PALM DESERT, CA: Brands must adapt to a marketing universe where “data-enriched value” from direct consumer relationships becomes a key element of the strategic mix, according to Randall Rothenberg, President/CEO of the Interactive Advertising Bureau (IAB).

Rothenberg discussed this subject during a keynote presentation at the trade body’s 2018 Annual Leadership Meeting held in Palm Desert, California.

“It’s now a commonplace understanding,” he said, “that pressures on the traditional advertising economy will continue to drive down traditional advertising spend.” (For more, read WARC’s in-depth report: Direct brands march to the front in the digital ecosystem.)

Drilling down into this topic, he cited a recent prediction from Rishad Tobaccowala, Publicis Groupe’s Chief Growth Officer, that advertising opportunities will decline by 30% in the next five years.

While traditional budgets may be in decline, Rothenberg reminded his audience that most industry-watchers believe the digital components of the ecosystem will see further growth.

“Media-spending patterns don’t lie. As the data from Zenith Media show, digital advertising will continue to skyrocket versus other media forms because it provides data-enriched value,” he reported.

And that rapid digital rise in the face of a steady decrease in traditional advertising means that nuanced strategies will be required. “It’s not that mass advertising won’t matter,” said Rothenberg.

“It’s that it will become less valuable as more and more consumer-facing brands cross the chasm and concentrate their activity on creating, reinforcing, and extracting value from their direct consumer relationships.”

A related shift involves legacy players – or “indirect” brands that traditionally built their businesses on relationships with third-party retailers and platforms – finding more direct ways of selling their products to consumers.

“There is only one strategy in the world: Become direct. I say ‘become direct’ rather than ‘go direct’ because ‘directedness’ is not a destination. It is a state of being. It is not where you’re going; it’s what you are and what you do,” Rothenberg said.

For digital-first upstarts, the main goal is to boost their scale. “One thing we know right now: most of these direct brands are small – under $1bn in annual sales,” Rothenberg stated.

Whether an enterprise is comparatively mature or at a nascent development stage, however, Rothenberg suggested, “all will need to develop more – and more enduring – relationships with their end consumers.”

Sourced from WARC