Y&R / 2018

SXSWINTERACTIVEINSIGHTS + TAKEAWAYS

What’s .inside?

Y&R @ SXSW 2018

1234567

HER FIRST WORD WAS ‘ALEXA’

STILL HUMAN AFTER ALL

THE CULT BRAND TAKEOVER

LIFE AFTER BITCOIN

PODCASTS, THE NEW OLD FRONTIER

FOOD, INNOVATION AND OUR HEALTH

WHAT’S NEW WITH VR?

What’s up, Austin.

Creators, innovators, futurists and blockchain enthusiasts all descended on Austin for the annual SXSW Interactive Conference. The mash-up of industries, technology and eye-opening presentations makes it an event ripe with insights and inspiration.

This year, we were joined by team members from New York, Austin, Singapore, and San Juan to learn about what’s on the horizon, what’s here already and why it matters to brands and marketers. Read on for our 2018 takeaways from SXSW.

Y&R @ SXSW 2018 #YRSXSW

1 Cult brands — we know them, we love them, we obsess over them. Brands like SoulCycle and Supreme tap into culture and subculture to develop relationships with consumers that are electric, personal and rooted in a sense of identity. As cult brands rise to prominence, it’s clear they’re here to stay.

We heard from brands like Glossier, SoulCycle, Milkbar, Madewell and Instagram about how they have launched their brands into cultural conversation and generated continuous growth.

It starts with your team. As SoulCycle CEO Melanie Whelan said, “Our first and most important customers are our team members.” Cult brands invest in their teams as the front-line to consumers. Teams that are passionate about

the product build an authentic culture that shines the best light on the brand.

Collaborations are critical. Cult brands hone in on their specific identity and value proposition, but they collaborate to showcase less-central facets of their brand. Collaborations also offer alternate points for creative inspiration. “The formula for a great company is to paint by numbers, then figure out precise places to color outside the lines,” said Christina Tosi, Milk Bar CEO and founder. While collaborations are not necessarily about ROI, they are about creating special moments that surprise and delight consumers. It’s a more emotional approach with incredible marketing value. “Collaborations are the oxygen for our business,” said Madewell President Libby Wadle.

THE CULT BRAND TAKEOVER

Y&R @ SXSW 2018

NICHE RETAIL AND THE RISE OF CULT BRANDS

CULT BRANDS

Experiment constantly. Assuming that ideas should always be strategic and oriented around brand values, taking an experimental mentality enables the freedom and creativity to try new things while learning what works, what doesn’t. Instagram Product Market Manager Jeff Taylor advised that on social it’s: test, learn, and adapt.

Be willing to do what no one else will. Pay for a Soulcycle rider’s cab when she’s running into class late. Rush a Milkbar Crack Pie for a customer’s birthday. Pick up the fallen sweater on the store floor, even if you’re the CEO. Tiny details matter, and showing you care about your consumers can build long-lasting relationships.

Don't underestimate influence. Many brands like Instagram build cultural currency and word of mouth through micro-influencers. According to Taylor, “Everyone’s an influencer no matter the size of the following.” What makes someone the

right influencer in marketing depends highly on the brand and goal. Kyle Wong, CEO of Pixlee, added, the right influencers are often: “within reach, have expertise, closeness/proximity, trust and relatability.”

Most importantly, cultivate community. Time and again, these brands came back to the idea of community, both online and offline. Instagram and Glossier have active online communities where consumers connect on shared interests, gather inspiration from one another, and trust fellow consumers’ recommendations. Madewell places dressing rooms in the middle of the store to invite conversation between customers, friends and store managers. SoulCycle is a source of friendship and relationships for riders. CEO Melanie Whelan explaining, “Our product is how people feel.” It’s a high bar to set, but building community is one of the most effective marketing tools out there.  

Y&R @ SXSW 2018 CULT BRANDS

80% of Glossier growth and sales have come from peer-to-peer recommendations.

CULT BRANDS

2 Whether it’s a search keyword, mouse click or menu, much of the internet has been about our adaptations to technology. These technologies have changed how we behave, but today’s voice-activated innovations not only shape our behaviors, they are also looking to learn from us. Humanizing voice technology means working to translate things like our voice prints (accents, dialects, tone), conversational context, and spatial intelligence into machine capabilities.

Programmers are conducting ethnographic research on how to help people day-to-day, from getting ready in the morning to relaxing when they come home. “We want to achieve seamless consumer adoption… so integrated in consumer lives that they don’t even talk about it,” said

Rachel Weiss, L’Oreal USA’s VP of Innovation and Entrepreneurship.

With rapidly evolving voice interface technology and the ubiquity of digital assistants, Amy Webb, Founder of Future Today Institute predicted that 2018 would mark the beginning of the end of traditional smartphones. The next decade will usher in advanced computing and connected devices controlled with voice, gesture and touch.

And the next era may be closer than we think. At the end of last year, there were more than 30m Alexa-enabled devices in US homes — following an adoption curve reminiscent of mobile phones at the turn of the century.

HER FIRST WORD WAS ‘ALEXA’

Y&R @ SXSW 2018

THE NEXT GENERATION OF VOICE-BASED SYSTEMS AND COMPUTING

VOICE

But if voice technology is being shaped by us, how are we being shaped by it?

Like the many technological revolutions before it, voice technology aims to save us energy. All we have to do is move our lips to access volumes of information and actions. Modern day voice assistants use two components: ASR (Automatic Speech Recognition), which recognizes and translates spoken language into text, and NLU (natural language understanding), which deals with machine reading comprehension. Some brands like SoundHound have taken it a step further by interpreting the meaning behind words with unprecedented speed and accuracy—an important step closer to replicating real human conversation. 

As home assistants become mainstream, we are likely to see greater effects on speech in the home—especially among voice-native children. As lines between human and machine blur, households may create rules on how to interact with machines. Does addressing Alexa with frustration teach children that this kind of language is acceptable? Does it matter that she’s not a person? Can our children even distinguish between an ‘it’ and a ‘he’ or ‘she’? As language is understood to be one of the facets that makes us human, the question remains: how do we retain humanity for a generation of ‘voice natives’ whose first word might well be ‘Alexa’?

Y&R @ SXSW 2018 VOICE

By 2020, 30% of web browsing sessions will be done without a screen. - Gartner, 2017

VOICE

3 Today, we interact with AI through assistants such as Alexa, Cortana, and Siri. Cortana alone has conducted 30 billion conversations and answered 18 billion questions, so it’s clear that adoption isn’t the issue. But what remains is the gulf between tech and the user interaction.

In response to this challenge, developers are making breakthroughs in Ambient AI, which relies on the intelligent cloud to merge our digital and physical interactions. This means receiving environmental data such as the presence of individuals, recognition of identities, contextual awareness (weather, traffic, news), and adaptation to individual needs. The result is a personalized experience or service delivered automatically and in anticipation of our needs.

There’s no reliance on a single screen or set of screens, thus creating a frictionless and more natural interaction between humans and our intelligent systems. Ambient AI taps into methods of communication beyond voice, such as body language. So called “invisible” decision-making will begin to happen without direct user input as AI systems learn to listen and observe in the background, sometimes asking questions, and sometimes adapting on its own.

AI has advanced considerably and new devices are increasingly able to determine sentiment in our speech or emotion in our facial expressions (even when faked). Futurist Amy Webb’s session on Tech Trends even discussed how computers have passed the Turing test for

STILL HUMAN AFTER ALL

Y&R @ SXSW 2018

ADVANCEMENTS IN AI TECHNOLOGY AND EMOTIONAL INTELLIGENCE

ARTIFICIAL INTELLIGENCE

emotional conversation, meaning a human being was unable to discern whether the audio sample they heard was from a computer or a real person.

Dr. Brian Cugelman’s session “Design for Personality Neuroscience & Emotional AI” began with a deep dive into the facets of human behavior and emotion. Pointedly, he discussed how humans are in essence a collection of biological algorithms honed by evolution and that computer algorithms may soon have the ability to surpass humans in emotional intelligence. For marketers, these shifts call for a greater need to leverage AI in order to understand and act upon an audience’s emotional journey—not simply their channel journey—to effectively communicate the right message at the right time. 

Y&R @ SXSW 2018

AI is expected to contribute $15.7 trillion to the global economy by 2030.

ARTIFICIAL INTELLIGENCE

- PwC, 2017

DID YOU KNOW?

4

2 LIMITED MEMORY

SELF-AWARE3

1 REACTIVE

THEORY OF KNOWLEDGE

• The most basic form of AI• Perceives environment directly and acts• Cannot form memories• Cannot reference past experiences to

determine future actions • Typically specialized

• Can consider past information• Utilizes memory or experiences within limits• Uses these memories or experience to

evaluate decisions and actions• Example: self-driving cars

4

• Yet to be built• Advanced capability to interpret the world or

environment around it• Can form information based on observations• Emotional understanding

• Yet to be built• Most sophisticated form of AI• Can observe and interpret the world• Capable of consciousness and emotions• Can anticipate emotions of others

ARTIFICIAL INTELLIGENCE

THERE ARE FOUR TYPES OF AI…

4 Bitcoin and ICOs (independent coin offerings) have dominated headlines over the last year. But those at SXSW were less interested in how the price will change, and far more interested in how the world will change.

The focus was on the revolutionary potential of blockchain, the technology that powers cryptocurrencies like Bitcoin, and its impending disruption of industries including the financial sector. Subject matter experts agreed: we’re seeing something analogous to the birth of the internet. And with that, we may also be seeing something reminiscent of the dot-com bubble.

“I think it’s pretty clear […] that we’re in the middle of a speculative bubble,” said Vinny Lingham, CEO Civic. When the cryptocurrency

craze lifts, many like TenX’s Julian Hosp are eager to see the real innovations emerge.

Beyond Bitcoin, the foundational blockchain tech is increasingly relevant today for three reasons: decentralization, transparency, and efficiency. As companies continue to explore blockchain technology, there will be far more applications beyond cryptocurrency.

LIFE AFTER BITCOIN

Y&R @ SXSW 2018

HOW BLOCKCHAIN WILL AFFECT OUR MARKETPLACES, INDUSTRIES AND MORE

BLOCKCHAIN

How will blockchain disrupt industries?

Y&R @ SXSW 2018 BLOCKCHAIN

BANKING

MUSIC

Enable artists to collect revenue directly, without a third party through smart contracts and licensing.

HEALTHCARE

Verify and authenticate secure access to personal medical records and data.

Facilitate faster global currency exchange, eliminate back-office clearing houses and third parties, and enable exchanges for micro-payments in developing nations that don’t have access to traditional banking.

Y&R @ SXSW 2018 BLOCKCHAIN

REAL ESTATE

VOTING

Support voter registration, identity verification, and voter fraud elimination through  immutable ledger records.

CONTENT + DIGITAL ADVERTISING

Advanced ad exchange targeting and ad-based monetization of video with increased security and privacy, without intermediaries.

Issue tokens that represent equity to record ownership and create real estate liquidity —a particularly significant implication for Millennial investors who lean heavily toward liquid investments.

How will blockchain disrupt industries?

Y&R @ SXSW 2018 BLOCKCHAIN

“Every industry that was affected by the internet will be impacted by this.” - Jalak Jobanputra, New York venture capital ist

5 Podcasts – they’re a dime a dozen and shouldn’t brands have this down by now? After hearing from podcast superstars like NPR’s Ira Glass and The New York Times’ Michael Barbaro, the answer is: not quite.

While some brands like GE and Spotify have dabbled in podcasts, the majority of marketers have yet to capitalize on the enormous opportunities that podcasts offer. Podcasts already exist on a range of subjects, and most are underfunded. It’s a relatively low barrier to entry for brands to seek out a podcast with a tone and subject matter that is interesting to their consumers. Brands would be remiss not to see podcasts as a significant opportunity.

Audio is a timeless medium. As NPR’s Ira Glass put it, “As long as human laziness exists, so will radio.” People want to be entertained while driving, walking, cooking or doing errands. It’s a pleasant, interesting way to learn and engage with content while simultaneously accomplishing all of the mundane aspects of life. Its longevity is what makes it a strategic place to invest for marketers and advertisers.

Engagement is through the roof. In a world where attention is increasingly fragmented across mediums, 80% of consumers listen to the entire podcast episode, and they listen to an average of 7 shows per week.

PODCASTS:THE NEW OLD FRONTIER?

Y&R @ SXSW 2018

WHY PODCASTS SHOULD BE AT THE TOP OF YOUR MARKETING STRATEGY

PODCAST

It’s personal and familiar. Podcasts develop a repeated interaction—one that builds trust and adds value. A consistent host means a consistent tone and personality, and people develop strong affinity for the voices they hear on a regular basis. There’s an emotional connection that can be extremely powerful.

The format reflects internet culture. It’s real people, talking about human things in an authentic tone on a one to one basis. It’s chatty, personal and sometimes snarky — casual but still informative. It’s a balance that television hasn’t figured out yet.

Podcasts are still growing. After becoming a full-fledged business vertical in 2017, podcasts are predicted to continue significant growth in the upcoming year. According to NYT’s Michael Barbaro, “The Daily” has been downloaded more than 200 million times since it launched a year ago. Marketers and advertisers can take advantage of this growth, smoothing difficult discovery processes and investing in podcasts that offer value and entertainment to their consumers.

Y&R @ SXSW 2018 PODCAST

Marketers don't understand the scale of podcasts. The Mad Men season finale had 3.3 million viewers.

Each episode of Serial had 16 million downloads.

- Ira Glass, SXSW 2018

PODCAST

6 The food being served to us in restaurants, what we’re finding in the grocery aisles at our local stores, and the meals we’re cooking at home are all vastly different from what we were eating, buying and preparing even just a decade ago. Much of what’s new today in restaurants and in our home kitchens is a direct result of the desire to eat healthier, whole foods, and the rising need for simplicity and convenience. It’s also reflective of a growing awareness around topics such as animal protection and the environmental impact of what we eat.

Many brands are tapping into these cultural trends and opportunities to bring healthy and responsible food to our tables.

For instance, the environmental impact of raising farm animals for meat consumption is one issue that has been brought to the fore in recent years. David Kay, manager of communications and sustainability at Memphis Meats, highlighted that 90% of the world’s people eat meat and the demand is expected to double in the coming decades. In response, Memphis Meats offers a solution using animal cells to create clean meat in a cultivator. This process allows for a 10X reduction in greenhouse gas, water and land use, and reduces waste and contamination.

And CEO of Beyond Meat, Ethan Brown introduced his product that has the look, smell, texture and taste of meat products, but has no meat product whatsoever in its makeup.

FOOD, INNOVATION, AND OURHEALTH

Y&R @ SXSW 2018

THE CHANGING LANDSCAPE OF WHAT WE EAT

FOOD

While mindfulness and ethical consumption is certainly a burgeoning trend, the food industry is changing on multiple fronts at all times. What used to be the South Beach Diet, fat-free, sugar-free craze is today the Paleo, Keto, Whole 30, GMO-Free, antibiotic-free, and organic diet. The result is a confused and frustrated consumer.

Rebecca Larson, of the Western Sugar Cooperative, noted how certain foods are using pointless labels to make consumers perceive their brand as healthier or safer than another. Some spices and salts now have a label that says “GMO-Free” even though there is no way to create some of these spices with GMOs.

“Rather than choose a label, choose the food,” advised nutrition consultant Roseanne Rust. She advises her clients get the nutrition they need, any way they can—and that just because something is organic, it doesn’t make it better.

There are 54 million people in the U.S going hungry every day,* which means not everyone can be picky about what they’re eating—they just need to eat. And while it is true that “we should celebrate the diversity of dietary choices” (Jay Hill, New Mexico & West Texas Produce & Alfalfa Farmer), we should all educate ourselves around what is/isn’t true and listen to our bodies to know what works best for us as individuals. *Source: Kris Moon of the James Beard Foundation, Re-Imagining How America Can Reduce Food Waste panel

Y&R @ SXSW 2018 FOOD

7 You didn’t need a crystal ball to know VR will be a hot topic at SXSW. But standout experiential pop-ups like Ready Player One, an 80’s pop-culture treasure trove, proved that an amazing “real life” experience can trump anything VR has to offer. But when done well, VR has the ability to transform and surprise. Here are some of the biggest VR takeaways from SXSW:  

Headsets are still unnatural. Saturday at SXSWi was 91 degrees, threatening to dethrone the all-time high of 92. Just imagine what it was like to strap on not only a headset and controllers, but a heavy haptic feedback backpack as well. Spoiler alert: it was a sweaty situation leaving assistants scrambling for extra wet wipes to clean the devices after each use.

Besides all that, VR can be very isolating and  unnatural—something that Mixed Reality, which blends real and virtual worlds, readily addresses.

It’s all about the experience. Like the real world, the virtual and augmented world is about delivering a great experience. But the quality of most VR experiences are average at best. There’s just no reason to slap on a headset and controllers to play table tennis or archery. The virtual versions never live up to the real thing. The most memorable were experiences that transport users somewhere they’ve never been or could never go. Think “Colossal Wave”—a multi-person experience combining art and sound in an underwater world.

WHAT’S NEW WITH VIRTUAL REALITY

Y&R @ SXSW 2018

THE LATEST VR DEVELOPMENTS FROM SXSW

VIRTUAL REALITY

Barriers to entry are still high. Most consumers haven’t tried or experienced VR, and those who have, aren’t buying headsets. But VR will continue to make in-roads in gaming and entertainment as hands-free and multiplayer VR capabilities are developed.

Immersive storytelling through VR is the next big thing. Volvo and BMW have introduced apps that allow consumers to test-drive vehicles through VR. Although still far from mainstream, virtual training and virtual simulations will become a rising trend. Marketers have a real opportunity to use the technology to tell powerful stories in simulated environments.

In addition, once other technologies like AI, block chain, and crypto are integrated with VR, we can expect exciting new ways for consumers to interact with brands.

Y&R @ SXSW 2018 VIRTUAL REALITY

VR connects you to an experience. It creates empathetic connections and bonds to social issues you can no longer ignore.- Dell Experience panel

VIRTUAL REALITY

HIGHLIGHTS

Y&R @ SXSW 2018 #YRSXSW

HIGHLIGHTS

Y&R @ SXSW 2018 #YRSXSW

CONTRIBUTORS:

Eric Ackley / Director of Experience Design, Y&R New YorkBarry Brothers / Senior Art Director, Y&R AustinLucy Cross / Manager of PR and. Communications, Y&R North AmericaSkye Duster / Account Supervisor, Y&R AustinEliud Echevarria / Design Director, Y&R San JuanAllison Griffin / Account Manager, Y&R AustinHeather Griffiths / Senior Strategist, Y&R New YorkJinie Kwak / Global Director of Communications, Y&R

#YRSXSWY&R @ SXSW 2018

See you next year!

Clara Luo / Chief of Staff, BAV GroupStella McClellan / Senior Account Manager, Y&R AustinAkia Mitchell / Global Director of Innovation, Y&RJennifer Siegel / Account Manager, Y&R AustinScott Youngblood / Copywriter, Y&R AustinLauren Silverman / Senior Strategist, Y&R AustinNancie Sophias / Brand Strategist, Y&R New YorkMarcus Rebeschini / Chief Creative Officer, Y&R Asia