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The Future of Measurement: four key trends
The evolution of measurement holds enormous and powerful potential for marketers, if the industry can overcome the state of decision paralysis – in an extensive new report, WARC identifies four areas to focus on with practical steps to help.
WARC’s Future of Measurement report is based on exclusive proprietary data as well as external research and reporting.
WARC members can read the full report here.
If you’re yet to subscribe, you can read a sample of the report here.
Why the future of measurement matters
Third-party cookies will finally be eliminated from online advertising this year, but only a tiny fraction of marketers are conducting holistic measurement, with a majority not using any modelling, explains Paul Stringer, WARC’s managing editor of research and insights, in an introduction to the report.
Four big ideas
The report explores four key trends across different chapters:
- AI and the growth of synthetic data
AI is set to transform market research, but the quality of output is only as good as the reliability of the data put in. Marketers will have to grow accustomed to deploying hybrid approaches. - The third-party cookie countdown
Though 75% of marketers understand their dependency on cookies, many remain unprepared for their end; interoperability of replacement systems is a big concern. - Hurdles in holistic measurement
MMM is a hugely exciting new step in measurement, but it requires some know-how to put into practice. - Closing the sustainability gap
Sustainability requires a more nuanced definition of growth, while new regulations will put pressure on brands to measure the emissions resulting from their activities.
Key quote
“With measurement continuing to evolve in several directions at once, marketers find themselves battling multiple headwinds: not only the demise of third-party cookies, but new regulations in sustainability reporting, and, of course, the growing influence and impact of AI” – Paul Stringer, Managing Editor, Research & Insights, WARC.
Online formats now account for over three-quarters of UK ad spend
The UK’s ad market grew 6.1% in 2023 to reach £36.6bn, according to the latest Advertising Association/WARC Expenditure Report, with online formats accounting for 78.4% of that total.
But after factoring in inflation, that growth equated to a 1.2% contraction in real terms.
Key stats for 2023
- Online formats combined grew by 11% to reach a total of £28.7bn.
- Out-of-home (+9.7%) was the only other advertising medium to record growth in 2023.
- All main media contracted: TV (-8.9%, although BVOD was up 15.9%), radio (-3.3%), national newsbrands (-6.3%), regional newsbrands (-10.1%), magazines (-9.1%), cinema (-4.2%).
- The only major product sectors to record rising display ad spend (i.e. excluding search and classified formats) last year were retail (+5.0%) and services (+4.7%), the latter almost entirely attributable to a 6.6% rise in the entertainment & leisure sector.
- 2023’s Q4 Christmas ad season topped £9.7bn after achieving growth of 7.4% year-on-year.
- Q4 growth was led by digital out-of-home (+18.1%) and BVOD (+15.9%) as well as search (+12.9%), as the traditional uplift in Golden Quarter investment was buoyed further by increased advertising activity during the Rugby World Cup.
Looking ahead
- The UK advertising market is forecast to grow 5.8% in 2024 to reach nearly £39bn, and by a further 4.5% in 2025 to top £40bn.
- Broadcast media, most notably TV (+2.6%) and radio (+2.3%), are expected to return to growth in 2024.
- Among digital formats, search (+8.9%) and online display (+6.4%) are again set to see the strongest rises, closing the year with a combined share of 77% of all spend.
- More favourable economic conditions should encourage advertisers to invest more in brand-building campaigns in 2024 and this, coupled with short-term stimuli such as the Men’s Euros in June, the upcoming General Election in the second half of the year and, to a lesser extent, the Paris Olympics in July, are expected to contribute to healthy growth in formats such as broadcaster video-on-demand (+14.1%) this year.
Sourced from Advertising Association, WARC
How KFC uses brand sponsorship to enhance sporting experience
KFC’s association with Australian sports has successfully created various distinctive brand assets, thanks to its good understanding of the audience and the environment, plus a dash of creativity that has allowed its sponsorship dollars to go further.
Why brand sponsorship matters
There are more brands than ever associated with Australian sport, but consumers are having a harder time remembering who they are, despite the significant investment required for sponsorship in this space. This makes it imperative for brands to “get it right” and not just occupy but demand the attention of the audiences they’re so keen to reach.
Takeaways
- A...
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Volkswagen doubles down on China as presence slips
The world’s largest car maker is aiming for an eighth of China’s automotive market with the launch of 30 new electric cars by 2030.
Why EVs matter in China
China’s massive market - of which Volkswagen enjoys a now slightly reduced 14.2% at 3.2 million vehicles shipped to China, just under 200,000 of which were electric - is vital to electrification, as it emerges as the critical arena in the electric car space.
Volkswagen’s plans come as major players in the electric space face a rocky period.
Pole position
The German OEM (Original Equipment Manufacturer, the preferred term for car assemblers) wants to remain the number one in the market, but must compete with close challenger BYD - with three million vehicles shipped, all of which are electric. VW’s EV business in China is growing at 23.2% year on year as they are expected to make up over half of the total market by 2030.
A new product mix is essential, starting with it’s China-focussed ID.CODE (pictured), which will premiere this week at the Auto China 24 trade fair in Beijing.
The company has explained that it will sharpen its strategy across three pillars:
- A comprehensive product portfolio accelerating the electrification of the brand’s models,
- A brand and design language developed specifically for the Chinese market,
- Local technical development with strong partners in China to accelerate the pace of innovation.
The brand opportunity is significant too. In a space with hundreds of manufacturers competing, there is a chance for a big international brand to leverage its equity at a time when significant demand-side perks are available to Chinese consumers.
Obstacles come in the form of short term economic pains that have troubled local giant BYD as well as Elon Musk’s Tesla, reducing revenues in the short term at a time when heavy investment in complex manufacturing is needed to sustain the electrical transition and meet consumer demand.
Sourced from Volkswagen, Morning Brew, WARC, SCMP
Why you need to focus on brand love before brand need
How consumers feel about a brand, more than need, drives stronger engagement with marketing, according to new research.
Key figures
- Sixty percent of respondents in a study* by martech company Epsilon said they engage with a marketing message because they are “familiar with and like the brand”.
- Fifty-six percent said they interact because they want to know more about a new brand or product.
- Just 37% of respondents indicated their engagement is driven by need.
Why it matters
“These findings remind marketers of the importance of creating relationships with consumers that are not just transactional, given ‘brand’ is the context in which all purchase decisions are made,” said Jeff Smith, chief marketing officer at Epsilon.
“The implication is that marketers need to stop thinking of ‘branding’ or ‘performance’ as separate and disconnected initiatives. Effective marketing and media not only capture sales in the moment, but also build relationships with your brand that drive more purchases over time.”
The importance of personalisation
- Two-thirds of respondents said brands have become better at personalising advertising and marketing, but almost all see at least one irrelevant ad every day.
- Three-quarters of respondents said they view brands negatively when they include inaccurate information about them in their advertising and messaging.
- Less than half of respondents felt they have some control over how brands engage with them.
*The Push and Pull of Personalization is based on responses from 600 US consumers aged 18-65.
Sourced from Epsilon
How long do the profits from advertising take to materialise?
Advertising has an average short-term profit ROI of £1.87 per pound invested which increases to £4.11 when sustained effects are included; a major new study concludes that 58% of advertising’s total profit generation happens after the first 13 weeks.
Context
Profit Ability 2: the new business case for advertising*, commissioned by TV industry body Thinkbox, is an update and expansion on a similar 2017 study, which found that TV ads drove 71% of advertising-generated profit.
The latest report analyses the profit generated by advertising at different stages as its effects build over time: immediate (within one week); short-term payback (up to 13 weeks); sustained payback (week 14 through to 24 months); and full payback (0-24 months).
Channel breakdown
- TV accounts for 54.7% of advertising’s full payback but only accounts for 43.6% of total advertising investment. Within this, Linear TV accounts for 46.6% of full payback and BVOD accounts for 8.2%.
- Online Video (which is mostly YouTube) has an average full profit ROI of £3.86 for every pound spent and accounts for 3.4% of full advertising-generated profit.
- Generic PPC (unbranded online search) offers the highest immediate payback, but its effects rapidly diminish after the first week and it has a weak sustained payback.
- Linear TV is the second strongest performer for immediate payback, followed by Paid Social, Audio and BVOD.
- TV also has the highest saturation point: advertisers can increase investment here to a higher level than other media and it will continue to generate a profitable return.
ROI varies by sector
- Full profit ROI varies by sector: in the automotive sector, for example, it’s £4.65 per pound invested, more than double the figure for the financial services sector (£1.95).
- That’s down to nuances in the different business environments, including the value of products, operating margins and the relative strength of advertising on sales.
Why advertising payback matters
“This is about the strength of advertising as a business investment that grows the bottom line and grows the economy,” said Matt Hill, research and planning director at Thinkbox.
* The study was produced by Ebiquity, EssenceMediacom, Gain Theory, Mindshare, and Wavemaker UK, using their huge econometric databases of client data. The final report covers £1.8bn of media investment in the UK across 10 media, 141 brands, and 14 categories.
Sourced from Thinkbox
CTV and podcast spending surges
British advertisers are increasingly tapping into the popularity of online entertainment, as can be seen from rising expenditure on CTV and podcasts, according to the latest Digital Adspend report from IAB UK.
Key stats
- Overall, the UK’s digital ad market grew 11% to a total of £29.6bn last year – far ahead of GDP growth of 0.1%.
- Ad spend on CTV devices grew 21% YoY in 2023, while the amount invested in podcast advertising was up 23%; social video continued to perform strongly with annual growth of 20%.
- Growth rates in all three categories outperformed the digital ad market as a whole, underscoring the appeal of these channels, which stand to be more immune to upcoming cookie changes than other forms of digital advertising.
- Digital out-of-home, included for the first time, grew 12% in 2023 to £841m.
- Digital retail media spend was also up 12% to £283m, as the sector continues to prove a popular route for advertisers looking to tap into retailers’ wealth of first-party data.
- Spend on mobile advertising has accelerated, increasing 15% to £16.7bn. This is a significant uptick versus 2022 when it slowed to a 4% growth rate in the wake of Apple’s IDFA changes.
- Search continues to underpin the industry, accounting for 50% of the market at £14.7bn.
- Display grew 12% to £11.3bn fuelled by video, which accounted for over 60% of total display spend for the first time.
Putting the data in context
“With the impending deprecation of third-party cookies, digital advertising is undergoing a shift and we know that the year ahead will reshape the industry in new ways,” said James Chandler, CMO at IAB UK. “In that context, it’s encouraging to see advertisers seeking out engaged environments and increasingly investing in a broad array of online solutions.”
Sourced from IAB UK
Revolut & Chase: The retail media boom comes to banking
Financial services brands are starting to see opportunities in advertising, with Chase in the US launching a media solution and the UK’s Revolut considering one, as the same first-party storm that hit the retail world now gathers above financial services.
Why advertising matters to financial services
Selling digital ads is usually much more profitable than providing a company’s core operations because the incremental revenue is a byproduct of those operations. With young fintechs like Revolut looking for new sources of profitable revenue and established brands like Chase also in search of profitable growth, advertising appears to offer a big opportunity.
It’s not the first time that financial services and, specifically JPMorgan Chase, have dabbled in media. Back in 2021, it acquired restaurant reviews site The Infatuation. It appears that for Chase, at least, the strategy has yielded some rewards.
Revolut sees potential in media as fintech boom fades
No longer the radical upstarts of the late 2010s, fintechs or neo banks like Revolut are becoming established (even if it waits for a full banking license). But it too has felt the pull of media.
In an interview with the FT, Revolut head of growth Antoine Le Nel talked up becoming a “media business” capable of bringing in a “proper chunk” of total revenues. Internal company files shared by another source indicate that expected revenues from the project in just two years could be as much as a third of Revolut’s £923m revenues in 2022.
The company has now hired TikTok’s former head of e-commerce partnerships in the UK, Inam Mahmood, to lead sales for the new venture, indicating some seriousness.
Chase Media Solutions
In short, Chase Media will send its customers targeted deals and discounts based on their spending habits, adding a new level of sophistication and targeting to the existing Chase Offers feature. And this is thanks to the 2022 acquisition of Figg, a card-linked marketing platform.
According to a release, Chase Media Solutions “serves as a key conduit for brands, connecting them with consumers’ personal passions and interests.” At launch, the banks says it has piloted the technology through some short campaigns for Air Canada, Solo Stove, Blue Bottle and Whataburger.
In turn, the release continues, “Chase customers benefit from personalized offers and the ability to earn cash back with brands they love or are discovering for the first time.”
“Like retailers, we have first-party data and a dedicated audience. But what sets us apart is the unrivaled scale and insights from our customers,” says Rich Muhlstock, president of the new media solutions division.
Driving the story: Everything is an ad network
For the original thinking on this trend, which began in the depths of the pandemic, look to Eric Seufert’s observations on his Mobiledevmemo blog and the long list of examples confirming them.
The deprecation of the third-party cookie has floated on the horizon for many years now, as online advertising looks past the deeply flawed but democratic tracking technology of the cookie. Though there remain more potential hiccups along the way to a Google-sponsored solution, it is undeniable that marketers and media owners need to look to their own sources of data, known as first-party data.
It’s the story that makes up a significant portion of WARC’s latest Future of Measurement report (members can read here; if you’re yet to subscribe, get a sample here). At the brand level, this manifests in 71% of brands, agencies, and publishers increasing their first-party assets.
What’s new here, however, is how wildly the definition of “publisher” is deviating from its original sense, as advertising dollars fall away from their traditional destinations alongside professionally produced content. What matters to ad buyers today is audience data close to the point of purchase – for financial services brands, the step makes a lot of sense.
Sourced from the FT, Chase, WARC, Mobiledevmemo
Gaming: How to create immersive and effective brand experiences
As traditional gaming arenas evolve into immersive, multi-sensory and multi-form social spaces, brands have the opportunity to curate personalised and lasting experiences to engage meaningfully with the lucrative US$5 billion gaming market in Southeast Asia and its 270 million gamers.
Why immersive brand experiences matter
Brands can build AI-enabled non-player characters to develop relationships with audiences in new ways to provide personalised and interactive real-time consumer experiences that allow AI to learn more about the consumer and conversation.
Takeaways
- Extend IRL occasions with exclusive in-game experiences and benefits to bridge the gap between virtual entertainment and real-world consumption.
- Non-player character (NPC)...
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How FIFA Women’s World Cup became a cultural phenomenon
FIFA’s brief for the Women’s World Cup was to create a promotional strategy to raise awareness, appeal, excitement and attendance with the ultimate conversion metric of selling two million tickets, elevating it beyond a sports tournament into a sociocultural movement.
Why the World Cup matters
To appeal to and convert the sizeable audience base of non-traditional football fans, the FIFA Women's World Cup had to behave more like a culture brand and lean into creating engaging content and experiences beyond the game that spoke to broader communities who could be convinced to participate in the tournament.
Takeaways
- Create enduring cultural narratives with wide appeal through on and off-the-pitch stories to connect with various types of traditional and new audiences.
- Drive fame through the power of sound, such as creating a unifying chant designed to transcend team allegiances and embody the spirit of greatness and inclusiveness that Australia and New Zealand are known for.
- Integral to the campaign was a made-for-social brand campaign aptly named Greatness Feeds Greatness. This underscored the profound impact of football on a global scale and reinforced the message of inclusivity and empowerment by creating different versions per audience and market.
How to maximise brands' engagement with sport
Marketers looking to make an impact during big sporting events could benefit from tapping influencer content and sports-adjacent celebrity buzz alongside tentpole events.
Why sports strategy matters
Sports is a key consumer engagement point for brands. Tentpole events can be the heart of this strategy, but the range of options has multiplied into everything from online highlights and creator content to a growing amount of celebrity-focused material that is adjacent to sports.
Takeaways
- Major sporting occasions like the Super Bowl offer significant reach on television, but a growing universe of related content opportunities is now available.
- Popular sports-related influencers can...
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Does ‘no guardrails’ AI threaten brand (and personal) safety?
Some artificial intelligence players like Open AI and Google are building guardrails into their models, but others argue that approach inevitably includes biases and are instead offering open-source models with little or no such fine-tuning.
Background
- Mistral, Alibaba and Meta are among the bigger companies releasing open-source AI models, along with a plethora of smaller ones.
- While the aim is that such models can reflect any user’s values – “Every demographic and interest group deserves their [AI] model,” says one developer – they could also further widen an already volatile political and economic divide by spreading misinformation, the Wall Street Journal notes.
- Larry Fink, the head of asset management firm BlackRock which has directed investment based on ESG criteria, has seen the firm more than triple spending on his home security in response to him becoming a target for conspiracy theorists and anti-woke activists.
Why it matters
Brand safety has become an issue for advertisers, many of whom would prefer their products and services not to appear on sites touting extreme views, but who also would like to avoid being drawn into the debate on wokeness that comes from actively avoiding such sites. It’s a balancing act which is only going to get more complicated as AI becomes more widespread and the risks greater if unregulated AI gains ground.
That personal safety issues are now being added to brand safety ones, meanwhile, is indicative of the times.
Sourced from Wall Street Journal, Financial Times
Google’s Privacy Sandbox not private enough, says regulator’s document
Google’s proposed cookie replacement technology, the Privacy Sandbox, has key flaws that could allow users to be identified, according to a draft report from a major regulator.
Seen by the Wall Street Journal, the draft report from the UK’s privacy regulator, the Information Commissioner’s Office, suggests that given systemic noncompliance some advertisers will be able to continue tracking users across sites. The full report is expected to appear at the end of April.
Why a UK privacy regulator’s concerns matter
It may not be the privacy regulator’s direct intervention that forces a change to Google’s post-cookie plans, which are set to go live globally across its dominant Google Chrome web browser this year, but how it helps to form a broader assessment by the UK competition regulator (the Competition and Markets Authority) that the search giant has promised to apply globally.
These included assurances that it would not give preferential treatment to Google-owned products and services.
Should it fail to secure the CMA’s blessing, however, the company will be unable to block cookies until the regulator agrees that a replacement is acceptable, as agreed in February 2022. This could, once again, mean even more delays to the deprecation of the third party cookie.
In context
- Over half of marketers are not well prepared for the withdrawal of third-party cookies, while a majority (58%) of global marketing leaders lack a working understanding of how changing privacy regulations will affect their work.
- Meanwhile, some observers have questioned whether Google’s Privacy Sandbox is a strategic ploy to consolidate its position under the guise of better privacy.
- Observers of the online advertising industry will be aware of the many false starts, delays, and tactical switches that have made up the deprecation of the cookie, not least the competition question asked by UK regulators the CMA, beginning in 2021.
Sourced from the WSJ, WARC, The Current
How Guinness differentiates
Drinks brand Guinness has a long history of leveraging its distinctive assets to meaningfully differentiate itself from its competitors and, after some recent wobbles, its recent campaigns are back on track.
Why brand distinctiveness matters
Brands can sometimes interpret the quest to be “meaningfully different” as a need to address higher order societal issues when they might be better served by focusing on more everyday category concerns, according to brand marketing director Anna McDonald. For Guinness, that means quality, taste and emotion.
Takeaways
- Keep it relevant: the brand has evolved the way it thinks about the perfect pint, away from...
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Young men feel powerless in the face of climate change
Almost a third of Gen Z and Millennial men think it’s already too late to do anything about climate change and there’s no point in changing their behaviour as it won’t make any difference.
A global study
- That’s according to Earth Day 2024*, a global study from Ipsos, which finds that almost three in five consumers around the world agree that if businesses in their country don’t act now to combat climate change they will be failing their employees and customers.
- While there’s a general consensus across the generations on this, it’s striking that, in contrast to many other issues, younger people, and males especially, are more pessimistic than their elders: 32% of Millenial men and 30% of Gen Z men think climate change is beyond our control, compared to just 25% of Gen X and 19% of Boomers.
- Almost a third of Gen Z and Millennial men also said the negative impacts of climate change were too far in the future to worry them.
- There are wide divergences between individual countries with consumers in Japan least likely to agree (31%) that businesses need to act now to avoid failing staff and customers and those in those in India and Indonesia the most likely to agree (both 75%).
- Recycling is not, as many consumers seem to think, one of the top ways to combat climate change (environmental damage, yes): governments and businesses have work to do to communicate those actions that will have the biggest impact on cutting emissions.
- Financial incentives and access to information are the leading motivators globally that could spur more climate action by individuals, followed by seeing climate impacts in their country.
What it means
Businesses that are crafting climate action strategies might need to tweak ads and messaging intended to target younger, and at least on this issue, more cynical staff/customers.
* Ipsos surveyed approximately 1,000 individuals each in Australia, Brazil, Canada, China, France, Germany, Great Britain, Italy, Japan, New Zealand, Spain, and the US, and 500 individuals each in Argentina, Belgium, Chile, Colombia, Hungary, Indonesia, Ireland, Malaysia, Mexico, the Netherlands, Peru, Poland, Romania, Singapore, South Africa, South Korea, Sweden, Switzerland, Thailand, and Türkiye. The sample in India consists of approximately 2,200 individuals, of whom approximately 1,800 were interviewed face-to-face and 400 were interviewed online.
Sourced from Ipsos
When do startups need to start investing in brand to avoid a plateau?
When do startups finally outgrow community- or product-led growth? Ideally, before returns from activation-focused channels start to drop off – a period known as the performance plateau – says a new analysis.
The analysis by Nigel Hollis, author, consultant, and former Kantar chief analyst, is fleshed out in a new blog which addresses ideas encountered in an earlier post and ties in with emerging thinking around the idea of brand as the creation of future demand as a critical objective for maturing startups.
What’s going on
- Modern startups are often digital by design, and can often grow on the back of a mix of word of mouth and performance marketing to convert interest.
- Hollis’ analysis is based specifically on a basket of Direct-to-Consumer (DTC) brands and brand name searches over the 95 months following their founding.
- “On average, brand name search doubles each year for the first four years. However, between years four and five the average trend changes dramatically and begins to trend down marginally,” Hollis writes. “That means they need to start thinking about how best to build their brand at the end of the third year.”
In context
- Hollis’ analysis, which will be of great use to early stage brands working out what to do next as well as to established brands looking to strengthen the argument for building demand, chimes with a framing of brand building in harder-nosed terms than ‘brand’, as explored by James Hurman in a WARC whitepaper in 2021 and fleshed out more broadly since then.
- The thinking goes that when a radical new product (or channel, like DTC) arrives, a successful innovation will likely find a group of consumers that needed that problem solved but just needed a company to exist in order to buy.
- Then, that natural pool of customers runs out and new customers become more difficult and expensive to find; Hurman noted that, anecdotally, this tends to happen around three years from launch. This is when you need to have started building future demand among an audience that is not ready to buy yet but may realistically come into the market in the future.
- “When future demand creation and existing demand capture happen concurrently, growth is sustainable and sustained,” Hurman writes.
Sourced from Ask Nigel Hollis, WARC
[Image: Nigel Hollis]
‘Encounters’-led planning adds new dimension to media quality debate
A report by Wavemaker UK argues that media planners should adopt an ‘encounters-first’ mindset when developing ad campaigns, concluding that TV remains the most cost-effective channel overall because of its high-completion rate and longer length.
From attention to signalling, the debate around the role of media quality – rather than audience targeting – in marketing effectiveness continues to grow.
Why do ‘encounters’ matter?
Metrics can be misleading when viewed through a singular lens; video formats do not allow for like-for-like comparison. TV reach delivery is based on impacts and is duration-based, while Meta, TikTok and Snap...
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The AI perception gap
Artificial intelligence has been a part of the mainstream conversation since the arrival of OpenAI’s ChatGPT in late 2022, but while the technology is becoming more powerful, users are also coming to terms with its limitations.
The crux of the matter
Generative AI is understood to have great potential if you need to produce a lot of text or imagery. Using a publicly available beta version, like the free ChatGPT that many people have tried, obscures the big costs of running an AI system. This is especially true when models are much less accurate than they need to be, as they don’t have robust oversight over what AI systems are producing.
Cycles of hype follow a pretty predictable curve when excitement dissipates once the rubber hits the road and a technology’s limitations become clear.
Research points toward impact-optimised image generation
First, the good news. Lumen reports positive results from a trial of AI creative tools with Diageo which could be optimised for “difference” performance metrics. In this case, the attention the ads commanded were “significantly” more than in Lumen’s average benchmarks.
For marketers needing to generate not ideas but sheer output rather than creative strategies or platforms, the signals are positive.
Or at least, positive for a balance sheet. Lumen also notes a 2023 Kantar study showing that on certain brand metrics AI had the potential to be at least as good as human-made creative. On the surface, this looks a lot cheaper at the HR level.
But costs are ramping up. You may be able to sack your creatives, but with demand soaring for AI-skilled engineers there may be a different set of costs to consider. Not least environmental, as the sheer amount of computing power increases.
Stanford AI index: money and nerves
Concerns about cost will be clear to readers of Stanford’s AI Index, which puts some numbers behind the staggering computing costs needed to train an AI – costs that are only rising as models get bigger. “OpenAI’s GPT-4 used an estimated $78 million worth of compute to train, while Google’s Gemini Ultra cost $191 million for compute,” notes the AI Index report.
There is, admittedly, a lot of money flowing in. Funding for GenAI has octupled since 2022 to reach $25.2bn. But investors are not the public, 52% of whom express nervousness about AI coming to products and services – a 13% year-on-year increase.
With figures so large required, industry leads the academic or government in development by a long, long way. But industry brings with it challenges: companies need to make sure their models look (and, vitally, sound) impressive to clients and imposters. Robust, standardized evaluations of LLM responsibility are scant.
AI is going to take longer to generate returns than thought
Data from ETR, a research firm specialising in an ongoing panel of tech decision makers, finds that gaps in the rate of application of this new technology are emerging, despite the majority (80%) of companies surveyed having evaluated the potential applications of AI in their business.
Unsurprisingly, leadership tends to be much more optimistic than the experts, with some of the biggest gulfs found in the expected short-term returns (three months) – a timeframe in which 21% of C-suite leaders expect returns compared to just 10% of experts. This is based on a smaller subset of respondents at companies that have “implemented” generative AI features.
“I do think the hype cycle, because of how quickly it moved, the pendulum is stalling and swinging back a little bit,” explained Erik Bradley, ETR chief strategist and research director, in comments to Sherwood, a business news website. “People are recognizing it's still important, it's still going to be there. It might not be the panacea, the savior of their enterprise at this stage.”
Sourced from Lumen, WSJ, WARC, Stanford, Sherwood
London marathon greets a new cohort of fashion-forward running brands
Major sportswear brands have long blurred the line between function and fashion, but as long-distance running gains popularity, a new generation of design- and community- led brands are entering the running – and wider sportswear – space with a different playbook.
Many are looking to this weekend’s marathon and other running events later this season to deploy it.
Why sportswear matters
Dominated by major brands, the sportswear market has seen and anticipates consistent worldwide growth. While new upstarts share some of the same drivers as the big brands – distinctiveness and performance – they differ in their focus.
In part, they are looking at helping serious runners stand out, with the Financial Times calling it a “fashion week for the running community”. These efforts often end up tying encounters with a brand to a sense of participation and community. But they are also looking to a smaller, often more committed niche than the broad swathes of interest sought by the big players, as they wrap their logos around global events.
Availability, then, stems from the know-how, the reality of having earned your stripes as an athlete.
Fashion and performance chases a key consumer segment
Taken as part of a deeper athleisure trend, which is the fastest growing category in fashion, according to GWI, there’s a distinctly fruitful audience to be found here. As GWI’s Ben Butling wrote back in November, they tend to be affluent individuals “happy to gloss over a higher price tag if it means access to fashionable items that look good, have the quality to match, and make them feel a part of a social tribe.”
Brands at the edge
The FT foregrounds a handful of brands operating in this emergent design-led running space. There are upstarts, from creative people who spend a lot of time running, such as the clothing brands Soar, Satisfy, Pruzan and the apparel and eyewear brand District Vision. And then there are bigger brands like New Balance who will hold a fashion week-style party on the Thames to coincide with the London Marathon.
Why it works
The trend is interesting due to what one founder, Tim Soar of Soar, calls the “festivalisation” of the sport, including additional events like panel discussions and post-race after parties, complete with some brands stocking high-end finisher specific t-shirts that tie the brand and the product to the experience.
It’s a tried and tested method in the space, and follows a model of niche-led sustainable growth typified by the runner’s darling brand, Hoka.
Following a spike in the popularity of running over the pandemic, Hoka kept its distribution to specific shops to grow loyalty among the community of the sport and assiduously avoiding overstocking, unlike a lot of other brands offered on the mass market. This maintained the premium perception of the brand – and, of course, margins.
Background
The rise of design-led or fashion-forward running brands chimes with a longer term trend in fashion of urbanites in activewear, which The Cut termed Gorpcore back in 2017. (The ‘Gorp’ element refers to the popular American hiking snack ‘Good Old Raisins and Peanuts’.)
If you live in a city and have noticed a lot of urbanites wearing hardcore outdoor brands like Patagonia or Arc’teryx, it’s likely as a result of the rise of Gorp.
More recently, Cosmopolitan observed in January that the outdoor/performance trend has melded with the Succession-era tendency of quiet luxury, to form a kind of stealthy outdoors made up of eye-wateringly expensive performance gear.
Sourced from the FT, WARC, NY Mag, Cosmopolitan, GWI, Statista, Retail Brew. Image: Pruzan
McDonald’s: A creative effectiveness transformation journey
Even brands as big as McDonald’s need to go through periods of reinvention and transformation, and for McDonald’s its most recent changes have been internal as well as external.
A new WARC Creative analysis takes a look at the impact of a re-prioritisation of creativity across the entire organisation, using data from the WARC Rankings and with commentary from a session the McDonald’s CMO, Morgan Flatley, gave at a recent WARC event in New York.
What’s changed?
McDonald’s has shifted in recent years from an extremely operationally focused organisation to one where creativity has a seat at the table in the boardroom and one that promotes creative courage. The fast food retailer can translate this directly into growth – $30bn in topline sales growth on a base of $100bn since the pandemic – outsized growth attributed to the focus on creative marketing.
The shift has resulted in the best year ever in the WARC Rankings for McDonald’s: 1st for effectiveness, 3rd for creativity and 3rd for media. And the first time a brand has ever ranked in the top three across all three rankings.
Why does it matter?
We know that creativity supercharges effectiveness from the many studies out there, but this is a specific brand example that can be linked to business growth. McDonald’s has increased the contribution of creativity to its effectiveness, raising the conversion rate from creatively-awarded work to effectiveness from 11% in 2017 to 27% in 2022.
A final word
“My advice is sometimes you have to take big swings in order to see that kind of momentum and help push an organisation out of what could potentially be a stuck moment to start to see the power of great creativity” – Morgan Flatley, CMO, McDonald’s.
WARC Creative members can read the full analysis here.
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