfied with Bali’s contribution.”

“The person to blame for these poor outcomes is unfortunately me and I take full accountability for that today.”

Read more on CNBC