Web advertising was defined in the early 1990’s and its measurement and pricing models were based directly on precedents set in the broadcast-television and newspaper publishing industries. The web was segmented into ‘pages’ and website owners became ‘publishers’.
Its funny how these ideas tend to stick isn’t it?
Pricing of ads by ad-size, prominence on the site and the idea of ‘cost-per-impression’ (usually calculated by CPM cost per thousand impressions) were taken directly from newspaper and television models, where advertisers were charged a rate per-thousand-viewers of the measured television audience or of newspaper circulation. In the future, historians may look back and tell the story something like this:
“Web advertisers in the 1990’s bought ad-inventory which was displayed on publisher’s websites. Publishers effectively sold their reader’s attention to Ad-Networks and Ad-Exchanges and ordinary web-users were simply passive bystanders in the process. However, people became more and more disinterested, until by 2012 less than 1% of web users ever actually clicked on ads. However the biggest ad-serving companies on the web at the time, like Google and Facebook, averaged even less! (for Google around 0.4%, and for Facebook a meager 0.051% of members clicked on ads, [real statistic] ) But the enthusiasm of legions of advertisers seemed to be unbounded and for what seemed like an eternity they kept pouring billions of dollars into a system that succeeded in annoying more potential customers than it converted into buyers.”
If it was any other industry, what might the reaction be?
“Hello Mr. Jones, thank you for trusting us with your account.
We are really excited to be able to inform you that we have now spent your entire budget, and using our highly scientific behavioral targeting technology, (which we paid $600M for) we have featured your product to a carefully selected target audience of close to one million cashed up, high-nett-worth fashion savvy prosumers! ..And
We are delighted with our above average click through rate of 0.064% !! meaning we had a whopping 640 clicks on your AMAZING ad!!! and we can now confirm that of those 640 clicks we have definitely converted 6.2 NEW Customers!!!
But… (and I saved the best bit till last) You absolutely totally
achieved really HUMUNGOUS EXPOSURE!!!”
Clearly, in any other industry, the client would either simply demand their money back or begin legal proceedings for gross negligence. However, with only a few exceptions businesses large and small are queuing up to unload dump-trucks full of cash into…
the macro money sucking vortex of web advertising…
Advertisers have collectively responded to the world wide web with the level of apparent blind adoration of a bedazzled cargo cult worshiping a giant silver bird coming down from the heavens. Just as television had first seduced them in the 1950’s and 60’s, the web has apparently cast a similar spell.
However, unlike television, where ad slots were subject to relative scarcity and high price, web-ad vendors struck it lucky as web-page and user numbers became almost uncountable, while distribution costs became negligible and reach became effectively limitless.
Since the mid 1990s the advertising industry has been gradually increasing the percentage of web-advertising budgets year-on-year. Within this sector the web always held promise as a medium for ‘Direct’ communications with consumers, when to the contrary, the process of profiling consumers, delivering ads and measuring results, was anything but direct.
For Advertising agencies and media buyers, audience-profiling and ad-scheduling which are both crucial to their online advertising revenues were becoming an increasingly complex guessing game with online advertising becoming so broadly focused as a result, that it is often seen by consumers as irrelevant and repetitive.
Then along came Google which applied a grass-roots internet logic to the problem of audience-profiling and relevance by matching advertising with key-words to create their adwords and adsense solutions, and in doing so, started to strategically out maneuver the Ad Industry on the Web, a prospect further compounded by Google’s purchases of ad-serving giant Double-Click and YouTube, which was already eroding the broadcast television market, a corner-stone of the Advertising Industry ecosystem. Sir Martin Sorrell, head of WPP, commented on Google’s $3.1 billion acquisition of DoubleClick. “It raises some issues for us. It raises issues as to whether we are happy to let Google have our clients’ data and our own data which Google could use for its own purposes”
That was in 2007… Now, five years later, despite Sir Martin’s concerns about Google getting his client’s data, and despite him referring to Google in 2007 as a “Frenemy” (short term friend, long term enemy) WPP will increase its ad-spend to Google in 2012 from $1.6bn to about $2bn.
As commentator Chad Hurley wrote in WIRED in 2006:
“Without being overly simplistic or melodramatic, the state of the Old Commercial Broadcasting Model can be summarized like this: a spiraling vortex of ruin.” … “…The digital revolution is equally terrifying to Madison Avenue, (US Advertising Agencies) They see the old model collapsing before them, and they have $67 billion to spend and no idea where to spend it.”
But what about the ordinary web users, who represent the reason why all these billions of dollars are changing hands?
The truth is that we have been reduced to metrics, integers in algorithms that tantalize technocrats and hypnotize corporations into believing that ‘relevance’ to real people can be calculated, and traded like commodities in the stock exchange. When in fact, these algorithms just tend to stereotype users and limit the variety of information that each person receives in Google searches or Ads served to publishers, causing endless repetition in the ads we see on the web sites we visit.
Web users should not be considered a large mysterious group that cannot be understood without complex server-based behavioral targeting and secretly allocated an ‘e-score’. We are in fact all individuals who each have interests and things that we want to do and buy. Its truly ridiculous that the advertising industry is more intent on finding new ways to spy on us to learn what we want, than actually work out better ways to simply ask us.
Web advertising is based around the Marketing or Sales Funnel which has been a mainstay of sales strategy for more than 100 years. Coined by Elias St. Elmo Lewis in 1898 it defined the customer acquisition process as going through four stages: Awareness, Interest, Desire and Action. However, without wanting to have to state the bleeding obvious… a lot has changed since 1898.