1/ Advertising agencies are dying.

👇 Thread 👇

2/ Big news from @FT.

Hedge funds are shorting the world’s leading advertisers.

Shares of WPP have fallen 10% this year.
Hedge funds have made a $2.2 billion bet against Omnicom.

 https://www.ft.com/content/ca16d32c-23bc-11e8-ae48-60d3531b7d11 

3/ Why is this happening?

The internet is transforming marketing.

Modern marketing is fundamentally different from the world that big agencies grew up in.

What worked for TV, radio and newspapers doesn't work on the Internet.

4/ Quick history.

Volney Palmer opened the first ad agency in 1841.

Instead of dealing with thousands of newspapers, advertisers could deal with a single ad agency.

Agencies simplified the advertising process — a 1-stop shop for advertisers.

5/ Agencies were built for a mass media world with limited media outlets.

Agencies focused on the top of the funnel.

Maximum reach.
Maximum awareness.
Maximum distribution.

Over time, agencies such as WPP and Omnicom have scaled this expertise across their client base.

6/ Agencies thrived in a world of imprecise targeting and limited shelf space.

Only big companies could survive funnel inefficiencies.

Customers were artificially loyal.
Products appealed to the median customer.

With no alternatives, consumers defaulted to what they knew.

7/ Media has fragmented.

Power has shifted to search and social platforms.

There’s unlimited shelf-space.
Consumers can buy anything, at any time.

Brands can super-serve niche audiences.
Direct to consumer models are unbundling big brands.

8/ This trend will continue.

Modern advertising is a duopoly.

Google and Facebook are attracting all the growth in the U.S ad market.

Superior to their competition, Google and Facebook have spawned the decline of large agencies.

9/ Brands can buy the same inventory as ad agencies.

For the first time, brands can access the same powerful technology stacks that were once exclusive to agencies.

10/ Big brands are struggling.

1. In the past 3 years, over $17 billion in sales has evaporated from the 10 largest U.S. CPG companies.

2. 90% of the top-100 CPG companies lost market share in 2015.

3. Gillette’s share of the razor market fell from 70% in 2010 to 54% in 2016.

11/ Companies are shifting their attention away from the top of the funnel and towards the middle of the funnel.

Even the smallest companies have premium design, commerce and advertising capabilities.

Everybody can create personalized content and re-target consumers.

12/ Branding and performance marketing have converged.

Ad optimization is a daily habit.

Brands:
* A/B test every ad
* Measure ad effectiveness
* Have in-house ad capabilities
* Evaluate customers with engagement data
* Use real-time data to iterate and improve creative

13/ The best brands move at the speed of the internet.

An example:

@Nike should prepare in advance for Tiger Woods’ next win.

If he wins this weekend, Nike should run a short, social media-style documentary on his comeback *right* after the tournament ends.

14/ Responsiveness is key.

Hard to do that on TV.
Easy to do that on social.

Agencies think in 3-6 month timelines.
Brands need to execute in 3-6 hour timelines.

15/ Follow the talent.

My smartest friends are moving away from agencies and towards brands and media companies.

When I speak with brand managers, they tell me that they manage strategy in-house but outsource execution to an agency.

16/ Marketing is moving away from traditional advertising and towards peer-to-peer recommendations.

Customers are the best form of advertising.

@glossier has mastered this.

~80% of their growth comes from peer-to-peer recommendations.

17/ On social media, ads compete directly with organic content.

Advertising and entertainment are essentially the same thing.

The best agencies blend marketing and content creation. The best agencies look more like media companies and less like traditional agencies.

18/ The internet changed the playing field.

It’s easier than ever to start a company but harder than ever to scale one.

Short the big agencies.
Bet on targeted brands.

I post all my tweetstorms on my website

🌟  http://www.perell.com/tweetstorms/main  🌟

Inspiration:

- @tweettal
- @wolfejosh
- @jasonwstein
- @benthompson

Shoutout to @mrsharma for thinking through these ideas with me 🙌


You can follow @david_perell.



Bookmark

____
Tip: mention @threader_app on a Twitter thread with the keyword “compile” to get a link to it.

Enjoy Threader? Sign up.

Since you’re here...

... we’re asking visitors like you to make a contribution to support this independent project. In these uncertain times, access to information is vital. Threader gets 1,000,000+ visits a month and our iOS Twitter client was featured as an App of the Day by Apple. Your financial support will help two developers to keep working on this app. Everyone’s contribution, big or small, is so valuable. Support Threader by becoming premium or by donating on PayPal. Thank you.


Follow Threader