Rocket fuel for advertising – the future is Artificial Intellgence

wargames - AI in action and a little less powerfu than Rocket Fuel
wargames – AI in action and a little less powerfu than Rocket Fuel

Advertising was never a very exact science, we all knew that 50% of our spend was wasted (but famously didn’t know which 50%), but that’s all changed now and changed forever.

I was lucky enough to be in a presentation from Lucy Arkwright of Rocket Fuel, who’s strapline is a rather cool ‘Artificial intelligence. Real results’. I haven’t seen a more amazing presentation in some time.

In short, what Rocket Fuel do is use single pixels on page to track a users real traffic. Then, using Artificial Intelligence (ie learned behaviour) they build up a picture of your real internet usage and shopping habits. It’s far more than just clicking likes, it’s about behaviours and real moves to action. So, less of what you say you’ll do and all about what you actually do.

As an example, with a traditional ad for a dishwasher, the agency buyer would just buy space in a magazine and hope enough people looking to buy their dishwasher wandered past and happened to want one at that point in time.

This was largely replaced by behavioural retargeting of ads (those ones that follow you around on the internet) which repeatedly show you dishwasher ads if you have ever clicked through to a site selling dishwashers or large kitchen appliances.

What the Rocket fuel system does is understand your specific behaviour. It begins to learn what brands you are most likely to buy and when you are really in the market to buy them. It knows to stop serving you ads when you have seen it more than a given number of times (your personal preferred number and not the rest of the worlds) and then stop serving you ads if you have actually bought a dishwasher from anywhere online. It’s like the Perfect Market, but all the sellers now have all the information. It’s a perfect, perfect market.

The AI bit is the really clever technology. This learned behaviour is done through a billion decisions per second that the system makes about how you like to think, shop and browse online. And this doesn’t just change the game a bit, it changes it completely.

I’ll leave you with a stat to prove the point.

The average click through rate (CTR) on a conventional online display ad is 0.03%, so all in all, pretty wasteful. and clicks aren’t anywhere near as good as actual conversions.

In one of the Rocket fuel examples, they showed that 40 percent of purchases of new BMWs in North America in the second quarter of 2012 were influenced by Rocket Fuel advertisements.

None of us had actually noticed that it wasn’t 50% of our ad spend being wasted, it was 99.97% being wasted. And it’s now with this system it’s back to being closer to 50% again.

When this technology rolls down to smaller users, it will change the way advertising is bought and sold completely. And forever.

Wow, just wow.

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It’s not the Internet that’s killing businesses…

…It’s businesses blaming the Internet that’s killing businesses.

We have seen more high street trouble in the UK than we have for many years. TJ Hughes, Jane Norman and Habitat closing and Thorntons closing half of their shops. Most seem to be blaming the Internet for their demise.

I think the problems that the design industry itself have had could also be/were also being blamed on the internet.

I’ve claimed it myself with articles that relate to buyers having perfect information and chasing the cheapest price.

But I think it’s simpler than that.

I think customers need three things.

1. Great prices – yes that’s a given. No-one wants to feel like they are overpaying, but i’m not sure it needs to be rock bottom, just equitable with the better prices on the Internet.

2. Differentiated products – A product with a barcode can be tracked and chased for the lowest price elsewhere on the Internet. A product or service that is clearly differentiated by a brand becomes one of one and people will seek it out and be prepared to pay more for it. Just look what Apple have done to Nokia in the last few years. It hasn’t been price driven has it?

3. Amazing service – This is where the real problems have been born in retail and lots of other service businesses. Crap service, inflexible exchange policies or surly staff who make you feel like they’re doing you a favour by speaking to you. Look at what retailers are being raved about online – It’s Zappos, Amazon and those who offer great service as well as good or even best prices.

So we can’t keep blaming the Internet for everything. We have to create better products, better brands and relevant pricing policies.

Then we all win.

Update

I got a note from John Jackson of Retro 36 with another good point to add to this. Firstly he pointed out some of my typos, oops sorry, hopefully corrected now, but also added these points.

“no it’s not just the internet. It’s supermarkets, obscene rent and equally obscene business rates… that’s the real killer.”

So John, I agree, rent is a real issue and business rates are just silly. Some of the rents in the centre of towns an cities must make it impossible for any retailer to make money. Add to this some greedy inflexible landlords and you have a recipe for massive retail failure.

Sadly, supermarkets and their oligopolistic power are a product of our lazy generation and are here to stay for a while yet. Supermarkets were born from bad service, inflexible opening hours and the silly pricing policies that local retailers employed, just as the Internet is doing to them in return.