This piece appeared in the May 10 print edition of B&T Magazine. 

It’s 2013: welcome to the future.

In the past few years the advertising industry has transitioned from handshakes, lunches, and the big idea, to a data-driven, real-time world where endless creative options are dynamically tested, optimised and iterated to make every marketing dollar more accountable and effective. We’re already putting radio on DSPs, and in a few more years TV buying will be fully automated, print will be dead, and the desks of three-quarters of the people reading this will be in the cloud.

Big data is at the heart of this. We’re finally able to take billions of pieces of information and create super accurate models of audiences. We can put the right ad in front of the right person at the right time – and then we can measure how effective we’ve been.

And it’s simple – building audience profiles is now as easy as hitting a button. An example: based on a few basic data points, I can tell the following about you:

“You have a great need for other people to like and admire you. You have a tendency to be critical of yourself. You have a great deal of unused capacity which you have not turned to your advantage. While you have some personality weaknesses, you are generally able to compensate for them. You pride yourself as an independent thinker and do not accept others’ statements without satisfactory proof. At times you are extroverted, affable, sociable, while at other times you are introverted, wary, reserved. Some of your aspirations tend to be pretty unrealistic. Security is one of your major goals in life.”

Welcome to the future. It’s exciting, yes?

At least it would be if it was all true.

Big data has been promising to revolutionise everything in our world for years now, but nobody seems to know exactly how. Behavioural economics professor Dan Ariely summed it up wonderfully - “Big data is like teenage sex: everyone talks about it, nobody really knows how to do it, everyone thinks everyone else is doing it, so everyone claims they are doing it.”

There are countless promises being made but very little actually happening. And even less making a real positive impact to this industry. The description of ‘you’ above wasn’t written by big data. It was written in 1948. It was written by a psychologist named Bertram Forer, and it describes accurately around 85% of people. It highlights perfectly the challenge that big data faces - we’re all unique in our preferences, thoughts, and motivations, yet we’re also exactly the same.

This individual uniqueness challenges the notion that we can use big data to understand precisely how people react to communications. Our understanding of how people form preferences and make purchasing decisions seem to be driven only by the latest theories that are supplanted every six weeks.

The reality is that there is so much data that it’s possible to tell any story you want, as long as no one actually looks behind the curtain. Nobody knows how a print ad or a Facebook Like or a YouTube video view will impact an individual when they’re standing in front of the shelf or hovering over a ‘Buy now’ button. And those who claim to almost always have a vested interest in the outcome they’re championing.

Using data to predict the mindset of people seems to be the unicorn that the industry is chasing, and we’ve somehow fooled ourselves into thinking it’s a possibility.

This stuff is really hard. And repeatedly saying ‘Big Data’ and tossing around a lot of numbers doesn’t make it any easier.

Predicting more rational aspects of a person in the real world is however, a very different proposition to predicting emotional aspects. And this is where the opportunity with data truly lies.

Using data to predict how people act physically is perfectly feasible. Albert-László Barabási’s research into scale-free networks (the kind of social networks in which almost all communications are transmitted) has shown that it’s possible to predict where you will be at 3 p.m. tomorrow with 93% accuracy, as long as we have the historical data of where you have been previously. The same logic correctly posits that cinema ticket sales go up in blistering hot weather, and that if you’ve tweeted about #QandA for the past 4 weeks, you’ll likely be watching again this week.

This isn’t a new idea. It’s just an idea that’s been largely ignored. As an HBR article on Big Data Hype proclaimed last year:

“Activities that are governed by physics and precise laws like the force of gravity can be predicted to an amazing degree. Predictive analytics can figure out how to land on Mars, but not who will buy a Mars bar.”

If big data is actually going to make an impact, we need to be better at identifying the opportunities and being honest about what’s possible. We need to stop looking to data to solve the problems we want it to solve, and understand the problems it’s best suited to solve.

It’s in the real world, the rational, physical, and measurable world that big data is interesting and powerful right now. It’s what we’re seeing in products like Nest and Google Now, and it’s the powerful innovation that the advertising and media industry seems to be ignoring.

At MediaCom lately we’ve been working on a few projects that explore the value of real-time physical data and the power of bringing that data to the point of decision-making.

mTrigger is a tool we’ve built that allows us to switch campaigns on and off, modify search bids and keywords, run mobile offers, and modify website creative in real time based on any external data trigger. We can completely change the experience of a brand in any digital medium when it’s raining, when an Australian cricketer has hit a six, when the trains are running late or even when cat mentions on Twitter by users located in Newcastle happen to be higher than normal.

We’ve also created mBuzzTV, an extension of our in-house social monitoring tool, that’s focused purely on TV shows. The Top 40 shows on TV are constantly tracked and given an mBuzz Score, an indication of the talkability of that show. We’re beginning to use these scores as a predictor of ratings in future weeks, and understanding which people keep coming back to a particular show and why they talk about it.

This use of data is exciting. It’s exciting because it’s real, not theoretical. This stuff is far easier than chasing unicorns, and helps us to get better at making decisions. Because if you can’t connect data to the point at which you make a decision, it’s useless.

By discovering and understanding simple metrics that create decisions and actions that make a measurable and positive difference, data can be powerful, not just big.

I presented this chart as part of a talk I gave at the Interactive Minds event in Brisbane last week.

It’s a simple (perhaps overly so) representation of the amount of information contained in standard ads delivered in different types of non-broadcast media over the past few decades.

A single-page full colour print ad is around 25MB of data. The equivalent online format – a rich media banner – is around 2MB. While mobile ad standards are loose at best, size restrictions dictate that 20KB is about as big as a mobile ad can be.

The human bandwidth for advertising is declining consistently by orders of magnitude. The future bandwidth available for advertising is 200 bytes – a little more than the amount of data in this sentence.

What will that future look like? The ‘Glanceable UI’ is a term coined by Misfit CEO Sonny Vu that perfectly describes how we will consume our content in the future, and why brands will be mostly absent.

Nike Fuel created a glanceable string of LEDs to communicate how much you’ve moved today.

Pebble Watch created a monochromatic glanceable screen to show you only the critical information from your smartphone.

And Google Glass gives you a glanceable heads-up display as a consumer device, not just military wizardry or sci-fi gadgetry.

When our screens are nothing more than a string of LEDs, there is no room for the insignficant.

Despite being an advertising company, Google does not allow developers to serve ads on Glass.

With screens shrinking, the first thing to suffer as a result will be advertising. In a world where the human bandwidth for advertising is approaching zero, content providers will face the challenge of having to adapt in order to remain profitable.

The New York Times, a business that is slowly weaning itself off a reliance on advertising, has released its Glass app. While a media company like Google seem to be perfectly positioned to survive in a glanceable future, it’s not so clear how – or if – the New York Times and others like it will.

Regardless of how targeted or how social display advertising is, it needs to be acknowledged that this is a low-impact, low-performing format.

Putting ‘hyper-targeted’ and ‘social’ in front of something doesn’t necessarily mean a lot beyond hype and perhaps a slightly higher cost per impression. Yet there seems to be an assumption in the market that social media advertising allows a level of targeting previously unfathomable by ‘traditional digital’. This is not true.

Meaningful, accurate audience models can be built outside of social platforms – it’s simply a matter of how well you can manage and model data.

The assumption that hyper-targeted social is the next big thing stems from the fact it’s a lot simpler to explain how you can create highly-targeted audiences with social data than it is to explain how to do it with less-obvious data. The former just requires an understanding that every detail of your life is available to Facebook. The latter actually requires hard maths, good technology, and clever people.

The truth is, the fact I visited a brand’s website is far more meaningful than the fact I like a brand on Facebook. And putting a banner ad in front of me, or a promoted post on Facebook, is not the best use of that data.

So what is all this data useful for? How about actually making stuff that people want to interact with? Or generating unique and previously unknown insights about your brand and your audience? Or using data and conversations to develop new products?

We need to move away from actually thinking display advertising is an effective format that we should continue to expect growth from. Whether it’s hyper-targeted and social or not, display advertising is a low-impact format that we need to evolve into something much, much better.

Short version: If you read books and have a Kindle (or use the Kindle app on another device), check out Kindred.

Longer version: I read books. I don’t read heaps of books, and almost none of them are fiction. But I do like the idea that the second best way to learn from someone or about something is through reading (the first best being meeting the person, which makes the second remarkably more common).

Every physical book I own is usually scattered with dozens of tiny post-it note markers highlighting all the bits that resonate with me and I’m likely to come back to.

Since I got a Kindle three years ago, every book I’ve read has been an eBook. When I made this switch I thought this would make the way I use highlights much simpler and much better – after all, every highlight from every book I read is now in ‘the cloud’!

The reality, I quickly discovered, wasn’t so great. The ability to access your Kindle highlights is limited to a web interface that resembles Yahoo circa 1998. There is no API allowing people to build on top of the service, and in three years it didn’t seem like Amazon were at all interested on improving the experience.

Talking to a few friends, it seemed this frustration wasn’t mine alone. So I set out to build a solution that allowed me to access, read, and share my highlights.

After a couple days over the Christmas break, a few late nights and a few more early mornings, the result is Kindred. If you’ve always wanted a better way to read or share your highlights from Kindle, head over and sign up. Kindred loads up your Kindle highlights, and allows you to easily select books, read through and share. You can also have a random highlight emailed to you daily or weekly, something that paper books always struggled to do.

The interface is minimal, but it works across all the various screens people are using. On iPhones and iPads you can even add it to your homescreen and it will work as an app. There’s already a few new features in the works (search and notes being top of the list), but if you’d like to see anything else included let me know.

Given it’s the start of a new year, I thought this was worth posting. It was also published on Mumbrella. It feels like the whole 70/20/10 model has already become passé, which is a good thing. But the core idea here – that brands are looking for innovation in the wrong place, and as a result are about to be massively disrupted – is more important than ever.

70/20/10. If you’re to believe the hype of every digital marketing conference these days, these three numbers are the saviour of every brand. Just spend 20% on moderately interesting work, and 10% on “innovation”, and watch those sales skyrocket. Agencies are loving it – finally the freedom to pitch those disruptive bottom drawer ideas and put all those Creative Technologists to use. But is this approach working? Is it right? Or are we all missing the point?

Every brand rightfully now sees innovation as a key to future success. Almost every client has an “innovation fund” (but very few have ever used it). Everybody wants to create the next Nike+. The only problem is that nobody seems to be doing it.

In almost every category there’s no shortage of innovative and disruptive ideas. The problem is that they’re not coming from agencies, or their clients. The Dollar Shave Club in FMCG, Shoes of Prey and Warby Parker in retail, Uber in transport, The Pebble Watch in technology, Spotify in entertainment, and Project Glass. These are just a handful of the new ideas that have brands reaching desperately for the innovation lever.

These ideas aren’t being created by the brands leading the category. They’re being created by startups that have no legacy in these categories. And that’s precisely why they’re succeeding. These businesses aren’t investing 10% into disruptive thinking. They’re investing 100%.

These ideas couldn’t have been made by traditional players in each category. The Pebble Watch couldn’t have come from Omega. Projects Glass couldn’t have come from Oakley. Spotify couldn’t have come from the record labels (and the trail of failed streaming services launched by the labels is testament to that).

It’s easy to look at where these ideas are coming from, and attempt to replicate the “startup attitude” that has allowed them to happen. “Agencies should be acting like startups” must be one of the most common ad-blog lines going around in 2012. “We should be starting accelerators and incubators and creating game-changing new products for our clients. Stuff the advertising!”

This misses the point entirely. Being a startup isn’t the reason these ideas are succeeding. Being aware of, and adapting to the real world is the reason these ideas are succeeding. 

And this is where agencies are going wrong. As soon as they get the innovation green light from clients, they try to act like a startup.The green light should instead be seen as an opportunity to act like an old agency in a new world, that has new rules. And one of the most fundamental new rules agencies need to understand, is what’s happened to demand.

Creating demand in the old world was simple – buy a bunch of TARPs, a few right hand pages, shout loud enough with a catchy jingle and be front of mind when a consumer gets to the shelf. Only the big brands had the scale of production, distribution, and marketing to compete in this world. They created the demand, and they reaped the rewards.

A quick look at Kickstarter will show you why, and how, that world is changing. Demand is now created upfront – before millions of dollars are invested in R&D and manufacturing and focus groups. The best ideas succeed, and every idea has a (relatively) equal shot.

Demand in the new world is created through amazing products and amazing service – and real people and real customers talking about that amazingness. These disruptive brands create demand by creating products people want. Experiences people love. They don’t rely on shouting louder. They just rely on being real, and being good.

And here’s where both advertisers and agencies seem to be getting it wrong. The agency world still revolves around pushing out messages that are anything but real, for clients and products that are anything but good. Making 10% of those messages more ‘innovative’ doesn’t solve the core problem. And increasingly, legacy brands will find themselves under attack by new players.

These new players will create good things. They will create real things. Things that people actually want. And people will talk about these brands in a real way. And they will disrupt traditional brands quicker than you can say ‘innovation fund’.

Walking through the agency earlier today, I noticed Ken Block’s Gymkhana Five video playing on at least four monitors.

The latest installment of the DC Shoes co-founder screaming around San Fran sideways in a rally car racked up 7 million views in it’s first 24 hours online. There’s no doubt that these videos are an epic example of how to do branded content. But that led me to think – what’s the cost of  all those views to the global GDP?

Turns out, with a few assumptions, it’s about US$32,653,499. In one day.

Google Docs spreadsheet, with references and assumptions is here.

Quite liked this from James Carse – Finite and Infinite Games…

Artists cannot be trained. One does not become an artist by acquiring certain skills or techniques, though one can use any number of skills and techniques in artistic activity. The creative is found in anyone who is prepared for surprise. Such a person cannot go to school to be an artist, but can only go to school as an artist.

In pretty much every business I’ve worked in, the edict that “everyone is creative” is thrown out with incredible frequency. Which makes life kind of awkward for the people who have “Creative” as a job title.

It’s not that the statement isn’t true, it’s in the details. Everyone has the potential to be a creative. Beyond that it’s an attitude, or as Carse puts it, “anyone who is prepared for surprise”. From now on I think “everyone is creative” should be forcibly postscripted with “if they’re prepared for a surprise”.

I’ve had a few emails and conversations over the past week post Fairfax and News admitting to the existence of the broader digital world. I haven’t had the time or inclination to put together a full article, there’s plenty of more qualified people doing that. But I thought it worth posting a few different thoughts from a few different emails and conversations.

Have the New York Times got it right finally with their Flipboard integration?

I’m not sure how it took so long for this to happen. Forward-thinking publications like the NYT and FT and the Guardian realised years ago that they’re in the content game, not the publishing game. The best thing a news organisation can do right now is abandon every aspect of their business that focuses on distribution (which they’re terrible at), and focus on the one thing they’re good at – creating content using words, pictures and video that people want to read and watch, and that set the agenda for the community, country, or world.

It’s more than a year since I wrote about this on the re-release of the Fairfax app, and I didn’t think it was a terribly groundbreaking idea at the time. I’m not sure why it’s taken so long.

Is there any way paywalls can work? Or are they a band-aid on the bullethole?

It’s easy to write off paywalls, and most analysis is correct in doing so. But that analysis only holds up when you look at publishers in isolation as a business. Almost every single business that is growing today is doing so through meta diversification. Supermarkets are banks. Search engines are mobile phone manufacturers. And in the communications world everyone is going for the triple-play of mobile, ISP and TV provider.

News is in an amazing position here with their 25% stake in Foxtel. Almost a third of Australian homes have a Foxtel box in them. And that means almost a third of Australian’s are already consuming content behind a paywall – but it’s TV. A News/Telstra/Foxtel triple play for subscription content could work, and could be implemented fast and soon.

Will the rate at which consumers accept they have to pay for online news content move more rapidly now?

I don’t think you’ll find people in Australia “accepting” that they need to pay for content. Ever. Especially now you have a generation of people who have grown up with free content entering the workforce/consumerforce.

This question seems to come from the same line of thinking that has led Fairfax and News to be in the position they are now in – they think they’re facing competition, when they’re really facing obsolescence.
Consumers will pay for content if it can be delivered to them in a seamless, interactive, and useful way. The content cannot be monetised, the method of delivery can. One of the biggest oversights of the past couple weeks is the critical need to decouple the content creators from the content distributors when looking at future business models. The journalist has no connection to the printing press any more.

Why are digital dollars worth less than print?

The audience are (for the most part) fully aware of the basic economics of physical distribution. They understand that the reason their newspaper is 20% ads, and the reason they have to pay a buck for it is because that physical item had to be created and transported into their hands.

From the beginning of newspapers the content has not been the valuable element in the transaction. It was replicated across every other version of the newspaper. So the value that we placed on the transaction was the ability to have our copy of that content.
With digital that model was flattened. Digital allows copies to be made for no cost – and the legacy attitude of “I pay for the physicalness of this content” is one that is hard to shift. Contrast this to books, where the value proposition has always been about owning the content. The acknowledgement in the transaction was that you were paying for the words that the writer had spent time crafting, not for the physical copy of the book. It’s a small difference, but it’s one of the key reasons that the newspaper world is falling apart, and the book world is not.

A 0 to 1 startup involves low financial costs but low non-financial costs too. You’ll at least learn a lot and probably will be better for the effort. A 1 to n startup, though, has especially low financial costs, but higher non-financial costs. If you try to do Groupon for Madagascar and it fails, it’s not clear where exactly you are. But it’s not good… The path from 0 to 1 might start with asking and answering three questions. First, what is valuable? Second, what can I do? And third, what is nobody else doing?

A chap named Blake Masters is taking Peter Thiel’s class on startups at Stanford. He’s posting all of his notes on his Tumblr. Startup people can obviously learn a lot from them. But a lot of it applies to pretty much any person who wants to make things – whether it’s a interweb startup, an ad, a new bike shop, or a new piece of music.

This piece was originally in AdNews.

Dennis K Berman, marketplace editor for The Wall Street Journal, summed it up with a single tweet: “Remember this day. 551-day-old Instagram is worth $1 billion. 116-year-old New York Times Co.: $967 million.” While the rest of us were scoffing down our Easter eggs, Mark Zuckerberg splashed out $1 billion to buy a mobile app that makes your photos look like they were taken in the ’70s.

The numbers are mind boggling. Instagram had less than 100,000 users in October 2010. By December, 1 million. Three months later, 2 million. By the start of November 2011 photos around the world were being vignetted and overshared by 12 million iPhone users. On April 3 this year Instagram launched its Android app, and picked up a lazy 1 million new users in a day. By the time founder Kevin Systrom was calling Zuckerberg “boss”, the app was being used by over 35 million people. To give that number some perspective, Instagram was installed on 1 in 10 iPhones in the world.

Unsurprisingly, in the last week there’s been a wave of speculation around why Facebook acquired Instagram. For advertisers, there are three key motives worth paying some attention to. And it’s not necessarily because they paint a rosy future for mobile and brands.

Firstly, and most obviously, Instagram was beginning to pose a real threat to Facebook. While even 50 million users is a fraction of Facebook’s audience, Instagram had grown its user base fast. Even more importantly was how it had grown it: photos. Facebook knows first hand how powerful photos can be in building a social platform. It was the addition of photo tagging that saw one of the biggest spikes in user growth in Facebook’s history. Partner this with the fact that Instagram has perfected the “content graph” – the ability to identify and recommend photos based on the photos you take and the tags you use – and it’s understandable that Zuckerberg was getting twitchy. On the Thursday before Easter, Instagram secured a $50 million round of funding, at a $500 million valuation. Cue complete twitch out.

Secondly, Zuckerberg wants to diversify. While Facebook will go public in the back half of this year, the founder still controls 57% of the company’s voting rights. In a letter to would-be investors in March he stated he wouldn’t be listening to “whiny short-term public shareholders”. Zuckerberg clearly doesn’t think that just adding new features for users or advertisers is the future for Facebook. He needs to diversify, and he’s willing to make some long-term bets in doing so. Looked at from this angle, the Instagram acquisition looks and feels a lot like Google’s $1.65 billion acquisition of YouTube in 2009.

Finally, and most importantly for advertisers, Facebook just hasn’t been able to nail mobile. Last year its revenue climbed 69% to US$3.1 billion. In Australia, 2011 SMI data reports over $26 million was invested in advertising on the platform. But not one dollar of this came from mobile. Facebook doesn’t often talk publicly about mobile for this very reason – it even listed the lack of mobile advertising as a risk in its IPO filing. But the platform’s growth in mobile, like mobile itself, has been stratospheric – in December 2010 it saw 432 million people accessing the site via mobile, up 76% from 12 months earlier.

In its acquisition of Instagram, Facebook has picked up arguably the hottest mobile-focused development team in the world. While Instagram will continue to operate as a separate product, you can bet that those developers have now been tasked with creating a scalable, user friendly, content-aware solution to get brands investing in ads on Facebook’s mobile platform. Once it’s cracked that, it will move on to creating an offering for any app developer to integrate advertising that utilises Facebook’s Open Graph. Facebook doesn’t just want to get mobile advertising right, it wants to become the biggest mobile advertising network in the world.

What will now keep Zuckerberg awake at night is the fear that he’s actually hunting a unicorn. Outside of paid search, no media company has been able to mobilise its existing advertising revenue successfully and meaningfully. While Instagram had outlined plans to create advertising revenue, it was still a long way off implementation. If Facebook can’t get mobile right, the bad news for brands is that they will continue to be excluded from what is now the fastest growing media channel in Australia. And it’s highly unlikely that any consumers will miss them.