AI Is Smashing the Marketing Funnel & It Might Crush CMO's in the Process | Mike Walrath | Yext

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1:37Learn more at typeface.ai.com. Welcome marketers, advertisers, and those who love them to Chief Marketing Officer Confidential. CMO Confidential is a program that takes you inside the drama, the decisions, and the politics that go with being the head of marketing at any company in what is one of the most scrutinized jobs in the executive suite. I'm Mike Linton, the former chief marketing officer at Best Buy, eBay, Farmers Insurance, and Ancestry.com, here today with my guest, Mike Walroth. Today's topic, AI is smashing the marketing funnel, and it might crush CMOs as well. Now, Mike is the chairman and CEO of Yaxx, a digital knowledge management platform that helps businesses control how their information appears across platforms, and the founder of venture firm, the WGI Group.

2:33Previously, he was the CEO of Right Media and worked at Yahoo and DoubleClip. So full disclosure, my marketing team and I had a strong relationship with Yax while I was at Farmers Insurance. So I've watched the company move through a lot of times. Welcome, Mike. Great to be here. Thanks for having me, Mike. I actually think full disclosure would also include the fact that I think you lent us one of your offspring for a few years, didn't you? I did. I did. My daughter worked at Yax for a while. I wasn't operational when she was there, but I've heard nothing but great things about her. Oh, that's good.

3:10I will make sure she hears this. Hey, so let's go right to the main topic. Give us the cliff notes on your view of the collapse of the funnel and what it's doing to customer and consumer discovery and the purchase cycle. Yeah, sure. So again, thanks for having me. It's great to be here. And hopefully I can live up to that theme or that title. So, you know, I think maybe we start with like, you know, you said it really well, the funnel is dead. The way we have been trained, you know, I've been working in marketing since the late 90s, all digital marketing. And, you know, one of the things that's been constant is that the way we think about the awareness, consideration, conversion, and loyalty funnel has been has been consistent our tactics have changed but that there's been a tremendous consistency there and i think one of the things that we're coming to terms with now or beginning to come as marketers beginning to come to terms with is that it's over right it's not going to well it's the funnel's been in existence since you know oh yeah before we were born absolutely yeah the first thing i learned was like here's how you talk to marketers and you know what we're talking to them about our awareness and consideration, right?

4:27That was, we're selling, you know, basically brand advertising. And, and, and so, you know, it was, I mean, it was literally one in the one-on-one documents in 1999 when I started working there. And I think, you know, we've been able to rely on it. And I think we have to come to terms with the fact that like, it's, it's not going to work the way that it, it has historically worked. And, and, you know, And that may not be the most sort of disruptive thing that we're going to see with this shift. Tell us more, because is this a total collapse? And the idea that you would move consumers down the awareness, consideration, purchase, repurchase, and you could throw trial in there if you were a consumer goods.

5:14Sure, yeah. Tell us in your mind, how is this collapsing? Take a look at it from the side. You used to have this perfect triangle funnel. And now what do you have in it? Yeah, so let me, maybe I can throw in a couple more inflammatory statements and then try to stitch them together. Yeah, knock yourself out. We love inflammatory statements. Into a quilt that makes some sense. So the funnel you've known your whole career is over, right? There's no more winning interest in getting attention to the consumer on the website. We're moving to zero click, and we have to talk about what zero click means.

5:45Put a pin in that one. The second massively disruptive thing that I think marketers need to understand is that AI creates the first environment in which you're not going to be in control of your advertising copy and message anymore. You will not be able to decide what your ad copy is. I think this is a shocking development for people who that's the one thing you've always been able to control. right um and and i think if you apply those two things to and maybe the best way to think about this is to use an example so historically if i take a brand take a great brand like land rover right and uh and if i were the cmo of land rover for the last 15 years you know i can think in terms of obviously my brand and the critical importance of my brain but i and actually i think this is one of the things that's not going to change right is that great cmos are still going to have to be great branders.

6:40They're still going to have to think about how do I build a brand and what is the message and all those important things. And I think some people who have incentive want you to believe that that part is going away. And I just don't think that part's going away. I agree with you. But can I go back before you go on the journey? What is in place of the funnel? Is it chaos? Is it? No, no, no. Yeah. Tell us what they used to have this funnel. Everyone understood the funnel, even consumers understood the funnel. What is now in place? So let's think about it. Let's use Land Rover as an example. So Land Rover, I drive an old Defender.

7:22They have a new Defender. It's an amazing automobile. I don't own one. I might own one. I have a 1993 Defender. I love driving it in the summertime in the Northeast. But if I'm Land Rover, what I want to do is I want to sell my new Defender. And I'm thinking about that in terms of a funnel. And I think that funnel starts with a consumer question. right so i think there's the you know obviously there's the awareness piece of this and i i think the big b capital brand piece of that stays the same but when it comes to uh discovery consideration conversion if i'm land rover you know i've i've been thinking a lot about how does the consumer first find my uh find my find my brand and and let's just assume for the that a lot of that starts on Google historically, right?

8:14So for the last 15 years, user, you know, I go to Google and I search for either Land Rover Defender, and I go probably directly to Land Rover site, right? Or a dealership or a dealer site or something like that. If what I do is a different search, and I say 10 best, you know, what's the best SUV as that's also a daily driver? What's the best Land Rover thinks about the funnel historically is I need to win the attention of the consumer. I need them to come visit my proprietary first party content. And I'm going to take them through the consideration to conversion to loyalty part of that funnel, primarily through direct interaction with that consumer.

9:02Right. And, you know, this is why like things like sponsored search and organic search have been so important in the marketing funnel, because it's how do I win the attention of the consumer? And the assumption there has always been the best way to get the attention of the consumer is to have them on your website. Right. They know the brand, you get them to the website, they're in the funnel, you can pull them down. Yeah. So today, what we hear about is, you know, everyone's talking about zero click, right? Zero click. and I think in a lot of cases we say zero click and I'm not sure people are fully grokking what that means right and so let me give you a different example of how I think this is shifting so I went to Chachi BT the other day I could have gone to grok I could have gone to Gemini I could have gone to perplexity I could have gone to any number of these things and I and I and I and this is what I did instead of a you know best SUV that's a daily driver and I can take off-road is I said I've been driving a Tesla Model S for the last 10 years.

10:03I am considering something else and I'd like to consider an SUV. Something fun to drive, but that I can also take on the beach and whatever else. That's my query. So that is a very different query than best SUV daily driver. Exactly. The next part is really critical. So the next part is ask me as many questions as you need to, to understand what I'm looking for. Right. So I get a series of clarifying questions from ChatGPT. What do you like about the Model S? Is it the quiet? Is it the power? Is it the cabin? Is it the nav screen? Is it the integrated Google, you know, blah, blah, blah. Right.

10:43It asked me five or six questions. Then it says, okay, I'm ready to make a recommendation. It then thinks for seven minutes. Seven minutes. Wow. Seven minutes. Yeah. And it's telling me researching, thinking, it's telling me what it's doing, right? After seven minutes, I go make a cup of coffee, I come back. And what I have is a full presentation on six or seven different models of SUV that I, knowing everything it knows about me, which is by the way, far more than the questions that I answered, we'll get to that memory. It's now made a recommendation and it's recommended the Land Rover, it's recommended an Escalade, it's recommended four other things that I would, that I might like, right?

11:26So the entire sort of awareness and consideration part of the funnel has now been compressed into the AI experience, right? Well, and personalized. And the other thing, the whole personalized at speed while you drink coffee at your house. We are taking a short break from our discussion for a word from our sponsor, Typeface.

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12:50exactly so so what i've been given is what i would have gotten five years ago if i assigned the task to an administrative assistant who's known me for 10 or 15 years knows everything about me and went off and spent days doing that research and came back and basically said look i think this is the car or these are the cars you should consider right so i've gone through basically awareness consideration, right? What we'd like to think is that the next, as marketers, I think the easiest way for us to think is, okay, now I'm going to win the click. Now I'm going to win the traffic, right? And so what's going to happen next is they're going to come to my website.

13:33And I think in some cases today, that is what's going to happen next, right? So they didn't come to my website after a singular search because I had done a great job with SEO and I was at the top of the page. But maybe after what amounts to six, seven, eight queries and a whole lot of research. No, I win the AI bake-off and what are they going to do with me now? So I'm number one in the AI bake-off. What happens? Yeah. So in today's paradigm, what will happen is it will present me the research and then it will ask me another question. And this is something that you're going to see is it's going to ask me another question and it's going to say, what do you think about these?

14:14Are there any of these that you'd like more information on? Right. And at some point in that process today, they're, they are going to invite me to go visit the, maybe it's the, maybe it's the defender page. Maybe it's the, the, the homepage, you know, they're going to send me somewhere by the way, or they'll send you to a dealer. Yeah. I think they'll send a dealer to me. Oh, interesting. So this is what I think happens next, right? And we're now in the world of prognosticating, which means I can look like a fool. But the way that when you talk about funnel compression, the way that that funnel is going to change for market and that the problem the CMO is going to have to deal with is that I'm not controlling this conversation as much as I have historically.

15:01My agent is controlling this conversation and they're doing it with a tremendous amount of context. And they know more about me than the marketer does, but they also know more about the marketer than I do. Right. And so the way that I think that evolves, and this isn't happening today, but it won't be very far away, is I'll say, hey, I think this defender looks great. Is there a dealership near me? And you know what my AI is going to tell me? Yeah, there's a dealership five miles away, but you don't have to go there. I can send the car to you? I think it's super interesting. So I want to write the CMO into the story because implicit in the discussion we just had, and I know we're prognosticating, because the brand is powerful enough that you're going to recognize it and you have enough presence in the entire space that AI finds you.

15:59So those are two marketing things. You know, to be you have to have a brand power you have to be around so they uh you know we did a whole show called is your next best customer an ai bot but then what is the marketer's job next yeah well so so so if you think about it like if you're the cmo of land rover again like you know and you you can kind of bake the end state of your job so there's all the art and all the science that goes into being a CMO, right? But I think the end state is going to boil down to some key metrics like test drives, like units sold, like visits to dealership, right? Because at the end of the day, those are the first pieces of the conversion part of this, right?

16:43So we like to simplify it and say it's awareness, consideration, conversion, and loyalty. But we all know like with a considered purchase like a car, like the conversion phase has multiple steps, you know, visit the dealership. I might come back later for a test drive, right? Then I negotiate, right? Then I might buy, right? And so the role the CMO ultimately plays in this process is, I think, across that entire spectrum, defining where are the value points, what are the things we need to understand, right? And how do we make sure that when the question gets asked and the complexity of that question is going through the roof, that we have the best chance of being the answer to the question?

17:28And it says consideration is obliterated in the funnel because you're going to get to the consumer answer without the consumer having to do that much work. Yeah, the consumer is outsourcing the consideration. Yeah, it's outsourcing the entire consideration in the funnel to AI. and it's also actually going to outsource maybe a lot of the negotiation in there um and yeah so so so here's so so take it to the second part right which is you know we've always used i think advertising as a way to ensure that we're part of the consideration set so so there's a reason why paid search is, is, you know, close to 40 % of all advertising, right?

18:17It's because we have, we have enough understanding of the intent of the consumer that we can basically buy our way in front of the consumer at the moment when they're in the consideration phase, right? It's the most powerful advertising medium we've ever seen. And what we get to do in that case is it's very expensive, but we get to put ourselves in front of the consumer with our key message at the most critical moment. Take that, wrap it in TNT and blow it up because that's not the way it's going to work in the future. The way it's going to work in the future is marketers have to become influence marketers.

18:51We have to figure out because we're no longer, now we will be able to buy our way in, right, as marketers. But the way we buy our way in is going to be totally different. And the most important difference is going to be that we can no longer control the message. So in essence, are you saying we're going to be marketing to bots, basically? Do I need to call John Connor? We're marketing to people which are basically being front-ended by bots. And I think this is the part that, so it's a very hot space right now, the whole like, I'm going to be your AI SEO engine. Right. And I'm going to reverse engineer everything for you.

19:30Yeah. And here's the good news and the bad news about that. That's a really important thing for marketers to figure out. But the way that it's being done generally today is so limited that it's going to be virtually useless. Right. And the reason why is memory. Right. Tell me more. Yeah. So, you know, Google has no, traditional search has no memory about me to speak of, right? Every search is Greenfield, right? All it has is the context in the query, right? And we all grew it, you know, you and I, we grew up learning how to speak search, right? So we grew up learning to say, you don't ask, hey, I'm really hungry for lunch and I think I'd like a burger, right?

20:13We learned to speak search. Yeah. near me, 33435. Yeah, right. Our children and their children aren't going to talk this way. They're just going to talk and speak English, right. And what that means, you know, that combined with the fact that these AI experiences are storing everything, they have so much context that, you know, whether I tell them to remember or not, that, you know, they do look, I talked to I talk to my AI like it's in the room. Yeah. Well, I'm going to save my, I know at the end you asked for a story, so I'm going to tell you a story at the end. Yeah, save it. Don't jump the queue on that.

20:52No, no, I'm going to save it, but it comes back to this point. So I think that the key point here is that we're used to marketing to intent-based queries, and the intent is now hidden in the context and in the memory. And so it makes the marketing challenge much harder because what I have to do is I have to anticipate what are the key sort of things. So like my AI knows that I own a Defender, right? I feel like Land Rover should send me a polo shirt. They should, yeah. I'm totally available for that as well. Totally, totally. Maybe the polo shirt or a Defender. Yeah, Defender if it's possible.

21:34I'm open. Yeah, I mean, it's crazy that one hasn't arrived in my driveway yet, right? But I think that this is the thing is that the visibility of the sort of the intent is going to be more hidden. So what does that ultimately mean for the marketer is that two things become really, really important. The first thing is like branding is more important than ever. Yeah. Right, because behind that AI and that agent is a consumer. And what you do to establish that your brand is superior or your brand attributes match that target consumer is going to be much more important when you no longer have the sort of referral-based sort of system to get them to...

22:22Well, look, if you don't have the brand, you're not in this game. No, no, you're out of the game if you don't have the brand. You're out of the game. So you hear way too much of this like, oh, no, CMO has to be a scientist and a scientist only. You know, that's bullshit, for lack of a better word, because the brand becomes ever more important in this. And is the brand for the bot and the consumer or just the consumer? So I think it's both, but in a different way, right? So at the end of the day, you know, judgment lives with the consumer. Now, maybe we get to a world of AGI and super intelligence where like we start trusting the bots to have judgment.

23:03Like you could imagine a world in a sci fi universe where I just say, look, go buy me a new car. You know everything about me. You know what I like you can you have all the information just go buy me a new car. I want it delivered to my house next Tuesday. right i leave it to you ai bot to make that decision that then then you really there is no funnel anymore right and and at that point it is how do i establish brand to a to a bot right but if but but by the way if it's agi if it's super intelligence then then you do it the same way you do it with humans right only you find the channels right or when you ask the question you know i want i want to buy a mercedes or something pick the best one for me you are actually controlling the brand when you ask your AGI to do it.

23:49So is this actually destroying the CMO job or is it changing it to the extent where instead of managing the funnel, I'm managing the brand and the customer expectation and interface? No, it's, it's, I think it's massively expanding the value of the CMO position, but the CMO has to change the way that they think. And they have to be, I think that the definition of the CMO unicorn is going to change. And so you're going to need either the new CMO unicorn is going to be an incredible brand marketer who knows how to create brands and knows how to create that magic and understands that there are still going to be marketing mediums where you have to create that magic without a lot of the tools that used to have 10 years ago yeah you have all these new tools but they're not as clear you know you don't have tv working like it used to use for sure you have attention spans that are short sure um so the the brand brand building is harder i think the advertising surfaces for brand building are obviously going to in a i mean you think about the the implications of a zero click world for we already talked about it for Land Rover, but for any publisher, it's, it has, you know, there's panic in the publishing, you know, uh, world now because, because, you know, if you're, if those clicks are to your content and your content is ad monetized, if the, if the content is being brought to the consumer instead of the consumer being brought to the content, what happens is the, the advertising services that you have to brand yourself change.

25:31And so, but you know, we're going to have live Live sports, things like that are going to benefit hugely from this because there are going to be places where you can establish brand. But we haven't gotten to the second part, right? And this is the huge shift, is that if you're going to be a unicorn CMO in this world, you have to understand the power of the brand and you have to be really creative about how you do it. But you do also have to become a scientist, right? Because at the heart of the mechanism of influencing the bots is understanding that bots don't consume content. They consume data.

26:08Right. And every piece of content you've ever created has to become consumable data. Give me an example of taking a piece of what you would call traditional content. Yeah, sure. Turning it into data. I'll give you a better one. So let's stick with Land Rover. right? I'm going to get that defender. So Land Rover has an extraordinarily beautiful website, right? It has been designed down to the pixel to represent that brand and the quality of those products and the attributes of that brand. It has amazing complexity to it. It has drop-down boxes. It has images. It has all these things, right? And they've spent, I don't know, tens of millions, maybe hundreds of millions of dollars on creating that digital experience of their brand, right?

26:58For human beings, right? But if you take all the structured data, which is all the core data, this is the location of the dealership. This is the inventory that we have. This is the, you know, this is the resale value of the car. Here's the MPV, here's all the specifications, here's the engine, here's every piece of structured data from that website, right? I mean, that website is a beast. Every time a consumer visits that website or a bot visits that website, they're sucking down huge amounts of images and drop-down boxes, and they're navigating. It's very, very sort of heavy. You take all the structured data of that website, and you put it into a structured data file, and it's hundreds of kilobytes.

27:50right right it's it's it's less than the than the smallest image on your iphone right and so so what we're going to have to do as marketers we're going to have to figure out how do the ai experiences want to consume our data because what they don't want to do is visit our website suck down all that image sorry they don't care about the images they might go get an image off the website but they don't want to be constantly consuming it right and so they can't evaluate an image so no but they can go get a reference image right they can go get a link they can go get a url and so so you still are going to need these surfaces you're still going to need your your experience for the consumer because some consumers are going to want to go touch it and feel it and like you know virtually look at the pictures look at the you know design their own all those all those experiences are all going to have to exist.

28:44But like, what is the state of the consumer when they arrive at those experiences is going to be much further along the funnel. And so therefore your job as a CMO is making sure that every piece of data about your business is in a form that it can be distributed and consumed by AI answer engines. And so that means I have to re-engineer everything so the bot can pick it up at speed versus make you what I hear you saying is don't make the bots work. You can't make the bots work. No, because because if if your competition and you have to understand at a really granular level, what is your competition doing?

29:27Because because, you know, we're seeing we're seeing this evolve, right? Like there's a huge debate, which I think is a worthless debate over is AEO or GEO different than SEO? Here's here's the you know, here's the thing that most people don't want to say out loud is that the CMO has largely not given a shit about SEO, you know, AIO or geo historically, because, because it's wonky and it's, it's, it's, you know, like understanding citations, understanding how, you know, other websites impact my ability to be visible, understanding how I rank, like all that stuff. It's been this sort of like the, you know, Now the guys down in the basement figure that stuff out, right?

30:07If you're a C, I think the future CMO can no longer have the luxury of having a group of people in the basement figuring that stuff out because like whether it's SEO or it's GEO or it's AEO or any other three lever acronym that we want to come up with. If you miss that, you are going to be so competitively disadvantaged that it'll be hard to recover. Hey, how do you know mathematically or when you're looking at your stuff, even if you're really good at it. How do you know you're doing it right? Yeah, well, there are signals, right? So we released a piece of research today. This is literally did this this morning.