Prediction for 2019: The Advertising Industrial Complex will crumble.

Partnerships between broadcast networks and big brands depend on Mass Media. They're built around television, radio, + newspapers.

But now, consumption is shifting towards YouTube, podcasts and social media.

Charlie Munger, Warren Buffett’s long-time business partner said it best:

“If you didn’t have a big volume, you couldn’t use network TV advertising — which was the most effective technique. So when TV came in, the branded companies that were already big got a huge tailwind.”

The Mass Media ecosystem worked in perfect balance:

Television networks, radio stations, and newspapers were intertwined with the advertisers who supported them, the products they sold, and the ways consumers bought and sold those products.

With a near-monopoly on television advertising, America’s biggest brands dominated advertising.

They sold AVERAGE products for AVERAGE people in AVERAGE households.

Sellers dominated the post World War II mass media environment.

But now, the balance of power is shifting towards buyers. Since the internet has unlimited shelf space, options for consumers have EXPLODED.

CVS has 10-15 different brands of shampoo. Amazon has thousands.

Brand loyalty is dying.

Because of platforms like Yelp, Amazon, and TripAdvisor, information asymmetries between buyers and sellers are disappearing.

The percentage of affluent consumers in the top 5% of household income who can identify their favorite brand is falling.

We no longer flock to logos and slogans. We now flock to PEOPLE and VALUES.

Celebrities will continue to launch brands. The YouTubers of today are the entrepreneurs of tomorrow.

On the internet, people want to follow PEOPLE - not companies. 

We no longer defer to brands as a proxy for quality. Everybody has access to reviews and personalized recommendations now.

Advertising, the weapon of choice for America’s biggest companies, isn’t as effective as it once was.

Big brands are losing share of America’s GDP pie.

Large brands are losing market share to small brands in almost every category.

Three reasons why:

1. Consumers want products that meet their unique needs

2. Marketing costs have switched from fixed to variable

3. The rise of direct distribution.

(h/t @ryan_caldbeck)

Big brands are dependent on old platforms.

Two stats:

1. Today, the top 200 advertisers account for only 51% of total advertising (41% of digital), but 80% of television advertising.

2. Among the top 100 CPG brands, 90 percent experienced a decline in market share in 2015.

Some predictions:

1. Market share will continue to shift towards small, emerging brands.

2. Influencers will continue to launch their own brands.

3. Companies who cater to their customers and develop direct relationships with them, will own the future. 

If you're interested in this stuff, I recommend this talk from @profgalloway. 

You can follow @david_perell.


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