How Digital Marketing Is Destroying Your Business
By Neil St. Clair
This article was originally published on Forbes.com (October 16, 2014)
I'm always up for a good Lewis Black-style rant. So pretend that I'm practically shouting this to you in his inimitable I'm-about-to-have-a-stroke way. Digital Marketing, and its current volume-based practices, are just about the worst things you can do for your business—from startups to mature brands, from C2C to B2B. And yet, so many seasoned executives and young entrepreneurs are continuing time-wasting, mindshare-sucking practices that provide little RoI.
I'll admit that I was provoked into this diatribe by a recent conversation with a digital marketing peer of mine at another startup. She laid out her strategic vision for 2015, and everything to me seemed to be about raising "awareness" and other digital marketing pablum of the day. In short, doomed to fail in terms of helping her company's bottom line.
In a world where everyone is digital marketing-crazy there is a certain majesty to being the salmon that swims against the stream. Yes, you may get eaten by a bear, but you also get to spawn.
So what are the most prevalent practices afflicting digital marketing? According to Gartner "the four most recognized techniques of digital marketing are social, mobile, analytics and digital commerce." I would term these "volume-based digital marketing," meaning that their goal is to appeal to as many people as possible for as low a presumptive cost as possible—quantity over quality. Going a bit more granular, these represent the following three failed techniques:
1) Mobile & Digital Ad Spend (PPC ads)—clickthrough rates are around 1 per 1000 (0.11%)
2) Paid-for SEO & Related Techniques—eBay conducted a thorough study on this and found the "efficacy of SEM is limited"
3) Paid Social Media—again clickthrough rates are around 1 per 1000 (0.11%)
So what am I caveating out of this? Specifically, content marketing and inbound-related techniques, websites and brand collateral, email marketing to existing databases, media, partnership, and relationship marketing, organic SEO, and event marketing.
These elements of marketing still have digital components, of course, but they are based less on volume and more on handing targeted brand stories to users. Ultimately, they may be more expensive as a single unit, but more effective in turning strangers to prospects and prospects to clients—in short, their RoI is better in the long run.
In a separate issue, we can discuss the somewhat questionable merits of micro-content and paid-for internal SEO on social media (e.g. paying for higher search rankings or boosting a post to the top of a news feed). Here I remain a bit ambivalent.
And while I'm certainly not advocating that you drop digital in favor of going analog, say "billboards," there is a certain majesty to being the salmon that swims against the stream. Yes, you may get eaten by a bear, but you also get to spawn.
N.B. Analytics and data-driven marketing are important back-end techniques for learning how to segment and test effectively and should be part of any marketing set up.
So Why Is Volume-Based Digital Marketing So Predominant?
Simple. It's big business. Depending on who you ask, global marketing dollars are expected to crest above $1 trillion in the next few years. And according to a recent Gartner study, overall marketing budgets as a percentage of revenue were 10.7% in 2013 and expected to increase by 8% in 2014. With digital marketing budgets as 3.1% of revenue and expected to increase by 10% in 2014. Digital advertising at 12.2% is the largest percentage of marketing budgets with other spend heading towards mobile marketing, digital commerce, etc.
And because it's big business, those that market the products related to it have influenced those of us (end-users) that it's what we need to be successful. Older marketers did it to remain current, and younger marketers continue to do it because it's what they grew up with—table stakes, as it were. But in reality, this grand experiment of digital marketing has failed to provide its promised RoI.
To another extent, it's also optically simpler and less staff-intensive. Yet, marketers spend extensive time strategizing, analyzing, and crafting around these volume-based plays. And in the end, this mostly "automated" technique is a handoff to systems out of your control that create a black hole for your message. And with so little value-add much of that "planning" is wasted effort that ought to be redirected elsewhere.
A Quick History Lesson
When modern digital marketing started to play with its OOH, media, direct, and other vestigial counterparts in the 1990s and 2000s it created a new industry (remember pop-up ads?) with unproven and unlimited potential. With the mobile and social explosion of the past decade, we've doubled-down on the idea that consumers are somehow influenced through the funnel to conversion via on-site ads, tweets, etc. But the proof, as they say, isn't in the pudding.
In my experience, bottom-line, people of all ages and geographies are influenced to buy through their peers, family, and reference groups. These groups are usually influenced, writ large, by meaningful content in a meaningful setting (e.g. storytelling or media articles), in-person meetings (e.g. events or sales meetings), or external influences (e.g. experts, celebrities, etc.).
As marketing budgets in the digital age have expanded, we've also seen an increase in overall personnel. This seems odd granted that digital marketing should be more efficient and widen our RoI. Yet, the Bureau of Labor Statistics predicts that "Advertising, Promotions & Marketing Managers" will increase by 13% between 2012 and 2022, about 2% faster than all occupations.
What this tells us is that the explosion of "marketing automation" related to volume-based digital marketing has created an increase in the need for staff to strategize, plan and execute—and with such low RoI thresholds, to begin with, I contend that we've reached a height of inefficiency in the marketing world. Of course, this could be attributable to some other factor (e.g. a general increase in global business) but granted the relative "deceleration" of economic growth, I'm disinclined to that belief.
Anecdotally, I noticed this "staffing-up" phenomenon at AlleyWire, where suddenly in order to "compete" with what I felt were the basics of the marketing game I had to hire a social media manager, assign several correspondents to marketing and marketing research tasks, build out a team to handle the incoming referrals (most of them low-quality) and work with outside digital marketing and PR firms. It ate away at time and budget for little return.
Does Volume-Based Digital Marketing Have Its Place?
For larger companies that have hit the limits of what the marketing galaxy can offer, and especially those facing stiff competition, blanketing all corners of the marketing landscape may make sense. The idea of saturation can be effective, but it takes massive time, money, and personnel resources.
However, too many smaller and younger companies are trying to play this Fortune 500 game—and by doing so, they spread their message and resources too thin. What they end up doing is creating what I call the "Marketing Funnel Fallacy:" they increase site hits, views, or some other top-of-the-funnel metric and call that success. But what they fail to do is drive bottom-line results, which is what they need.
So let's say post-campaign they increased from 10,000 to 15,000 monthly views. But for the most-part, the bottom-line (the only line that matters) in terms of sales has hardly moved—let's say it stayed at 50. So you've increased views by 50%, but your bottom-line conversion ratio is now .33% instead of .50%.
And, in turn, you've wasted a ton of cash to raise "brand awareness." Awareness is great, but it usually means that the "aware" person will take an action at some future, and potentially un-measurable, point—and for most younger or smaller companies that leads to poor immediate cashflow and misleading analytics upon which future decisions are based.
Awareness is also my marketing "missing link." While basic logic dictates that a customer must be aware that you exist and have an idea of the service/value you provide, I've yet to see the definitive study that shows how raising awareness actually increases efficiency to the bottom line.
It's the Pareto Principle (aka the 80-20 rule) that 20% of your effects (customers) will represent 80% of your causes (profits). There's a high likelihood that you'll develop your core customers (your 20%) through content creation, word-of-mouth, and good old networking. So does all of the effort put into volume-based digital marketing "awareness" campaigns make sense? You'll end up sifting through low-quality referrals to hopefully build out that remaining 20% of profits. Ideally, you would have shifted focus to more efficient methods (like content creation) that draw in the remaining 20%.
As I Regain My Composure
Hopefully, I got your attention about why volume-based digital marketing has a dark side. No doubt there's a book's worth of research and ranting here, and I'm looking forward to a future deep-dive into specific topics about what to avoid and what to venerate as a marketer. But thank you, sincerely, in the meantime for allowing me my Faulknerian marketing catharsis.
As you might be able to tell, I approach marketing from a very specific thesis: namely, content is king, and that bringing digital conversations into brick-and-mortar events/meetings are the true ways to build core repeat customers and scalable results.
I've no doubt some will say, "well he simply doesn't know what he's doing," or point to this study or that about why these volume-based digital marketing techniques are effective. I look forward to the debate. But yet I implore you, especially those of you at young or small companies, to heed my warnings presented here. Until next time.
Neil St. Clair is a respected social entrepreneur, journalist, and philanthropist. He is currently CEO & Founder of social change consultancy, NES Impact as well as fear-focused venture studio, Notimor. An advocate for children and gender equity, he founded and chairs The NextMen Foundation. Follow him on IG @neilstclair