Can Innovation Scale?

It would seem we are. A clarion call has gone out across the business world to innovate and change, or die. Now that we're all onboard with innovation as a priority, organizations are investing in teams dedicated to innovation. Innovation has become a priority for corporate leaders and innovation is the mantra their followers are required to adopt. Research and data are suddenly the sweethearts of innovation. Is the advertising business about to turn upside down?

No, unfortunately it is not. Because innovation is not scalable. And if it is not scalable, it is not sustainable. Yes, our industry is in the midst of transformation, but there is nothing less sustainable in business than a non-scalable idea.

There are three reasons innovation in advertising is not scalable: economics; innovation cannot thrive on shiny new objects alone; and "free," contrary to common digital thinking, is not a scalable business model.

1. Pure economics. In 2014, marketers invested an estimated $9.5 billion in "innovation-led" media campaigns exclusive of sports. (The official budget description is "Media-Directed Promotion/Social/Sponsorships/Native.") With projected annual category growth of 6.8%, in 2020 the category will represent 2.4% of all ad spend -- $13.5 billion. The most celebrated recent innovation is Pepsi's extraordinary branded content integration with Fox-TV's Empire, described as the "Coolest. Sponsor. Integration. Ever." by my colleague Ed Martin at Planet Ed. As creative and innovative as the Pepsi/Fox deal may be, the full execution will be completed after its three-episode arc, after which Pepsi will forever accrue exposure from the integrated content, but ad revenues will live only from long-tail viewing at Hulu. Even the best and most innovative promotions are not sufficiently scalable.

2. Innovation cannot thrive on shiny new objects alone: Marketers are not structured to fund creative innovation through their media budgets, which are primarily focused on generating awareness and message retention through reach and frequency. Improved targeting and data science is not innovation. The innovative Pepsi/Empire integration is the product of inspiration, dedication and investment. But it's a "shiny new object" in search of a strategic long-term vision and committed mutual partnership. There are revenues and a well-deserved "win" for Fox, the producers and the talent. There's good will and probable sales growth for Pepsi. OMD, BBDO and Wasserman Media Group can appropriately tout this as examples of their innovative spirit. Everybody wins.  It's a truly impressive accomplishment. But "perfect" ideas are rare, and marketers cannot sustain continual expansion of the resources required at all levels of the organization to implement them. Making a commitment to innovation is essential, but we need to be realistic in setting expectations.

3. "Free" is not a scalable business model:Because they spend most of their time pitching and managing media agencies, media companies literally give away great ideas to get a larger share of a client's ad budgets. That's not a sustainable and scalable business. There's an amazing appetite among marketers and media agencies for innovative new ideas. But as quickly as they are embraced and activated, ideas are discarded for next year's – or next month's -- shiny new object. Innovation is transient and fleeting. Marketers are leveraging media dollars in return for innovation; and are discarding hundreds – even thousands – of good ideas in their wake as they leap from shiny new object to shiny new object. Innovation has become a commodity, to be delivered in exchange for a few more dollars in the Upfront.  For the marketer, media seller, and agency, innovation costs a disproportionate amount of time and money. It yields too little return and the few sustainable home runs are far too infrequent.

Whether you're a South Park fan or not, if you work in advertising or media you must watch the episode on Sponsored Content at Hulu, season 19 episode 8. As Ed Martin consistently reports, South Park geniuses Trey Parker and Matt Stone "have been producing their show for a remarkable 19 seasons and remain as timely, provocative and thought provoking as ever, perhaps more than anyone else working in television." Their commentary on ad-blocking, branded content, and the disintegration of 'separation of church and state' in media, captures the public's awareness of just how pervasive advertising has become.

The episode also offers a lesson in innovation, throwing a back-handed compliment to Geico for its leadership in exploiting the media industry's appetite for innovative one-offs. Geico's intrusive cleverness is typically welcomed and enjoyed by consumers… the first time. But its stalking tendencies are apparently worthy of a South Park episode. Did Geico pay Trey Parker and Matt Stone for the product placement? Hmmmmm! That would be an innovative one-off.

This TomorrowToday report has been underwritten with funding provided in part by "innovation." Partnership funding is provided to MediaVillage by Hulu, Comedy Central and Fox-TV.