Ok Everyone, You Missed the Point

Last week Burger King earned significant publicity over their latest ad stunt, in which a TV spot was designed to hijack Google Home devices by asking “OK, Google, what is the Whopper burger?” The hope was that viewers with a Google Home Virtual Digital Assistant (VDA) would hear a list the ingredients back from their device. There has been a lot of news and industry talk about the advertisement itself… the Wikipedia skirmishes… but so far, everyone has missed the point.

This stunt is not about the ad, but about the power of the home-based VDA. Given Google’s insatiable appetite for advertising revenue, Google Home is programmed to use Wikipedia to list Whopper ingredients — a tiny illustration of the power of VDAs. How long will it take for your Google Home, Amazon Echo, or other VDA, to not only link to an advertisement and choose where to direct you, but for Google and Amazon to get paid by brands for your virtual self-space? Imagine you ask for paper towels – let’s say your VDA can choose Bounty or Brawny – what is Amazon’s incentive to pick one brand over the other?

I already say to my Echo, “Alexa, reorder XYZ”, and it does. No price check, no alternative, and when XYZ is a generic item, like sugar, it effectively selects the brand. I know this is the effect of my own laziness, but what I expect to see soon will be nothing short of invasive. Amazon already knows far too much about me. Again, my own choice, but in this “winner take all” economy, our retail choices are going to become limited in an entirely new way. It will not just be the local merchant being pushed out by big boxes and malls. Even they are being shattered as we embrace e-commerce, online price checking, and are swayed by social influencers, changing how we buy. eMarkerter’s recent report on programmatic spending, indicating that 84% of all digital advertising will be programmatic, shows that algorithmically-driven advertising works.  It is coming to TV (already in video) and to every other form of advertising.

What is fascinating about the potential power of VDA as it relates to marketing, advertising, and commerce, is that no one is paying attention. This will be the largest sea change in advertising/marketing and controlled by only a few companies (Google, Amazon, Apple, ???). Both Google and Amazon have reduced the friction of every transaction and are basically selling a BIG EASY BUTTON for shopping. However, the costs of finding alternatives, or actually knowing what the alternatives are, will continue to empower that easy button. This enables yield pricing on every product we buy online.

Many are already familiar with how airlines present different prices to the same person based upon how they search (one price on Kayak, another on the company’s website, and a third price on the company’s app).  When I recently searched Delta for a flight from LaGuardia to St. Louis using these three methods I was simultaneously quoted three different prices (ranging from $171~$187).  In each instance, Delta knew different things about me, and therefor quoted me three different prices. What is to stop Amazon Echo from quoting me a different price? Amazon already changes its pricing in real time – that cookware set you bought yesterday may be cheaper today (and Amazon no longer offers price protection). Why wouldn’t Amazon set pricing based upon willingness to pay? They could tune their margins perfectly.

VDAs are becoming the next narrowing point of the purchase funnel. Limiting selection and actively managing price is simply the next step.

What can we do? The answer is complicated, but it begins with awareness. We professionals in the MadTech world are familiar with how algorithms dynamically bid for impressions, change creative content inside of ads, and generally drive the successful targeting of advertising. But most people don’t know how pricing algorithms discriminate based upon what they know. As these Madtech capabilities continue to migrate to pricing, the most important thing we can do it is not fall into the easy trap by spending a little more time looking for pricing alternatives.

Author: Jonathon Shaevitz

Jonathon Shaevitz is the CEO of Industry Index.

Posted in Programmatic, Virtual Digital Assistant.