Digital: The year the gloss came off
A catalogue of unfortunate revelations have dogged digital marketing in 2017, chief among them being the world’s biggest advertiser cutting over $100m of digital spend with no negative impact on sales. That was Procter & Gamble chief financial officer Jon Moeller’s statement to investors in July, when he explained it had set out to slash misplaced ads and fraudulent impressions.
As a result, “we didn’t see a reduction in the [sales] growth rate”, Moeller said. “What that tells me is that the spending we cut was largely ineffective.” That came after P&G chief brand officer Marc Pritchard had labelled the digital supply chain “murky” in a much-heralded speech in January.
P&G’s arch FMCG rival Unilever, the world’s number two ad spender, also cut back digital investment by up to 59% between January and May compared with the same period in 2016, according to data from MediaRadar. Both companies cut the number of sites they advertised on, as well as the amount spent.
These high-profile budget cuts came in the wake of some bad press for the digital advertising giants, Facebook and Google. The former continued an inauspicious run in May by admitting to measurement errors for the 10th time since September 2016. Google’s YouTube video site, meanwhile, suffered an advertiser boycott after The Times called attention to ads being run against terrorist videos in February, then in November against videos of children featuring sexualised user comments. On top of all this, The&Partnership forecast the cost of ad fraud would rise to £13.1bn in 2017.
Despite this annus horribilis, more UK marketers are still increasing than decreasing digital budgets – by a net balance of 17% – according to the IPA and IHS Markit’s Q3 Bellwether study. However, the FMCG giants often lead industry trends, so their next public statements about digital spend will be closely watched. New efforts to adopt global standards on issues such as viewability and acceptable ad formats show digital vendors are starting to take their responsibilities seriously, though they will need to do much more next year. MB
Uber shows: ‘Unicorns’ can’t get away with everything
None of the recent breed of multibillion-dollar startups has tested the world’s moral response more than Uber, and this year it has found that not all sins will be forgiven. Bad behaviour endemic within the brand’s corporate culture has jeopardised the company, which seemed untouchable not that long ago, with Google owner Alphabet recently investing $1bn in its rival Lyft.
This year saw the dramatic defenestration of Uber’s controversial former CEO and founder Travis Kalanick, as well as the removal of its Transport for London (TfL) licence, which it is appealing in court. In November, Uber admitted to covering up a 2016 data breach, thus breaking data protection laws.
Problems started long before 2017, but came to a head with a damning blog in February by a former employee that accused Uber’s male-dominated hierarchy of sexual harassment and discrimination. An investigation by Uber’s lawyers led to the firing of more than 20 people.
The company had tested shareholders’ resilience to bad publicity before, when Kalanick himself joked in a GQ magazine article about his ability to attract women on demand: “Yeah, we call that Boob-er.” He was also filmed berating an Uber driver who had questioned the company’s price drops.
In June, Kalanick resigned, reportedly at the demand of investors.
More serious misfortune could yet befall the business next year, as it waits to hear whether TfL’s ban stands. London’s transport operator decided Uber was not a “fit and proper” licence holder because of failures to report assaults and obtain medical certificates from drivers, and owing to reports of Uber’s Greyball software, designed to fool regulators. Numerous apps stand ready to take Uber’s place if it loses its case, which would effectively kill the brand in the UK. Google’s Lyft investment, meanwhile, suggests it could be ready to challenge Uber’s dominance in ride-hailing worldwide.
Shareholders’ patience with the loss-making Uber continues for now, but its story could end up as a cautionary tale for ‘brogrammers’ who believe high-growth digital startups can do whatever they want. MB
Airlines: A crisis of customer experience
Crisis management in the airline sector came in for serious scrutiny in 2017 as the cracks started to show for brands from British Airways to Ryanair.
The turbulence began in April when video footage emerged of security officers dragging passenger Dr David Dao off a United Airlines flight in Chicago after he refused to give up his seat on an overbooked flight.
The scenes provoked outrage, with consumers scorning the airline’s ‘Fly the friendly skies’ motto. From 9 to 11 April, United Airlines was mentioned more than 2.5 million times on social media, 68.9% of which was negative according to Brandwatch figures.
Chief executive Oscar Muñoz was then slammed for his mishandling of the situation after a leaked email showed him describing Dao as “disruptive and belligerent”. Within a matter of days Muñoz chose to express his “shame” live on the breakfast show Good Morning America.
Just a month later British Airways (BA) disappointed 75,000 travellers after a massive IT failure caused the airline to cancel all its flights from Gatwick and Heathrow.
Stranded passengers were furious at the lack of communication from the airline, with some waiting hours for responses via Twitter. BA’s YouGov BrandIndex score plummeted 9.5 points in the week after the crisis, with consumer purchase intent falling 8.5 points.
Then, in September, it was Ryanair’s turn to cancel more than 2,000 flights, admitting it had “messed up” over its pilots’ holiday roster. Ryanair CEO Michael O’Leary was forced to apologise to the airline’s 4,200 pilots after saying they were “full of their own self-importance” for being unhappy with their treatment.
Airlines’ brand success has long been based on price and availability but consumers are ready to punish any brand that fails to live up to its promises, and the constant cost pressure caused by intense price competition is making these damaging mistakes more and more likely. CR
Virtual reality: Virtually useless?
At the beginning of the year, it was difficult to escape the hype around virtual reality (VR), with the technology widely tipped to conquer the mainstream by the end of 2017. However, these predictions have yet to materialise. In reality, 2017 was a bit of a stinker for VR.
In July, Facebook was forced to announce a $200 price cut for its Oculus Rift headset (taking it down to $399) following a sustained period of sluggish sales. This meant that the price of Oculus had been slashed by 50% in just four months. Although Facebook claimed this cut was “temporary”, the Oculus and its rival HTC Vive headset continue to be sold at heavily discounted prices.
Virtual reality’s potential as a pure gaming device also looks questionable. Following its launch in October 2016, Sony said its Playstation VR headset sold an impressive 915,000 units. However, it took Playstation VR until June 2017 to surpass the one million mark, as sales quickly stagnated as a result of the hardware receiving poor support from third-party game developers.
When Marketing Week spoke to Nokia in March 2016, it claimed it would achieve the same success in VR that it had previously enjoyed in the mobile phone market. It hoped its £43,000 professional VR camera OZO would revolutionise storytelling and the way marketers filmed adverts. Fast-forward to October 2017 and Nokia had stopped production of OZO altogether, cutting 310 jobs in its VR division due to “poor demand”.
As it stands, VR is not even close to becoming a mainstream technology. With its high consumer price tag and high production costs for brands, VR is an unattractive prospect compared to the cheaper and more smartphone-friendly augmented reality. And while VR can still be used effectively as a sales and experiential marketing tool (car and travel brands continue to use it intelligently to preview their products in-store), why would marketers even consider adding it to a mass marketing plan when its reach is still so low?
If VR is to take off in 2018 – as the likes of Gartner have recently predicted – it needs to get into more consumers’ homes, and fast. This could be boosted by reports that Facebook is planning to launch a $200 Oculus Rift variant next year. However, with even John Lewis predicting that there will be “weak demand” for high-ticket items such as electricals in the foreseeable future, the mainstream ascent of VR isn’t going to happen overnight. TH
The risks of influencer marketing multiply
Social media influencers have been an increasingly popular way for brands to reach out to young audiences, and they are willing to part with big bucks to make this happen. Over the past year, brands have spent more than $1bn (£776.7m) on Instagram influencers alone, according to Mediakik, which tracked the number of sponsored posts on the platform.
Some marketers are willing to pay more than £67,000 per video post with a YouTube influencer, rising to £75,000 for a single Facebook post by a celebrity influencer, according Rakuten Marketing.
This year, however, cracks have started to appear in the influencer façade. Calculating return on investment is a big problem – more than two thirds (38%) of marketers claim they are unable to tell whether influencer activity actually drives sales, while 86% are unsure how influencers calculate their fees.
There are also big issues with influencers and brands not adhering to industry regulations. As with any ad, sponsored content has to be distinctly marked so that viewers understand they are being sold to. And while the Advertising Standards Authority has been working hard to educate brands and influencers of this fact, awareness remains low. Various influencers have been slapped on the wrist for misbehaving this year – but this doesn’t seem to deter others.
Some brands have also struggled to get the right fit. L’Oréal draws on more than 20 influencers for its campaigns, but it hit the headlines in September for its decision to end its contract with activist and trans influencer Munroe Bergdorf less than 48 hours after announcing the partnership.
The make-up giant decided to drop her after she wrote a blog post accusing all white people of racial violence following riots in the US city of Charlottesville, in which a neo-nazi drove a car into a crowd of protestors. This suggests that while the company was eager to capitalise on her large following, it wasn’t on board with her activist messaging.
If influencer marketing is to retain a place in the marketing mix as a channel that reliably delivers business returns, marketers will need to do a better job of due diligence and measurement. LR