In 1906 Francis Galton, the country's foremost statistician, attended the West of England Fat Stock and Poultry Exhibition and uncovered an intriguing phenomenon.
Galton was interested in the highlight of the country fair: a guess the weight of an ox competition. After the competition ended, Galton analysed all 787 entries and stumbled upon a surprise finding. The median of all the guesses was remarkably accurate – 1,207 lbs, compared to the actual weight of 1,197 lbs.
A mere 0.8% off.
In fact, the average guess was more accurate than the vast majority of individual guesses – including those from cattle experts.
This "wisdom of crowds", as the finding became known, suggests that the average guess is often remarkably accurate as it balances out the errors each participant makes.
So why is this quirk of interest to brands?
From wisdom of crowds to winner's curse
It's interesting because this statistical observation applies as much to auctions as a guess the weight competition. After all, what is an auction but a crowd making a numerical estimate?
The wisdom of crowds means that the average valuation of a good at an auction is accurate, and therefore, the winning bid - the most optimistic in its valuation - must be inflated. Economists term this the winner's curse and have spotted it in action in a remarkable variety of auctions – from oil rights to 3G.
That's a problem as media is increasingly bought via auctions. Brands need to be careful if they are to avoid unwittingly over-paying.
How should brands approach auctions?
Auctions are here to stay. Brands can't ignore them. Instead they need to adapt their bidding tactics with a contrarian targeting approach. In the words of ad legend John Hegarty, when the world zigs, zag.
Most advertisers judge the value of an impression by looking for demographic signals – targeting, say, 18-34s or ABC1s. However, since this method is commonplace, those using it will be involved in competitive auctions. And the more participants in an auction, the more accurate the average bid and the harder it is to avoid the winner's curse.
But this herd like behaviour means there are plenty of under-exploited opportunities. If everyone else is prioritising demographics, then the canny brand should target contexts instead. After all there's plenty of evidence that receptiveness to ads varies markedly, from context to context.
The power of context
Over the last two years we've found a number of contexts where messages resonate best. We've discovered that people are more receptive to ads when they're in a good mood. That funny ads get far more laughs when they're watched in groups. Even that brand rejecters are more likely to change their opinions when they're distracted.
There are dozens of different contexts in which ads work harder. The key for each brand is to work out the particular context in which their message will resonate best. If they take the time to do that, rather than relying on tired, demographic data, they'll gain a competitive advantage by avoiding the winner's curse.
Richard Shotton is a member of the Effective Channel Integration panel of the Warc Media Awards.
You can read all of Richard's blogs here.