Mobile Fix – mobile disrupting GAFA

Simon Andrews, founder of the full service mobile agency addictive!, looks at the developments in mobile and how it might be disrupting GAFA (Google, Apple, Facebook and Amazon)

Google financial results leaked last night and the poor performance led to a US$22 billion drop in the company’s value.

Digging into the key figures, the problems are all mobile related; the purchase of Motorola was seen by some as a mistake and it’s poor performance was a big factor in the poor results – but ultimately owning a device manufacturer has to be a good thing, and we expect Google to get this business sorted fairly quickly.

But the other cause of the poor results is that the dramatic rise in the volume of mobile clicks hasn’t been matched with advertiser demand for those clicks, so the cost of a click has declined. This is symptomatic of the sloth like pace at which brands recognise the potential of mobile. If you don’t have a mobile optimised site, then buying mobile search isn’t wise (although we see many people wasting money by doing this).

However, each time we have done the math with a brand, we can see that the cost of the mobile site is soon covered by the value unlocked in search. Combining the additional volume with the lower prices, means that brands can reach more people looking to buy from them, at a lower cost. In these recessionary times, what’s not to like?

So as brands recognise this and seize the mobile opportunity, Google is well placed to benefit and the company value will recover. But, like Google, we wonder how long this will take and what is holding brands back?

The new centre of the advertising world?

For over 60 years the centre of gravity for the ad world has been 350 Madison Avenue – the original office of Doyle Dane Bernbach – where Bill Bernbach invented the way agencies still – essentially – work. But we would now argue that the centre of gravity is moving to here;

These data centres – owned by Google, Apple, Facebook and Amazon – enable cloud computing to do all the good stuff we now expect from our technology – amazing speed and huge processing power.

Take Google Goggles for example – when you take a picture using Goggles your smartphone sends it virtually instantly to one of these data centres where 55,000 computers compare the picture to the millions of images within Google, vote on what they think is the most similar and then tell you about what you have taken the picture of. And they can solve Sudoku puzzles along the way.

These centres are normally kept secret – and most actually didn’t feature on Google maps. They tend to be in obscure places that have enough space, access to lots of power and to water for cooling. Plus a local council that will give tax breaks to gain the investment and jobs for their community. Google have now shared some insight into the centres – with some great photography.

Now this might seem a long way from the guys who brought us Lemon, but as eyeballs move en mass to tech platforms and as amazing services and experiences become mainstream, the ad industry needs to stay connected and relevant.

Yet few agencies have much involvement with GAFA, other than a transactional one around buying ads. With strong client relationships and a commercial outlook they should be driving brand adoption of opportunities like Apple Passbook, Facebook Want and Google+. But clients are increasingly going direct because their agency is not credible in this space.

Media ‘to use stock market algorithms

From television commercials to mobile phone ads, almost all media will soon be bought and sold via sophisticated trading algorithms that mimic the technologies of stock exchanges.

The rise of demand side platforms and exchanges is changing media planning and buying and suggests the agency world will soon need its own data centres. There are some issues involved in this level of technology that we suspect are going to need some thinking through. Stock market algorithms can and do go wrong and wreak havoc. And the application of this approach to dynamic pricing on Amazon led to one book on flies being priced at $2.8 million.

The part of the business that has yet to work through the effects of tech is creative. With media being dynamically priced, based on data and granular targeting, how do we afford enough variants of creative that takes advantage of this targeting?

There is an anecdote about Facebook ads that says if you run ads about football without targeting, the response is virtually zero. Run the same ads against people whose profile shows they like football and the response is 10 times better. But if the ads mention the football team the user supports (available from the profile) the response is far, far better – largely because of perceptual filtering. But very few campaigns get that granular. Look at Google search where the same logic prevails and you will see many people run the same copy for each keyword.

We need to find ways of industrialising creative production, without losing the magic of the idea.

GAFA

The defining feature of GAFA is that each company is battling the rest across a number of issues. And whilst they will work together in some ways, we shouldn’t be surprised when Apple kick out Google maps etc. It’s all very reminiscent of Orwell’s 1984, except we have 4 empires whilst 1984 just had Oceania, Eurasia and Eastasia; with the alliances constantly changing.

Eric Schmidt believes the battle between Apple and Android is the defining battle for the tech industry right now. We see it as key to the media industry too. Each of the GAFA empires has a different global footprint for music, books, movies and apps. Each is looking to extend their reach and we’ll continue to see the vertical stacks being built out.

One new potential battlefield is education, where Apple have declared their ambitions and with iTunesU made a good start on democratizing knowledge. But the Amazon suite of products could have a real advantage. With Google in there with some content and tools and Murdoch focused on this area we expect to see lots of innovation.

Mind your language

The language you use shapes how you think and how people react to you. Jack Dorsey at Square has decided the word ‘user’ carries too much baggage and he has now asked that his whole team talks about customers instead.

In our Mindshare days we caused a little controversy when we argued that describing people as consumers was wrong, as it presumed an intention that wasn’t really there. And Martin Weigal at Weidens argues a similar point when he talks about advertising that presumes an audience, being set up to fail.

Once we think that people are consumers or fans or users, we inevitably slightly underestimate what we need to do to win the war for attention. And without attention you have little chance to persuade. Of course Robert Heath tells us that quiet, relevant seduction of the subconscious can be just as good as shouting to get attention.

Quick reads

The latest issue of Think Quarterly from Google is out.

The eBay CEO says mobile continues to be a game changer.

Analyst Benjamin Evans has a very insightful look at WhatsApp, showing how mobile start-ups can build a significant business.

Finally…While it can be hard to be optimistic when so many politicians are just so inept or worse, technology does offer a cause for positive thinking. A great talk from the Google Zeitgeist suggests the future is getting better every day. Our favourite point was that a Masai warrior with a smartphone now has access to more information than George Bush did when he was President.

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