The Advertising Industry is on the Verge of Serious Disruption

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I had lunch with a friend the other day; he spoke of the continuous frustrations felt by his client, one of the ad industry’s major advertising networks. The rise of social platforms, coupled with the increasing adoption of Programmatic, has directly impacted performance on the ad publishing side. While media buyers struggle to maintain relevance in an industry that’s becoming more machine-driven, the media and publishing industry continue to grapple with the ever-morphing consumer behavior.

Nothing is as it once was

Click-through rates on ads continue to decline.

This has been happening for some time as banner blindness becomes an increasing reality. I tried to find more recent statistics, but this one from the last 2 years states the click-through rate for display ads are at an all-time low of 0.1%. Almost 18 years before, when they were first introduced, banners were returning almost 50% CTR. That was the heyday. According to Coull, display in general, has seen better days. Mobile has much better performance than desktop.



The banner ad is now 18 years old. It has become a symbol of all that’s wrong with online advertising. It is more often than not devoid of creativity; it stands out as an intruder on webpages; and it is mostly ignored by readers.

The traditional 468×60 display now commands a whopping .04% click-through rate. Consumers continue to experience a deluge of ads. According to Digiday:

… The typical Internet user is served 1,707 banner ads per month. (Comscore)
… An estimated 31 percent of ad impressions can’t be viewed by users. (Comscore)
… 8 percent of Internet users account for 85 percent of clicks. (ComScore)
… Up to 50 percent of clicks on mobile banner ads are accidental. (GoldSpot Media)

Even Facebook admitted last year that engagement rates on Pages were in decline. Remember when the strength of organic distribution was the reason that advertisers flocked to Facebook to quickly set up their Pages?  Today there is NO organic distribution. It’s virtually non-existent. The prized Newsfeed is a getting increasingly cluttered and to vie for visibility the advertiser will continue to bid not only to acquire – but to keep its current fans. To top it off,  in order to optimize the user experience, friend notifications and top friend engagement posts will show priority before any advertiser’s posts.  This chameleonic priority between fans and advertisers is a fine line the platform continues to redraw.

Despite all of this, the digital ad industry will continue to grow. According to the CMO Council, 30% of the $180 billion ad spend went to paid digital media in 2014.  This is expected to increase another 15.5 percent this year. Mobile will be the largest benefactor of those dollars.

Buyer behavior, today, will continue to elude the Advertiser

According to Forrester, buyers might be anywhere from 60 to 90% of the way through their buying journey before they even contact a brand. The buyer’s increased exposure to content (across multiple channels) will largely be determining factors towards the final purchase decision. From a B2B perspective,

“every buyer will find three pieces of content about a vendor for every one piece that marketing can publish or sales can deliver.”

Trying to be one step ahead of the buyer can be frustrating.

Programmatic has provided a legitimate avenue to close the gap

The efficiency of programmatic allows the advertiser to secure a buy much more quickly than going through the media buyer. I worked at Yahoo! and I witnessed the onerous process of insertion orders, negotiating rates to secure inventory based on targeted profiles. The tiered rate structure allowed publishers guaranteed premium revenue for homepage or highly trafficked placements.

In most cases, the brands that had the most media dollars were granted premium placements with the cool interactive formats. However, the process to negotiate, then to secure those placements meant a constant back and forth between the sales publisher and the ad buyer.  First class ad unit availability was the prized placement. In many cases, the structure bumped the advertiser to a Class 2 ad unit or Remnant inventory if there was overwhelming demand for property placement.

Today programmatic, in many ways, levels the playing field, and allows marketers to secure inventory based on a bidding system. This has vastly improved the traditional media buy and it has allowed the marketer to save considerable time and money by bypassing media agencies in favor of internally controlled media strategies.

This, however, does not go far enough to meet the consumer where they’re at.

The challenge of the always-on consumer

A few years ago I wrote this post, What is the Future of Advertising?  Here I saw a dire need for the ad industry to evolve further past demographic and behavioral targeting. While it’s already happening, I surmised that the future ad model will eventually involve social data:

Now imagine if you had the best of both worlds: behavioural data AND conversation data… Now we not only have recent behavioural activity where the user’s been on the Internet, what he’s communicated via public social channels, in what context and the communities or groups that influence his behaviour.  The MORE information on the user will allow advertisers to serve an ad, or respond to him with relevant offers, but DO so with a certain degree of confidence that he will, at the very least click on the ad.

Susan Silver wrote a sensational post that needs some serious consideration. Why We Should Target Customer Conversations, not Demographics provides this salient information:

Demographics are a labeling method, but the information they contain is insufficient.

We don’t need to know who someone is to find insights. This is because only language is analyzed. The extracted information tells us a lot about the backgrounds of people having these conversations, but not necessarily identifying information.

This is a panacea, but it will take some time.

    1. Data continues to move at a pace much faster than the advertiser’s ability to react. Marketers are still trying to figure out how to properly learn and quickly react to real-time data.  Facebook and Paid SEM are the only two areas where constant optimization including ad creation are advancing performance. The display market has yet to catch up.
    2. Aggregated search and conversation data need proper logic. You’ve heard it before: What people say and what they do can be two entirely different things. Conversations can be influenced and groupthink can play a strong role in how an individual responds to a recommendation or argument. On the other hand, once someone has made up their mind, what they search for online may be a culmination of the content they’ve researched, the ads they’ve seen, the sites they traversed, and the people with whom they’ve spoken. Ultimately proper weighting of these two variables based on recency and frequency will need to be considered.
    3. Targeting true relevance surfaces an increasingly niche audience.  In EVOLVE, we constantly reference the phrase, “Give the customer what they want, when they want, and how they want to receive it.” With consumer attention being increasingly fragmented through social and mobile communication, plus information overload, and constant ad interruption the name of the game is test, learn and optimize performance. No longer can we sit and wait for our ads to perform. This is not a waiting game any longer. It’s a series of strategic moves to continue to push that boulder uphill.
    4. The strength in predictability. Facebook does this very well. The power of social data also allows you to find “like individuals” of for example, the top 10 percentile of customers, by profiling user interest, geography, topics, demographics etc., and targeting them with similar content or offers.

At ARCOMPANY, we are constantly pushing the limits with data to understand people, their motivations and what they care about at any given moment. We aim to inch closer to defining those moments where we can accurately predict how an individual will respond given the right message that matches his needs at that time. That time is upon us. You need to be ready for it.

ArCompany uses social data insights as the foundation of our content and community strategies. Discover more about your customers by contacting us today.

Image source: badjonni

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