Deep Dive

Part One: Terry Kawaja’s New York investment bank Luma Partners is behind the Lumascape spaghetti maps that try to make sense of the sprawling, connected pipes of the adtech industry. Kawaja thinks consolidation has to happen for the industry to shake the cowboys – “the environment is highly fragmented and that allows people to hide,” he says. That’s code for "nefarious" market behaviour which undermines adtech’s credibility. Kawaja argues a clean digital ad system is more important now than ever if open web players are to compete with big tech, especially as he sees retail media quickly eating a third of open web ad dollars. But consolidation and M&A has been lean of late. Kawaja admits adtech is still notoriously opportunistic and has played a starring role in the creation of some of the problems the market is struggling to address with junk digital data, fake people and opaque trading practices that nobody seems able to solve. Regardless, he sees another incoming wave of tech investment and reckons Google’s global advertising trading system being broken up would have huge financial upside for Alphabet shareholders – and the industry at large. Kawaja thinks Google may even be playing to lose.

Brands are spending “literally tens of millions of dollars with cloud providers” to train and fine-tune large language models from scratch. Wasteful, says Salesforce global CMO Ariel Kelman. “There are lots of use cases where you do need to train and fine-tune your models. But absolutely not sales, service, marketing and commerce – the models are smart enough that they can go and grab information.” Salesforce’s argument is that pointing AIs at existing repositories – catalogues and order management systems, for example – begets faster, useful results that "blur the lines" between sales, marketing, customer service and commerce. The alternative so far has been training and tuning LLMs on “thousands of hours of customer service calls”, to get so-so results for massive outlay per Kelman. He suggests cloud providers milking LLM training/tuning business teats are operating on perverse incentives akin to digital marketing being asked whether clients need branded keywords for every product: ‘Let me give you 50 white papers on why you need that…’ Next up Salesforce’s “autonomous agents” and “large action models” are coming for sales lead development.

Despite lofty purpose and customer-centricity talk, only one big brand, Hyundai, has put its heft behind Australia’s push to lift the age threshold for social media access to 16. But as the policy settings move from a cyber/tech issue to a public health crisis, the position brands need to take becomes more accute. Veteran social media marketer, Katie Palmer-Rose, has worked with the likes of L'Oreal, PepsiCo and Aldi and now runs influence agency Kindred. She thinks regulation is required for a legal age at 16 – and that brands will ultimately back it. For now they are “waiting to see where it lands”, but she reckons it’s time to prepare new teen approaches for “a digital world that doesn't live in social media”. Rob Galluzzo, one of the architects of the 36 Months campaign urging government to protect younger teens from the health risks of social media, suggests more brands are about to walk the talk and sign-up. But the platforms, he claims, are pointblank refusing to engage – and telling staff not to talk.

Regulating algorithms and forcing transparency about how they work – or just making platforms make them “dumb” for teenagers – might be a more proportionate response than an outright ban by the Australian government, argues former Facebook ANZ managing director, Liam Walsh. He warns a lack of support infrastructure means kids face shock impacts if “suddenly their whole network – not only their social network, how they commune with others – is gone”. But campaigners, and school principals, say the harms go far beyond algorithms with attention gamified and platforms made addictive in the process and young teens simply not developmentally ready to face the pitfalls of the anonymous digital world. But what comes next, in terms of education and support infrastructure for teens – and society more broadly – will be critical so that the ban comes with a plan. Either way, says Walsh, prepare for challenges.

Kincoppal-Rose Bay Principal, Erica Thomas, doesn’t take banning social media for under 16s lightly. But Thomas is at the coalface with 1,000 kids daily and from what she sees playing out in the classroom, thinks it’s critical. Concentration levels are dropping with learning and results affected despite teachers’ best counter-strategies. Meanwhile, girls are being conditioned to perfectionism from a young age and exposed to “toxic and harmful advice” daily, while boys are pushed increasingly violent content and AI bot-created “highly sexualised” stereotypes of women. Thomas says the negative impacts have accelerated in the last five years – and it’s getting worse.

Latest analysis of SVOD growth rates from tech and telco analyst Telsyte proves one thing: fear of streaming services losing subscribers by pivoting to ads is overblown: They’re growing – though some more than others. MD Foad Fadaghi says ads, plus AI personalisation, integration and format innovation, will power the next cycle but streaming growth has peaked. Omnicom investment chief Kristiaan Kroon suggests Stan, Nine’s ad-free holdout, should heed that lesson because Nine has something globals like Netflix and others do not: “Sophisticated, at scale, sales infrastructure, which means they could make really good money.” That's crucial given the number of streamers selling ads is set to double within 12 months – and a market this size can't sustain all of them.

For anyone in ecom or performance marketing, it’s time to downweight ROAS and ROI and laser focus on unit economics, says former investment banker (her last big deal was the Myer float) turned entrepreneur Carla Penn-Kahn. She was early into ecom and left Credit Suisse to launch four of her own – Kitchenware Australia, A Gift Worth Giving, Everten and Buy My Thing. But she sold her last venture last year when she realised it had hit peak profitability. With performance ad prices doubling in four years, and Amazon reaching full speed, the unit economics weren’t going to get any better. Penn-Kahn thinks direct-to-consumer trailblazers now face the same dilemma, because they can no longer sustainably scale through advertising and VCs are sharpening their bottom line focus as much as the top.  Hence she’s cool on the outlook for many, but particularly the likes of The Iconic, Temple and Webster, Adore Beauty and Australian marketplaces like Woolworths-owned Catch, which last week put a $96m dent in Wesfarmers’ balance sheet. Loyalty programs and retail media offers a lifeline for some, per Penn-Kahn, but most DTC brands don’t have the latter option.

The effectiveness “revolution” is colliding with the AI-spawned efficiency uprising and it’s leapfrogging the early consensus on AI use cases in marketing around automating personalised content and communications. So much so Mark Ritson choked on his Wellfleet oysters when Jon Lombardo and Peter Weinberg told him they were leaving top jobs at LinkedIn-backed thinktank, the B2B Institute. Then they told him why. Ritson promptly joined their venture, along with what Weinberg calls “the advisory board to end all advisory boards”.  Thus the synthetically-enhanced AI marketing outfit Evidenza was born. The founders claim their new piece of “synthetic customer” tech – which starts with creating AI copies of target customers – creates 95 per cent accurate customer responses. I.e. it mimics company CEOs, CFOs, CTOs, CIOs, CROs and the rest with strong correlation to the real thing. Those customers are really hard to find within B2B markets, which is why research is so expensive and takes so long. EY’s CMO – and a long list of others – verify that claim, because they’ve tested it head-to-head. “It can imitate essentially anyone by gathering and synthesising massive amounts of data,” per Weinberg. Evidenza claims it can also synthesise marketing strategy, science and the “pantheon” of effectiveness gurus, like Byron Sharp, Jenni Romaniuk, Karen Nelson-Field, Les Binet and Peter Field. Which means marketers can ask them what they ‘think’ of their plans. Evidenza has already cloned Ritson to deliver “a finance friendly marketing plan that used to take months in minutes”, per Lombardo. “Well, maybe a day.” Weinberg acknowledges cussing is a challenge. But they are actively debugging.

Apple hobbled much of the digital ad industry in the name of privacy, conveniently kneecapping rivals like Meta in the process. But after Google, the US Justice Department is coming for Apple – and it alleges those claims of privacy are nothing more than “an elastic shield that can stretch or contract to serve Apple’s financial and business interests”. The DoJ pulls no punches, claiming: “Apple wraps itself in a cloak of privacy, security, and consumer preferences to justify its anticompetitive conduct … In fact, many alternative technologies that Apple’s conduct suppresses would enhance user security and privacy,” per the filing. “Apple is also willing to make the iPhone less secure and less private if that helps maintain its monopoly power. Similarly, Apple is willing to sacrifice user privacy and security in other ways so long as doing so benefits Apple.” A conga line of US states have joined the action, spearheaded by the same antitrust chief that convinced a federal court this month that Google is indeed a monopolist. Here’s what Apple’s accused of and must now defend against.