Ever stop to think, "Boy, that Facebook ad sure knows what I want to buy right now!"? Probably not. Nor is it likely that the latest email from one of a thousand businesses you're subscribed to (willingly or not) pegged your innermost desires the day it was sent.
But advertising may be changing. For much of its history, advertising has been a way to sell you what you didn't know you wanted yet, and it did so in broad psychological strokes meant to reel in as many consumers as possible.
Now, thanks to technological and psychological advances, the day may soon come when advertising knows you better than you know yourself. Analytics? Call it ad-alytics. Only a few companies are on the bleeding edge, and their advancements could transform the way we interact with our advertising, whether we're ready or not.
Tastemakers and targeted influence
Few investors are aware of Omnicom
Enter sparks & honey, which aims to -- bear with me, as some pretentious marketing-speak is coming -- "leverage a proprietary next-generation real-time engagement engine to distribute culturally relevant brand content." In other words, it wants to grab you at the moment of interest and push a product when you're most likely to buy it.
This is a big undertaking, but it isn't necessarily a revolutionary step. You could make the claim that Google
How will it end?
Advertising that knows you better than you know yourself is still just over the horizon, but not for lack of trying. Google's and Facebook's futures both depend on catching and maintaining user interest in now-ubiquitous advertising. Yelp
There's an obvious trade-off between accuracy and privacy, as it's simply not possible to target advertisements to individuals accurately without knowing a good deal about them. Omnicom's particular strategy seems to be an ideal complement to a recent Microsoft
The ultimate goal of advertising is to get everyone who sees the ad to buy the product. If 100% of the target audience converts to being a paying customer, there's less need for advertising in the aggregate, but each ad served becomes far more valuable. This isn't going to happen any time soon, but it's where advertisers want to go. My recent article on Google's transition toward semantic search earned some interesting comments, which mostly point out that offering fewer search results will result in less ad revenue for Google. It may result in fewer ads, but if each ad served becomes more relevant and more immediately interesting to the user, Google can see similar levels of revenue, if not an uptick.
Foolish final thoughts
As investors, we often talk about consumer psychology alongside our own psychological weaknesses. We don't always think about how consumer psychology might be influenced in subtle ways from moment to moment by the constant barrage of advertising everyone is exposed to on a daily basis. Advertising's just there, a part of life, like the weather. What if it became a more active participant? The Groupons and Yelps of the world are already pushing us in that direction, but the results are frequently haphazard -- do you really need another discount manicure, especially if you're a 60-year-old war veteran?
Ultimately, every company that relies on advertising can and should learn to be more effective with less of it. And every company that uses advertising will be grateful for the greater conversion rates that result. It would be well worth your time, as an investor in any ad-centric company, to watch the trend toward personalization and real-time consumer connections. Those who master the art will thrive, and the rest might be left behind.
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