Adidas goes digital

Adidas has laid down the gauntlet and placed its bet that digital advertising will be much more effective when it comes to driving revenue as compared to traditional TV commercials.

In a recent interview with CNBC, Kasper Rorsted, Chief Executive Officer, Adidas Inc. said that in order to target the younger potential customers, the company is focusing on their marketing efforts on the digital platforms. Moreover, they have pegged their sales target for 2020 via online channels at USD 4.3 billion. This figure is almost 4 times their e-commerce sales in 2016.

THE REASON FOR THE SHIFT!

The primary reason for Adidas shifting its ad budget to digital channels has to be attributed to the company’s ambitions of attracting a younger audience who consume content on the go!

THE IMPLICATIONS!

• Adopting the digital route contributes to the company’s growth helping them to understand on-going trends doing the rounds to develop products accordingly.
• Adidas strongly believes that consolidating their ad spends on digital will assist them in expanding margins in the long run. Owing to the success Adidas has tasted via their digital and social channels, the company believes that allocating a huge chunk of marketing resources to the platform will eventually bear fruits.
• From actors to sportsmen, the social media world has everybody hooked on to drive their respective engagement. Brands leverage this high engagement rate to reach out to their prospective buyers. For instance, Nike and Adidas have signed contracts Cristiano Ronaldo and Lionel Messi, the two most followed athletes in the world, to enhance their respective brands’ social media presence.

• However, not all brands are jumping the digital bandwagon. Marc Pritchard, CMP, P&G, the top advertiser in terms of ad spends, criticized the ‘other side’ of digital advertising, commenting on the call for much more media transparency and a viewability standard to be set across all platforms. These issues stemmed by the measurement gaffes as well as misreported metrics courtesy Facebook and Twitter. Owing to that, the social giant, Facebook has agreed to an independent audit by the Media Rating Council (MRC), which they announced in their official blog post in February 2017.

As time spent by consumers on digital goes up with every passing day, advertisers continue to boost their ad budgets into digital channels.

This strong influx is not expected to dip in the near future and going by the current scheme of things, the US digital ad industry will continue to experience this exponential growth through 2021 and reach close to $100 billion in annual revenue. This growth is driven primarily due to the sustained migration of ad spends from traditional TV to digital video coupled with increased social spending.

MOBILE – THE NEXT TOP DESTINATION!

With technology advancing at a lightning pace and people consuming content on the go, mobile is set to be the next top destination for advertisers, as they look to bridge the gap between time spent on phones and tablets with the proportionately small share of ad budgets being allocated to the respective platforms. Going by reports, mobile is set to take over desktop ad spends in the coming year.

A report on U.S digital media ad revenue forecasting revenue trends for the next five years along with the key growth drivers has been compiled by Dylan Mortensen, Senior Research Analyst, Business Insider Intelligence. The report highlights the increasing popularity of digital media amongst brands and consumers and it also explores the reasons it will exceed all other formats in the coming 5 years.

THE CHALLENGE FOR CMOs

Across the consumer marketing industry, there is a strong tussle between the role of digital channels and their impact on traditional media buying. TV was the ultimate brand building destination till the late 90’s, however, with the rise of content marketing coupled with the multiplication of digital channels, the choices for media strategists rose as well. This idea of being spoilt for choice is more than just a switch of media channels. Leading brands have realized that content and experience can go a long way in shaping them and just as effectively as it was in the past via traditional advertising.

THE DIVIDED VIEW!

Adidas may have ditched TV advertising for digital, but other brands have been typically vocal and cynical about the effectiveness of online advertising.

As stated before, Marc Pritchard of Procter & Gamble has called out the digital platforms to clean up their acts with respect their measurement mechanism, transparency and a ‘not so effective’ supply chain. He made it clear that P&G will cease to pay for ads failing to meet their standards.

Researchers at Ebiquity conducted a meta-analysis in 2014, commissioned by UK TV marketing body Thinkbox, found that advertising on TV is ‘the best profit generator’ for every £1 spent! So there you have it!

Source:

• Business Insider: http://www.businessinsider.com/adidas-jogs-on-from-television-advertising-2017-3?IR=T
• Net Imperative: http://www.netimperative.com/2017/03/adidas-shift-tv-budget-digital-dont-see-tv-advertising-anymore/
• Business Insider: http://nordic.businessinsider.com/adidas-says-its-ditching-tv-advertising-because-young-people-engage-with-the-brand-on-mobile-2017-3
• ISPO: http://www.ispo.com/en/markets/id_79704178/adidas-stepping-away-from-tv-commercials.html