Currently worldwide, about a $1 trillion is spent by brands to market their products. Almost half is spent on advertising. Marketing services grabs about a third of that total and agencies account for 12%. Software and other tech tools merit a piddly $10 billion, or about 1%.
But that lineup is going to be shaken up in the coming decade, according to a new report from Foundation Capital, a VC firm that was an early investor in more than 60 technology-based companies, among them Netflix and Responsys. The company predicts that advertising and the agencies that enable it will begin to crumble in the oncoming, data-driven digital earthquake, and that the biggest beneficiary of the rebuilding of the marketing edifice will be technology. Foundation predicts that tech’s share of the pie will multiply 10x by 2025, to an estimated $120 billion.
“The underlying drive behind this eventuality is the shift in consumer behavior to an all-digital world,” says Foundation General Partner Ashu Garg. “I think we all know it, but most of us don’t realize how fundamental this shift is and how organizations will be shaken up in the coming decade. The pursuit of customer satisfaction is going to blur the lines of sales, marketing, and all other disciplines.”
Foundation predicts that in 2025:
- The value of context and, by way of association, media, will decline dramatically. Super Bowl ads will be worth half what they are now.
- Agency fees will be flat to declining.
- Direct mail will survive but decline; other marketing services will be digitized and automated.
Foundation, which has thrived for 20 years forecasting the fortunes of tech startups, sees marketers needing more powerful technology to stitch together disparate data and distribute it cross-channel, to measure the relative effectiveness of each touchpoint on the path to purchases, and to make informed recommendations to optimize efforts and strategies in real time.
Garg counsels CMOs of the future to hire Math Men, not Mad Men. “Chief marketers will lead the way and make fundamental changes in their organizational structures. They’ll be in charge of the data, and the data will be the number one drivers of change,” he says. “They’ll become the C-little E-Os—the chief experience officers—and in time many will become the CEO.”
