Memo: The Case for QR

If you ever want to give up, consider the QR code’s journey from where it was just a few years ago. While immensely popular in Japan and other Asian countries, prior to the pandemic it was nearly forgotten in the United States.

The QR code dates back to 1994, when it was first used by a Toyota subsidiary to track auto parts during assembly. More information-rich than a barcode, QR codes were designed to unlock information like product files or manufacturing records. It wasn’t until 2002 that the “quick response” code took on a new life as a way to drive viewers to properties like websites and events. And by 2007, QR’s promise was what we know it today: for brands and advertisers to tack on additional storytelling, details and access when trying to get customers’ attention. Still, it never ever quite caught on in a meaningful way, at least not in the US.

In fact, the technology was the butt of many jokes. When Tim Armstrong reintroduced efforts to market brands through QR codes in 2018, the idea was widely panned. The former AOL and Verizon Media CEO attempted to rebrand the then-24 year old technology as “Flowcode.” In November of 2019, his latest project, DTX Company, contacted 120 DTC brands in an attempt to build a new shopping holiday called “DTC Friday.” In 2019’s In Defense of Tim Armstrong, I explained:

Tim Armstrong is not wrong; he’s early. DTX’s effort to launch DTC Friday 2019 wasn’t designed to prioritize the advertising brands. The goal was to advertise Flowcode, a reportedly advanced rebrand of the QR code concept that was dismissed in the United States, several years ago.

In that report, I characterized the difference between the US and Asia’s offline attribution models. When this was written in 2019, billboards, mailers, catalogues, and brochures were the primary forms of offline marketing in the US. Meanwhile, China used QR codes to fuel sales and attribution at scale. My assessment of Armstrong’s bet, at the time, was as follows:

Given the flow of retail innovations from China to the United States, it’s clear to see that when Armstrong discusses payments “getting easier”, he anticipates an adoption of mobile wallets and streamlined payments systems. Why? The prevalence of these systems correlated with a mass adoption of QR code usage in China.

Mobile wallet adoption and streamlined payments systems have vastly improved since Tim Armstrong’s attempt to resurrect the QR code through DTX. He wasn’t wrong; he was early. And something else happened: the pandemic. In 2020, Square built systems around QR use for shops and small businesses. The Verge published this in 2020:

When using the feature, a restaurant can print a QR code out and leave it on a table. A customer would then scan the QR code, browse a menu, place their order, and pay from their phone. The restaurant would know what table placed the order, and then bring their food out when it’s ready. Square says the system is flexible, so a coffee shop, for example, could have a single QR code in its window that people would scan and then wait for their drink.

And the rest was history.

Web Smith on Twitter: “QR’s j-curve of adoption: 1994: Toyota invents QR 2007: Wide use in APAC2011: 14M Americans used QR2013: QR codes derided2019: DTX tries to rebrand it2020: Square’s QR for shops 2021: Pandemic popularizes it2022: 60 sec Super Bowl ad / Twitter”

QR’s j-curve of adoption: 1994: Toyota invents QR 2007: Wide use in APAC2011: 14M Americans used QR2013: QR codes derided2019: DTX tries to rebrand it2020: Square’s QR for shops 2021: Pandemic popularizes it2022: 60 sec Super Bowl ad

The QR suddenly popped up everywhere: restaurant menus, packaging, device installs, the walls of museums. There, they’ve taken the place of guides who would have ushered guests before pandemic restrictions hindered their roles. There is a newfound appreciation for the QR. Seemingly overnight, it became a necessary technology in America as payments technology proliferated and proximity payments nearly doubled over the span of 2019 to 2021.

So when the QR code popped up on the screen for 60 seconds during the Super Bowl, the room’s reaction wasn’t one of distaste. In a room of 30 adults ranging from 35 to 55, the consensus was: “OK, whoever this is, this seems smart.” As many Super Bowl lists have now-noted, it was a clever advertisement for Coinbase. The project was a joint effort between the cryptocurrency exchange and its agency of record.

Accenture Interactive, the agency responsible for the ad, had undergone a digital transformation and acquisition spree under CEO Brian Whipple, who left last summer and was replaced by David Droga. Accenture Interactive’s reinvention turned the consulting firm into a creative agency and technology partner – a combination perfectly suited for the Web3 era. I would have loved to have been in the room for the decision to acquire a the television spot for $15 million and spend nearly nothing designing the actual creative for it. It’s a level of efficiency that has become a feature in the age of proximity payments, blockchain implementation, and subscription-commerce. The less thought, the better. AdWeek explained:

Had the ad been just 15 seconds, casual viewers might have shrugged off the odd spot and gone back to their snacks. But running a leisurely 60 seconds, the spot and its hypnotic music became increasingly curiosity inducing until finally many of us had to pull out our phones and scan it. In a night defined by crypto players working hard to get your attention, Coinbase leaped past simple brand awareness and directly engaged viewers by the millions. Bonus: It also—finally—proved all those 2007-era QR evangelists right.

A 30-year-old technology experienced a J-curve in popularity, from Toyota’s invention in 1994 to widespread use in most Asian-Pacific countries in 2007. In 2011, just 11 years ago, 14 million Americans scanned a QR code. According to Bitcoin Magazine, Coinbase received 20 million hits to its website in one minute.

That’s nearly double the entire audience for QR, just a decade later in just 0.00019% of the time. By 12 p.m. EST the day after the Super Bowl, the stock price began reflecting the market’s positive reaction to the chatter. Sportico’s Jacob Feldman noted a stock price that added 1-2% to the company’s market cap. A $14 million spend and a $1 billion+ outcome.

If just 2% of viewers decided to make an account in that first minute of viewership, In theory, Coinbase won 400,000 new wallets at a cost of $35 per customer. We’re going to be seeing a lot more of QR codes in the media. Tim Armstrong wasn’t wrong, he was just early. As Web3 rises in popularity and the metaverse conversations persist, the core of many of these discussions is the basic understanding of cryptocurrencies and their potential. Before MetaMask, OpenSea, and other marketplaces — Coinbase may be the most foundational platform for mass adoption. Accenture Interactive and Coinbase were right on time with a simple message that overshadowed much of the night’s game, the internet’s betting commentary, and the musical fanfare of America’s top sporting day. A QR code did all of that.

By Web Smith | Edited by Hilary Milnes with art by Christina Williams and Alex Remy

Member Brief: The New Oil

In this week’s Retail Dive, Corrine Ruff wrote on the “DNVB University.” In it, she illustrated the influence of Bonobos alumni over a number of the younger brands that began in the DTC era. Care/of, Native, and Rockets of Awesome are but a few companies that launched with the help of former Bonobos employees. She went on to write:

This member brief is designed exclusively for Executive Members, to make membership easy, you can click below and gain access to hundreds of reports, our DTC Power List, and other tools to help you make high level decisions.

Join Here

No. 312: The Evolving CMO

On Accenture’s acquisition of Droga5 and the evolution of the full-stack, digitally-native agency. A lot can be said for the evolution of the early-stage CMO. It’s now common to spot data-driven, b-school graduates employed at early-stage retailers. Just five years ago – chief marketing roles were typically reserved for sales-minded creatives. This shift may be influenced by the position’s updated responsibilities; in earlier years, these responsibilities would resemble more of a CEO or CFO’s stake within the company.

These priorities include: cost accounting, personnel accounting, attribution sciences, and applications of Six Sigma principles: define, measure, analyze, design and verify. Equipped with paid marketing budgets and a creative director on staff, the traditional CMO is more data-driven than ever. In a early-stage meeting with a DTC retail CMO, I asked what his priority was over the next 6-12 months:

Paid, for now. It’s measurable.

This pivot towards the data-driven marketing approach is not without consequence; blind spots can develop. Modern CMOs are more likely to focus on shorter-term, tactile decisions at the cost of the brand-building strategies that may lead to better long-term outcomes. If there isn’t an ROA or an ROI assigned to the opportunity, it is rarely justified in the DTC era. As the adage goes, what can’t be measure cannot be improved. Droga5 founder David Droga suggests that this approach to marketing is incomplete at best. Here’s a recent quote by Droga:

CEOs, CMOs, and CIOs all need to be on the same page, because they all affect each other now. This isn’t a nice-to-have. I think it’s going to be crucial for any brand going forward. This is future-proofing.

On Droga5 and Accenture

Accenture. Spun-off from Arthur Anderson in 2001, Accenture serves as the leading management consulting firm that provides services to include: operations management, strategic insights, and consulting. A Global Fortune 500, the company serves clients in over 120 countries with over 250,000 employees. Accenture reported net revenues of nearly $40 billion in 2018.

Droga5. Based in New York and founded in 2006, Droga5 is an award-winning, global advertising agency with a roster of high-impact, advertising successes. William Morris Endeavor invested in Droga5 in 2013. This allowed Droga5 to combine their advertising resources with WME’s entertainment connections, allowing Droga5 to develop a cache of major advertising partners. Accenture’s acquisition suggests that the combination was a successful one, and WME reportedly profited on the Accenture acquisition. The impact of this deal is a significant moment. Fast Company explained:

In easily the highest profile deal the ad industry has seen in recent memory, Accenture Interactive announced this morning that it has fully acquired creative advertising agency Droga5, which counts Under Armour, HBO, the New York Times, Amazon, Covergirl, and more major brands as clients. The deal will see all of Droga5’s 500 employees across offices in New York and London become a major creative cog in Accenture Interactive’s massive $8.5 billion digital customer experience and marketing services machine.

The report goes on:

Droga5’s founder and creative chairman, acknowledges that folding his company into Accenture Interactive reflects a larger reality: Brand communications have gone far beyond just advertising, into every time and place a consumer interacts with and experiences a brand–from retail to e-commerce to, yes, even ads.

The Droga5 Signal

This new category of full-service agency will surely influence other mergers and acquisitions. But most importantly, this will require new brand CMO to reimagine their roles and address the brain lateralization that has led to an increased dependency on Facebook and Google over the last five years. In June 2018, 2PM published “The Patreon Signal.” In it, I wrote: “Patreon’s acquisition of Kit and Memberful has signaled an uptick in M&A and partnership activity throughout the creator space.” This is a similar moment for the agency space.

Accenture has invested in sponsored media to advertise Accenture Interactive for some time and was best-positioned for this type of partnership. More agencies in the shape of Droga5 will be sought after as top management consulting firms like Deloitte, McKinsey, and KPMG look to compete with Accenture’s groundbreaking acquisition. Just this week, eCommerce and branding agency BVAccel acquired Katana, a paid media agency that may help BVA address more of the needs of its clients.

Agencies that combine the best practices of traditional advertising, data science, and creative expression will make its way to the DTC space. Accenture’s acquisition of Droga5 signals that for chief marketers, relying on the instant gratification of data-driven marketing will be an insufficient strategy – especially for those early stage companies that seek to develop lasting brands. AdAge’s Penry Price on these developments:

Rising agency players like Giant Spoon, gyro, Heat, Oberland, and Phenomenon are leaving their marks on the industry by combining speed, data, creativity, digital products (apps) and marketing optimization. Rest assured that Accenture Interactive and Droga5 will do their level best to provide a similar combination of services as soon as possible, and they will likely succeed.

Late-stage digitally native retailers will seek out the style of full-spectrum services offered by the Accenture-Droga5 partnership or the many creative consulting hybrids that this acquisition will further influence. This is not only attributable to the services that Accenture will give, rather due to how their offering influences the agency’s overall approach to problem solving. But for the brands that feel their strategies should stay close-to-vest, the CMO role must evolve to meet four goals that the new consumer economy will need.

  • CMOs will be responsible for digitizing all traditional (offline) marketing communications. These marketing leaders must apply a layer of measurement to in-store marketing, physical retail operations, print marketing, and other forms of traditional marketing.
  • Marketers must be tasked with leading workforce education and evaluation. Rather than partnering with agencies to discuss in-house weaknesses, CMOs will lead training efforts that insure that their teams are aware of the latest data, industry developments, and technologies that are most useful to the company’s revenue targets and brand defensibility.
  • CMOs must be able to find and invest in the brand, agency, and media partnerships necessary to move concepts and strategies from proof of concept to reality. These partnerships must be prioritized to keep up a forward-thinking posture and an emphasis on the insights necessary to pursue longer-term goals.
  • And CMOs must combine skill in data-driven marketing with the willingness to adjust to a rapidly changing digital environment that may offer better, more cost-effective opportunities elsewhere – both online and offline.

Coaches tell their quarterbacks to keep their eyes down the field when they leave the pocket. For marketers, that analogy is more relevant than ever. Within digitally native brands and traditional retailers-alike: chief marketers have long-leaned heavily on what was measurable, even if that approach has cannibalized longer-term prospects. The Droga5 acquisition suggests that marketers may begin realigning their resources to pursue a more holistic approach to brand messaging, awareness, and sales – efforts beyond the dependency on paid media spend.

Marketers will tolerate more brand-side experimentation and risk-taking. But unlike the marketing and advertising efforts of earlier years – the goal is to use observations to de-risk opportunities as quickly as technologies will allow. Risk aversion is still an objective but more chief marketers will grow to become the explorers of their industry. More than ever, these executives will be tasked with forging new paths and modernizing their approach to measuring the data that tells the story.

Read the No. 312 curation here.

Report by Web Smith | About 2PM