How the internet of things will change advertising

Hello from the Pacific Northwest! This is my first newsletter created from my new home of Bainbridge Island. Unfortunately my belongings haven’t arrived yet, and won’t until June 12 or later. If you want an area ripe for disruption, it’s multi-state moving. All those messy physical goods needing transport!

To spare my brain cells and make time for getting organized, I’m writing up my long-promised feature on the future of advertising in a world of connected products. I gave a talk about this a few months back in Sweden, but have thought about it on and off for the last few years as I pondered what it meant to live in a world where screens become less dominant and our interactions with computing become much more intent-driven.

As consumers bring smart TVs, smart speakers, smart fridges, and more into their homes, marketers are eyeing such devices as a way to get closer to said consumers. But as marketers prep for this future, I think they should look back 70 years as opposed to the last 20 for examples of how marketing should adapt to the smart home. More specifically, they should look to the “Easy Ways to Delicious Meals” cookbook from Campbell’s Soup circa 1968 for inspiration, not the web.

The data and insights generated by everything from our ovens to our light bulbs are rich and tempting, but they are also deeply personal. My June oven knows what I had for dinner last night, for example, while my Hue bulbs know when I am on vacation and what time I go to bed. But absent utility, using this type of personal data for advertising — especially when it comes to data gleaned from paid products — will quickly cross over the creepy line and generate a huge backlash.

So how can marketers adapt?

With the abundance of data from the home, gaining insights about the customer will be easy. The real challenge will be figuring out how to use those insights to get a customer to buy your product or service. And because those insights are based on deeply personal data, it’s crucial that the IoT optimizes for trust as opposed to clicks. Creating trust will require transparency around how the marketer gets the data — ideally through letting the consumer opt into sharing it. And the easiest way to entice a consumer to opt in is with a promise to deliver them real value.

So how can marketers do this? By delivering advertising as a service or a product.

Take, for example, a connected fridge. Consumer packaged goods companies or data brokers serving those companies would love to know what’s in your fridge so they can create new products or additional marketing. What if you let them see your food inventory in exchange for a recipe service or a shopping-list generator?

For example, if your fridge shows you have broccoli and chicken perhaps you could get a recipe from Campbell’s showing you how to best use those ingredients. Or maybe your grocery store will send a meal plan and a shopping list over based on the contents of your fridge. These are services I expect to pay money for at some point in time, but I would consider sharing my data if it meant I could get them for free.

This is essentially the Campbell’s “Easy Ways to Delicious Meals” cookbook of my mom’s generation upgraded for the modern world.

Another possible way for product makers to think about advertising to consumers in a smart home is to build a device that acts as an advertisement for their product. Budweiser did this with a connected light in partnership with the NHL back in 2013. The brewer created an internet-connected red light and siren that goes off whenever the owner’s chosen hockey team scores a goal.

The product, which you can still buy for $175, helped boost Budweiser’s brand and sales in Canada and launched an entirely new product for Budweiser that has since expanded to the U.S. as well as to other sports.

Neither approach will replace traditional advertising, but they will offer brands a way to more deeply engage with their customers. For brands, building such connected services and products will give them more context about those customers and how they use those services and products. They can also strengthen loyalty and trust in the overall brand, and through the delivery of valuable services could possibly even generate another revenue stream, as Budweiser did.

But before getting too excited, there are several challenges and potential pitfalls related to new types of advertising that brands need to take into consideration. Rules such as the General Data Protection Regulation can make gathering and using data tricky, while the threat of crossing the creepy line is ever-present.

Brands should also think about how a campaign might use data in biased ways to suggest products that fall flat or too tightly segment their audiences. Plus, many connected devices are resource- or bandwidth-constrained, which means they may not have the ability to send more information or perform larger computing tasks without taking a power hit.

If my smart fridge started burning more electricity or eating up my bandwidth because of some marketing efforts, I would be livid. Another challenge associated with smart homes, and even delivering traditional advertising, is that new ad experiences will require marketers to deliver to many new types of devices. If you think trying to optimize for half a dozen browsers, two mobile operating systems, and the web is hard, wait until you’re trying to deliver to Google’s Home, Amazon’s Echo, a smart fridge screen, and a washer.

And even if you do stick to a service or connected product for your IoT ad strategy, there are likely dozens of others that will be competing for the same opportunity. For example, in the kitchen, my fridge maker might offer a service in exchange for my inventory — as might my local grocery store, Amazon, food companies, and even celebrity chefs. It’s going to be a free-for-all.