Mumbai: Rob Norman, the chief digital officer (global) for GroupM, oversees the activities of one of the world’s largest buyers of online media with more than $5 billion in billings. He also advises the parent company WPP on its digital investments. Norman spoke in an interview about the challenges of the market and the impact of policy on the future of digital media. Edited excerpts:
We are still a long way from knowing the return on investment in social media companies such as Facebook. Your comments.
Personally, I am a small shareholder in Facebook as well as in Apple, Google, Intel, General Electric and many other things. It’s a curiosity portfolio. When you look all of the companies, and the ones that we talk about the most, in the last three to four years, Facebook, Apple, Google have had an astounding impact on not just the advertising business but on life.
Google has become a verb and it has enabled people to do things that you couldn’t possibly imagine you could have done before... The idea that some form of data is embedded into everything in society...and Google has made the organization and the access to that data...an astounding thing to have done.
The idea that someone could emerge with a platform in a world which already had telephone and develop a communication network for people that proved to be so rich and adopted by billion people around the world... Facebook, you sit back and say wow. And when you think about Apple, and watch a three-year-old with an iPad, it’s an amazing thing. These companies have changed the consumer experience and that is an incredible thing. And all of those events happened in the last 10 years.
To underestimate something from an advertising and marketing point of view, something that has had a profound effect on the human race, is a risky business. And I think people may make judgements too quickly about economic rates of returns of certain things, maybe they need to think about it long term.
The Indian regulator wants to reduce the amount of advertising on television to 12 minutes per hour. How will this play out for new media?
The regulator is going to improve the user experience, that is for sure. If that happens, there will be inflation in prices on television. We will see some migration from television to other platforms where people (advertisers) will buy greater frequency at lower prices.
It will be a big boost for online video, I’m sure. When eyeballs move, money moves. The interesting thing, of course, is what happens to the audience on television. Is it conceivable that user experience on television improves so much that television audiences go up?
And if they do, then television will carry on capturing very large amounts of money. Because what’s interesting is that advertisers tend to like media that has a relatively lower ad load, a smaller amount of advertising in relation to content, because they believe in their ability to stand out and create memorability.
As far as new media is concerned, there could be two things—prices could rise in old media but advertisers could still feel that the reach of television is the dominant need of their businesses. The other could be that they can no longer afford the frequency and compromise a part of their reach and online media could benefit. We’ll see (how that pans out).
How do you respond to criticism about the alleged practice of arbitrage—where agencies buy web ad inventory at a low price and resell it to clients at a higher price?
We believe there are a number of different business models in advertising. There are commission, fee, time and performance-based models. There are lots of ways of getting paid. We also believe there are advantages to be created for advertisers by taking raw impressions or audiences and applying data and technology to those impressions and audiences and creating a new audience of value, whether it is people who are in the market to buy a car in the next three months, or people who are expecting a baby in nine months.
And if you can do that, you have changed the original object, as in a bunch of disparate impressions into an object which is a valuable audience to the advertiser. You will sell that audience at a differential price than the aggregated price of all the individual impressions, and you need to do that because you applied technology and data and insight to that. So whether or not you would call that arbitrage, it is my view that you are selling something different from the thing you have bought. In arbitrage, you are selling the same thing you have bought.
What would you say are some of the key challenges in India?
What India would benefit from enormously is the technical infrastructure that reflected the enthusiasm for technology and innovation that this population has. I think your broadband infrastructure is not as fast or effective or as well distributed as it might be...even in the cities. Even in affluent districts in Mumbai, you get very variable Internet connections that hold India back. I think 3G to 4G is going to be a very big issue and a great benefit in India. I think the future from the (view of) smartphones is going to be a very big benefit in India.
All of those things will catalyse e-commerce. And it’s a key stage in the online advertising market, particularly it’s where e-commerce becomes a significant part of GDP (gross domestic product). But inevitably you’re going to have a three-speed digital development in this country and I think you have an economic and geographic divide which is what the three speeds are: So in places where you have dense populations and significant economic activity and wealth, that is one speed. Places where you have a dense population and no wealth that would be the other speed. Massively distributed populations in rural India, that would be another speed. (In) the first of those groups, I expect e-commerce to grow very quickly because the logistics are manageable.