This old chestnut is variably attributed to Henry Ford, John Wanamaker, J.C. Penny, William Hesketh Lever, amongst others. Each one is a great symbol of consumerism, but we’ll never know which or if any of them really said it.
We have been hot and cold on the advertising sector for years. There are times when it seems that technological disintermediation will spell doom for the industry. For television broadcasters and channels, that doom is well understood and newspapers have long been spiraling downward. Advertising agencies are a more contentious point, but we think that they will survive in some form as the complexity of the changing advertising landscape will leave plenty of room for these “experts-for-hire.”
Let’s talk a bit about privacy and advertising and how it can help the agencies.
Facebook has been grilled of late for doing what they do - selling your attention to advertisers and manufacturers by slicing groups and tribes of people into marketable chunks. In a perfect world, if I were selling body spray to young men, I would only show my advertisements to young men, probably single, with ample disposable income. This makes sense since my product is targeting a segment and is tailored to appeal to certain people. Attempting to sell ‘Rage Body Spray’ to 80 year old women probably won’t result in the best ROI. The ad agencies have been helping companies use various targeting tools in creative ways to help these companies peddle their wares.
Targeting advertisements is usually a smart business decision. However, there are a number of ways that this targeting could be abused…
- It’s pretty simple to target your advertising to avoid “moms,” “people who speak Spanish,” and “people who are probably disabled.” It is also probably illegal to do this if you are selling housing.
- While it is reasonable to target our fictional body spray at young men, it is likely illegal to target job advertisements by age or gender.
- In the UK, 16 year old students take the GCSE, a high-stakes standardized test. Targeting students with test-prep or tutoring advertisements around test time seems reasonable, but what about advertisements for a career in the army?
Facebook provides some pretty good geotargeting tools. If you own a local business, there is no point advertising to anyone outside your area. But how granular can this data be? Turns out, it can be very granular.
- Here is a story of legal advertising being sent to people because they visited a hospital…while they are still in the hospital!
- How about targeting women visiting reproductive health facilities?
We don’t know if Facebook’s tools were used in either of these last two cases, but they do provide tools with similar capabilities. Even if you manage to get your privacy under control at Facebook, your cell phone is happily leaking your location in plenty of other ways.
- US cell carriers are selling access to your real-time phone location data
- Smart Technology: Inherent Risks Of GPS-Enabled Devices
In short, the power of targeted advertising can mean that we get more ads that are relevant to our interests, and people are certainly addicted to advertising funded content. Yet, we are reminded from time to time about the implications of being the product. More and more of these cases are likely to drive increased scrutiny and regulation. The General Data Protection Regulation (GDPR) in Europe is just one example. Of course, with increased regulation comes increased complexity which may provide opportunities for the consultants and advertising agencies to help navigate the world they helped to create…for a price.
Interested in having our insights delivered directly to your inbox?
As international equity investors, the team at R Squared Capital Management (former team at Julius Baer / Artio Global) utilizes fundamental and macro analysis in our quest to correctly identify structural tailwinds and headwinds at the geographic, sector and company levels.
FROM THE DESK OF HARRY POLISHOOK
Harry Polishook is a Partner and Analyst at R Squared Capital Management.
Prior to joining R Squared, Harry was a Portfolio Manager and Analyst with the International Equities team at Artio Global Management. In 2000, he joined the firm, which was part of the Julius Baer Group, after serving six years as a Securitization Programmer at Deloitte and Touche.
Harry received a Bachelor of Science in Computer Science and Applied Math from the State University of New York at Albany.
To view other RSQ team member bios, click here.