1Q25 Ad Results Flurry, A Critique of Mark Zuckerberg’s Take on AI Advertising and GDP + CEO/CFO Commentary on Tariffs and Marketing, Ads101 on Digital Advertising With Butler/Till's Scott Ensign
Madison and Wall: Saturday Summary for May 3, 2025
Will you be in Cannes for the Lions? Are you returning via Paris? If so, on Sunday June 22 (the Sunday following the Cannes Lions Festival of Creativity) we will be organizing another “chocolate marathon,” a nearly 26-mile path around Paris, France over the course of the day. To see a past route and get a sense of what it looks like, visit www.chocolatemarathon.com. If you would like to join in for some or all of the day please reach out and let us know.
On this week’s M&W Podcast we summarize our take on the latest GDP data, a critique of Mark Zuckerberg’s take on how AI-driven advertising will impact GDP, second quarter ad results and much more. Plus, on this week's podcast, our Advertising 101 series continues with a focus on digital advertising with Scott Ensign, chief strategy officer of independent agency Butler/Till.
This follows the past eight weeks where we explored the role of agencies (Ep. 23 with Macquarie Securities' Tim Nollen, the function of global account leads (Ep. 24 with Heartmore's Carl Hartman), media agencies (Ep. 25 with Boston University professor Janna Greenberg), media planning (Ep. 26 with Scott Wensman), media research (Ep. 27 with Stacey Schulman), national TV and CTV buying (Ep. 28 with Todd Gordon), local TV (Ep. 29 with Janice Finkel-Greene), outdoor advertising (Ep. 30 with Keith "Kappy" Kaplan) and our first segment on digital advertising at agencies (Ep. 32 with Martin Galvin from Calm Media. Our first six parts focused on marketers and how they allocate resources (you can listen to these interviews on episodes 17-22 of The M&W podcast).
Separately, on Agency Business, Olivia Morley and I interviewed Jose Villa, founder and president of Sensis. On this episode we talk about what it takes to build and scale an independent cross-cultural agency, and what the future of multicultural marketing looks like in today's shifting business and political climate.
Weekly Work:
Amazon, Roku, Reddit, Instacart, SiriusXM 1Q25 Ad Trends: Solid Growth, Uncertainty Ahead
Snap, Spotify, Booking 1Q25 Ad Trends OK, But Headwinds Ahead
FREE TO ALL An Update on The Canadian Ad Market, With Madison and Wall's Greg McLelland
FREE TO ALL An Interview With Newton Research's John Hoctor on Agentic Marketing Analytics
More Context:
During his company’s 1Q25 earnings call, Meta CEO Mark Zuckerberg commented that artificial intelligence “is really redefining what advertising is into an AI agent that delivers measurable business results at scale. And if we deliver on this vision, then over the coming years, I think that the increased productivity from AI will make advertising a meaningfully larger share of global GDP than it is today.”
While we don’t doubt that subjectively and objectively superior forms of advertising can grow to take share, we strongly disagree with the notion that increased productivity will, by itself, directly lead to the industry growing in terms of its share of GDP
We have consistently observed that the two most important drivers of advertising are the overlapping notions of “creative destruction” and the competitive intensity of businesses within categories.
Put differently, as economies produce businesses that effectively replace other, older businesses, newer business’ operating models may be relatively more or less dependent on advertising given the competitive intensity those businesses face.
As a practical example, traditional retailers allocate around 1% of revenue to advertising, and the number remains relatively consistent as physical competition is relatively consistent: a new hardware store might open near an older one, but that’s not a daily or necessarily an annual event.
By contrast, online retailers allocate around 4% of revenue to advertising – also remaining relatively consistent – and we believe this more elevated level spending reflects the ongoing and heightened competitive intensity of selling goods and services in online environments. As these newer businesses take share of the markets in which they compete, their allocations to advertising remain constant and cause an outpacing of advertising growth for the relatively broadly defined category.
The rising availability of AI will undoubtedly impact advertising, but it’s only through the degree to which it changes the competitive dynamics of businesses and the composition of the economy that it will change overall spending levels.