What if in the near future inequality continues to rise and the most valuable reason to advertise to many people becomes to seek their votes rather than their dollars?
This was the fascinating question that my friend and collaborator Andrew Kortina posed over dinner recently, and I think it is an important question to consider seriously.
It is pretty clear that the transition from mass media to the micro-targeting of the internet is changing not only how products are advertised, but what products are being created and for which audiences.
At the same time, as inequality grows, there seems to be a strong argument to be made that the value of the attention of those with less disposable income is declining—and that the lowest- common-denominator buyers ultimately are politicians attempting to buy support and votes with increasingly extreme and inexpensive rhetoric.
It is impossible to imagine a move back toward the era of mass media, but it is worth examining the aspects of mass media that we perhaps underappreciated until it was lost.
The Medium Is the Message & the Product
In the pre-internet mass-media era of advertising, the products that could effectively be marketed and sold needed to appeal to broad populations, specifically because advertising was so broad and imprecise.
Brands like Coke, McDonald’s, Tide, Gillette, Marriott and Marlboro all worked because nearly everyone could be a customer. When you marketed to nearly everyone in a mass-marketing channel, the effectiveness of your spending could be much higher than a brand that still had to message everyone, but could only be bought by a small percentage of the people exposed to it.
In this era, everything was about converting the people you reached into people who bought something from you. The race was simply to develop ever more mass-market-appeal products that you could market.
The internet changed all that with micro-targeting.
With micro-targeting, rather than reaching out to everyone, you only need to pay to speak to the narrow segment of your exact target customer.
The net result of this is that broadly targeted brands lose, and highly targeted micro-brands can better speak to, and monetize, just their segment of customers, and skip over everyone else.
That means that products that would never have had a prayer of finding an audience in a mass media world, from $1,000 air filters to monthly electric toothbrush subscriptions to pubic hair softener, all of a sudden not only succeed, but succeed better than almost anything else.
In today’s highly targeted environment, what actually matters most is no longer the potential conversion rate from views to customers, but instead how tightly you can select the people you want to talk to, and how much you can afford to pay to win each of those individuals.
As the internet has massively expanded the pool of people any brand, even small ones, can reach, and allowed for deeply personalized targeting, the game is about how much margin you can make when you convert someone (which defines how much you can afford to pay for attention from those people), and how specifically or narrowly you can select whom you want to speak to.
Enter Inequality
In some ways, there is good reason to celebrate this movement from large mass brands to highly targeted specialized products. The move in many ways makes products and services better for the audiences they appeal to versus having products that are generally OK for all (such as soft drinks, cigarettes or sitcoms). After all, most of us like our Netflix shows a lot better than what was available on the three major networks for decades.
The problem is that as we get better at micro-targeting, we are also living in an increasingly unequal world. And it turns out that in an increasingly unequal world, capitalism biases heavily toward not only marketing to but building products for the people with the most disposable income.
I, of course, am generalizing, but the big fear (which I believe we are seeing play out currently on the internet) is that with better targeting and growing inequality, the competition to create better goods and services for the richest people will continue to intensify, while the market for everyone else becomes less vibrant because it is harder to monetize.
My strong bet is that because of this dynamic, most innovation and product work in the coming years will continue to aim upmarket, as we are seeing currently with increasingly outrageously expensive smartphones, to name one example. You pay more to reach better customers and skip the customers you don’t want versus paying an average price for all.
From Sales to Votes
So, the cynical question is, what do you do with all the now-remnant advertising inventory aimed at those who don’t have as much disposable income? When companies don’t want to speak to people who can’t buy their products (and no longer have to), who fills the void of inexpensive attention?
As capitalism no longer is forced to market to those without capital, and the incentive to serve those populations abates, the buyer of last resort of that attention becomes people trying to influence political outcomes.
It feels very sad, but also fully rational given our current market and government framework that if you don’t have capital, the market won’t serve you, and that those who talk to you and value you are those who are after your political support.
Late Capitalism
The internet has fundamentally challenged traditional capitalism. The industrial and transportation revolutions did a curious thing to the historical balance of human capital in the last few centuries: It made financial capital far more valuable, and relatively devalued social capital, which for most of human history was the bulwark of civilization.
The internet reverses this by allowing information to catch back up to the flow of goods and services around the globe, and relatively revalues social capital and devalues financial capital.
I still fervently believe this interpretation of what is happening in the world today, but Kortina's insight makes me think that there is an even more immediately challenging way the internet is affecting capitalism, which is that it is morphing the dynamics of capitalism from being something that applied to everyone to something that only applies to a minority of people with capital, and those that flock to serve just them, efficiently excluding the have-nots.
If this is what ends up happening, and populism fills the newly underpriced attention inventory of everyone else, it will be a fascinating and I believe novel lesson in history—and an outcome I doubt even a thinker like Marx anticipated.