Amazon, Whole Foods and why traditional ad agencies are dying
The forces wrought by digital disruption are changing the way advertisers spend, forcing them to ponder whether they rather missed the plot in previous attempts to reach consumers
This week, Amazon completed its acquisition of Whole Foods and immediately rolled out a catchy price cutting campaign to celebrate.
Because of its phenomenal reach through its own networks, combined with big news coverage, the advertising cost of this campaign was precisely zero.
Direct marketers, such as Amazon and Alibaba, which owns this newspaper, are on a roll. Not only can they charge suppliers for how and where they appear on their sites, but they are also the conduits for sales, providing the ultimate ability to determine which marketing methods work and which do not.
Meanwhile, what do you think happened when the giant consumer goods group Proctor & Gamble slashed US$100 million from its digital advertising budget in the second quarter of this year? The answer is nothing, as far as sales are concerned.
Little wonder therefore, that they and other major corporations are rethinking their advertising spend and concluding that they’ve been wasting a hell of a lot of money.
Advertising agencies have been quick to feel the pinch, WPP, one of the world’s biggest agencies, has issued two earnings warnings so far this year. Shares in other big advertising groups such as Publicis and Omnicom have also been marked down with a vengeance.