Analyzing data has become an increasingly important part of advertising, and the opening panel at the American Association of Advertising Agencies annual meeting Tuesday morning in Los Angeles debated whether or not that was good for the industry.
The panel faced off Sir Martin Sorrell, the financier who built the giant media agency holding company WPP, and Jaron Lanier, partner architect at Microsoft Research.
The two couldn't have looked more different, with the smaller 67-year-old Sorrell in a suit and the hulking Lanier in dreadlocks, black T-shirt, shorts and sandals. An autopsy determined that they were from the same species, joked moderator Rob Norman, North American CEO of WPP's GroupM unit.
Sorrell and Lanier differed on whether data technology has destroyed more value than it's created.
Lanier, a former jingle writer turned technologist whose credits include creating virtual reality, said unlike in the past, when "technological advancement has always been about expanded the economy rather than shrinking it," data technology had destroyed more value than it's created. Silicon Valley has found ways to "apply information systems to industries so that you can shrink those industries and grow yourself," he said, noting that it happened to the music business.
He described the current attitude as a search for a silver bullet. "If we can get data on everyone, we can manipulate our way into certain wealth," he said. Ultimately, he said, that's "a losing game and not something you can continue."
Sorrell disagreed, saying that technology has shifted the balance of power to consumers, creating economic, political and social benefits that outweigh the disadvantages.
Those disadvantages include the threat of privacy and a lack of depth. "There's a proclivity to analyze things even before they're analyzable. The lack of depth is a tragedy," Sorrell said.
But Sorrell said on balance, the increase in data and technology has helped the industry and WPP in particular. In the past 27 years at WPP, he noted that there had been only three down years. "Our industry has consistently grown," he said.
The two men found areas of agreement that the marketing and advertising world needs more data, but only as it leads to advertising magic.
"Data can be magic and useful, but it's a hard kind of magic," he said.
Since the economic crisis, "the balance of power inside companies has shifted dramatically, away from marketing to finance and procurement," Sorrell said. "That's not healthy in the long term. You can't cut your way to success," while "there is no finite limit to what you can do to the top line . . . we need more magic and less logic."
Sorrell also said that while companies like Google and Facebook offer analytics, "these companies are media owners. They are not technology companies. When they go to a client it is exactly the same as Rupert Murdoch going to a client, the same as [Disney CEO Bob] Iger going to a client, or [Viacom's Philippe] Dauman or Les Moonves of CBS, saying use this channel," he said.
WPP clients spent about $75 million in Facebook and about $1.6 billion in Google last year, Sorrell said. Those figures will rise to about $2 billion on Google and $400 million on Facebook this year. That compares to about $2.5 billion with Murdoch's News Corp. "There has to be someone who interprets and analyzes the balance between all these channels," said Sorrell.
"The question of measurement is becoming more important. Clients have gone in almost willy-nilly in the area because it's fashionable to do so," said Sorrell added. But now, "finance departments are looking at the value of those investments."
To answer that question, WPP has made the application of technology and data analysis a core part of its strategy, Sorrell says. He said the company currently makes about $4 billion from research, about 25% of its total revenue. He expects that to grow to about a third in the near future.
But that means WPP, with its market capitalization of about $17.5 billion is competing against companies like Facebook with a cap of between $75 billion and $200 billion, Google at $200 billion, Microsoft at $200 billion and Apple at more than $500 billion.
"You're dealing in a space where people have much more capability and potential financial firepower and resources to analyze all the data we'll be face with." But WPP can't rely on the Googles and Facebooks for analysis. "We're not prepared to sit on the shoulder of new media owners. We want to stand on our own two feet."