Donna Hoffman & Thomas Novak – How the Digital Future Killed Traditional Advertising

Donna L. Hoffman, Professor; Co-Director, University of California Riverside; Sloan Center for Internet Retailing
Thomas P. Novak, Albert O. Steffey Professor of Marketing; Co-Director, University of California Riverside; Sloan Center for Internet Retailing

Imagine being able to virtually try on clothes in 3D, see how they fit on your body, get style and size advice from the system, and do this all from the comfort and privacy of your living room or anywhere from your smartphone without ever actually putting on the clothes. Or how about a motorized shopping cart that follows you around the store, scans the items you drop into the cart, keeps tracks of your shopping list and checks you out when you’re done? New coming soon applications from Microsoft’s Kinect for Windows will soon let you do just these things.

As smart devices and products augment consumers’ experiences in ever more inventive ways, advertisers are wondering what might be in store for our digital future. Our research suggests that it may not be social. In fact, digital “augmentation” may dwarf social media, as new devices use personalized data to “improve” reality in ways that will make Facebook and other social media applications look quaint as platforms for advertising.

For the past decade or so, we’ve watched as consumers, products, and places (reality) have been simultaneously made smarter through technology. We are now reaching the point where all three aspects are being simultaneously augmented, to the point where what we call “convergent augmentation” is occurring.

Augmented consumers. Decide.com tells consumers if the price for that high-end flat screen is likely to drop in the next two weeks. Quora will answer your burning questions on just about any topic, Yelp will help you discover the best restaurants in town and once you’ve found all these things, Instapaper will help you remember when you’ve found.

Augmented products. Smart running shoes track your run and post your status to Facebook, networked jackets display your moods and information like maps or even ads, heart sensing bras monitor your heart rate and biosensor underwear monitors your blood pressure and heart rate—these are just a few of the products on the horizon.

Augmented reality. Rayban customers can “try on” glasses through a webcam on their website.  In-store units show Legos fully assembled on top of the Lego box, and augmented reality is now in the palm of your hand as smartphone apps overly digital information on the real world, e.g. GPS location data or information about cities, restaurants and subway lines superimposed upon real world images. The line between in-store and web experiences is not just blurring, it is disappearing altogether, as the real world is overlaid with information from digital world.

What are the implications for the future of advertising as the convergence of smarter consumers, products, and reality continues? We see several trends.

Gamification. Game dynamics are being integrated into web sites, user communities, marketing campaigns, and other content to influence consumer behavior. The “Samsung Nation” social loyalty program turns visits to Samsung’s Website into a game, complete with levels, missions and a leaderboard. In Foursquare, consumers are rewarded for checking-in to restaurants and other local retail locations. Shopkick rewards consumer behaviors such as walking in a store, entering the dressing room, and scanning clothes with a smartphone. Even simple “reward badges” to display on Facebook profiles can be motivating to consumers.  However, while we are seeing increasing applications of gamification, the jury is out on whether badge-earning consumers are more loyal consumers.

Smart signs.  In stores and on city streets, we are seeing “smart signs,” dynamic signage that tailors advertisements to consumers, using facial recognition algorithms. “Gladvertising” presents different ads to different consumers based on the customer’s current mood as inferred by their facial expression. Cameras are being used to identify and target customers by age and gender with increasing accuracy. Kraft is testing a signage system in supermarkets where a camera recommends products based on consumer demographics and other factors such as time of day. As smart signs continue to converge with augmented reality that overlays digital information on physical objects, marketers will be able to identify particular consumers, suggest products just for them and digitally augment them right there on the street!

In our nearly two decades of research on online consumer behavior and digital marketing trends, the one constant we’ve seen is that the nature of interactivity continues to evolve.  We are moving from the Web 1.0/2.0 world where person-to-person interactions are mediated by computer-based applications, to the emerging post-social Web 3.0 environment where we are beginning to interact directly with smart applications themselves. Three observations guide our understanding of what’s next for advertisers and how they can prepare for the digital future.

Offline and online are fusing. Convergent augmentation implies a more complex consideration of integration. Marketers are used to talking about how online and offline influence each other as two separate asynchronous things that need to co-exist and be integrated. But with the rise of convergent augmentation, online and offline are happening at the same time in the same space. So when a consumer is offline, she is also online. This puts the burden on integration to be completely synchronous. This may prove to be very challenging for advertisers who are still struggling with integrating their online and offline advertising campaigns in more traditional asynchronous ways.

Consumers want digital to be real.  People are hungering to take their digital experiences and bring them into the physical world by creating physical instantiations of those experiences. The emerging category of 3D printers will transform the way consumer items are created and brought into the home. Imagine a consumer creating household items like cups or spoons using a 3D printer. Imagine Google inserting a marketer’s ads on a billboard captured from Google street view. Convergent augmentation is converting reality into new realities.

The future isn’t social.  Consumers are shifting from interacting with other people, through applications, to interacting directly with applications. This trend will accelerate as consumers become embedded in an “Internet of things”.  In turn, these smart applications will not only interact with people, but also with other applications. Thus, social networks of tomorrow may be not be networks of people, but rather networks of applications that, guided by ambient intelligence, collectively respond to consumers in a social way. As products get smarter and as consumers shift from interacting with people to interacting with smarter applications, particularly in mobile and local contexts, consumers’ interactions with each other – i.e. what it means to be “social” – may recede in importance compared to our interactions with smarter apps that “know” more and more about us. These shifts in the digital landscape will require advertisers of the future to think far beyond a model of advertising that, even now, still hews closer to broadcasting than to innovative, personalized digital approaches for communicating with modern online consumers.