Reset password:

Strategic insights
The Day Advertising Died

The new form of advertising is based on heavy contextual and personal targeting. Instead of creating a poster or an advert, you make yourself useful by being relevant to people.

10
PAGES

PLUS ONLY

FREE FOR SUBSCRIBERS

Written by on December 21, 2010

Shared By Plus Subscriber

Tom Corbett

READ ALL THE PLUS REPORTS

This is Baekdal Plus content. It is shared with you for free by a member. Please reshare it.

Here is a prediction for 2011: Advertising overload, combined with better use of social media, the rapid change to mobile media, and better metrics, will lead to the biggest advertising crisis ever in digital media.

Advertising overload

Advertising overload is nothing new, and has been a growing problem for the past 20 years. But we are close to the critical point where people just cannot take it anymore. You are being bombarded with advertising no matter where you look online.

  • On YouTube, you will see advertising both inside and outside the videos, constantly disrupting your experience
  • Most websites include a ton of annoying ads
  • Many games are ad supported
  • We got promoted tweets
  • TV stations are increasingly adding inline banner ads, annoying while you watch a movie
  • ...and the list goes on and on. There is even talk about adding advertising to ebooks

Note: I would personally never buy an ebook that includes advertising. I read books to relax, and advertising prevents me from getting into a real relaxing state.

It is getting out of hand.

A recent study (PDF) from Denmark (where I live) found that 74% hate advertising, and that the number of ads on TV has quadrupled in the past 10 years.

The trend is clear. We are rapidly moving towards advertising overload. That is a point in time where people will stop buying a product if they are being disrupted by advertising.

If you place an annoying ad in an ebook, you might sell 100 products, but you might also turn away 200 customers. That is not a good return of investment!

Note: It is likely that this is already happening, but since everyone only measure positive engagement (as in how many people buy), and not negative engagement (how many who don't), we really don't know.

Mobile revolution

The mobile revolution is likely to change the economics of advertising dramatically. In the old world, advertising is something you put around the content.

Just head over to Mashable, where they have nine advertising spots around the content. This is not unlike print advertising, where ads are placed next to articles, or on the opposite page.

The problem, however, is the mobile internet is growing rapidly. It is expected to become the primary browser device in late 2012. And you just cannot place ads around the content on mobile devices. Although many mobile apps now include advertising, it is usually in the form of a single small banner in the lower part of the screen.

There is absolutely no way you can cramp nine advertising blocks into the smaller mobile form factor.

It is the same on the iPad or other tablet devices. While they do have bigger screens, they do not even come close to the desktop web. If you want to create a good mobile experience, you also have to drastically decrease the number of ad blocks, and thus lose a substantial number of ad impressions.

Add to this the growing trend of smarter news aggregators, where content is atomized. That too lowers publisher's ability to add advertising around the content.

The mobile and aggregation trends severely dampen the display advertising market.

Better measurements

One of the biggest trends in 2010 was the growing focus on return of investment. The digital world offers us new tools to more accurately measure the real impact of whatever it is that we do.

The results are shocking. We are starting to realize that most campaigns actually produce a negative return of investment. We are starting to realize that marketing is not always what drives sale. Sometimes marketing is preventing your product and sales teams from being successful.

Often, marketing wastes--not earns--money. This is true for all forms of marketing--both in the traditional world, and in the digital. The traditional world is built on deception and the knowledge that marketers are willingly sticking their heads into the ground.

One example from the TV industry: The biggest TV station in Denmark sells 30 second ad spots, like so many others. And like many others, they have divided the country into regions to provide better targeting. So how many people are you going to reach if you buy a 30 second ad spot for all eight regions? The TV station provides this overview of the target demographics.

This is where it starts to go really wrong. If you buy an ad for all eight regions, they claim you will reach a total of 5,319,000 viewers. But, the population of Denmark is only 5.5 million people.

So, by placing a single 30 second ad spot, on a single day, you will reach 96% of the population. That is not actually possible. Even if the number of viewers where correct, 96% of the population is not going to sit around the TV at the same time.

It is a blatant lie!

The real number is that only about 18% of the population watch regional TV, and of those, only a fraction watch it at the same time. It turns out that 5.3 million viewers are more in the range of the hundred of thousands.

We see the same in print advertising. Vogue got 1.1. million readers, and there is about 50 full page ad spots in each magazine. So how many people would you reach if you advertise in Vogue? I don't know what the real number is, but it is not 1.1 million.

The problem is that many people in traditional marketing never question these numbers. They just believe that they are real. A high "Reach" looks good in the eyes of upper management.

It sounds wonderful when a marketer says that they have reached 1.1 million people. And when sales don't follow, they can blame the product and sales teams for not leveraging the effect of the marketing campaigns.

Note: Remember: The Real Story Behind McDonald's Foursquare Campaign?

The digital world offers us a new level of insights into the real effect of our campaigns. You now have much better measurements available to you. Marketing people, however, will not like the result.

The vast majority of digital campaigns are likely to produce a negative ROI, just like its traditional counterparts. The problem is that most companies measure only ad impressions and click-through rates. They fail to measure how many of those people buy a product? Click-through doesn't equal a sale.

The number varies greatly from one campaign/product/company to another. But Amazon's sale conversion rate is about 4%. That is, only 4% of those who click, go on to buy a product!

This has a dramatic impact on the cost of acquisition, as illustrated in the example below. With a 1% click-through rate and a 4% conversion rate, the real effect of 100,000 ad impressions drop to just 40 people. And with a CPM of $6, the result is that it costs $15 to get just one person to buy your product.

This is the new reality that better measurements bring to the table. And this is going to be a really big topic in 2011.

It will be a slow change. The new measurements illustrate that many people in traditional marketing are not actually performing. They are not doing the job they are supposed to. And we will see many people try to hide this from becoming public knowledge. Both from the media industry, who relies on deception to sell ads; from the advertising agencies, who is suddenly faced with proof of negative ROI; and to the marketeers who find they have exaggerated the real effect.

But it is not all bad. There is a huge opportunity for new marketers to enter the stage in a more dramatic way. When people start to question the effectiveness and budgets of traditional marketing, it opens up a new world for people who focus on the real tangible effect.

Break away from the deception.

Social Media

This leads us to the new realities of media. Social media isn't the savior as such, and in some ways it makes things worse.

First, there is a lot of traditional deception in social media. When people go out and measure number of followers, engagement level or post impressions, they are no better than the people who think they will reach 1.1 million readers in Vogue.

As I illustrated in "How To Create a Social Release Plan" each post only reach a very small percentage of your followers.

You need to look beyond the social buzz words and measure the real effect. The difference is that the effect of social engagement is not the result of a single post, but the cumulative effort over time.

Second, social drives traffic and thus ad impressions away from the destinations. In the past, people would visit a website and explore it. But with social, people no longer explore websites. They click on a link, read the article, and immediately go back to their social channels to find something else to click on.

The result is a substantial drop in page views. The more you engage on social channel, the less reason people have to browse around.

Upside? While this causes a substantial drop in ad impressions, it also increases the total number of unique visitors and visitor loyalty. Great news for sites that sell products, not so great for those who rely on advertising.

Third, social media eliminates a huge chunk of marketing. In the past, when distance was a problem, you had to turn to advertising to get people to come to you. If you had a fruit shop in one city, you needed to put up posters in all other cities.

The internet solves that problem by eliminating distance. Instead focusing on marketing; you have to focus on selling. You don't market to people who are already inside your shop: You sell to them.

The future of advertising

These four trends combined will result in the next big advertising crisis. The advertising industry is facing the same problem as the print industry. The old business models aren't compatible with the new world order.

The media industry will be the first ones to get hit, and will have to find new ways to monetize their content. Mind you that advertising is unlikely to disappear anytime soon (if ever), but the old saying of "trading analog dollars for digital pennies" is likely to become an even bigger problem. More advertising equals less effect for the advertisers.

It is not a good mix.

Media agencies have to look at how they can become sales and community consultants, rather than companies thinking up the next 30 second animated showcase.

And marketers need to join forces with the sales and product teams, break down the silos, and create new units that function similar to personal concierges.

We still need one form of marketing--the type that creates awareness. It is a new form of advertising that is based on heavy contextual and personal targeting. Instead of creating a poster or an advert, you make yourself useful by being relevant to people. The way it should be: product and purpose driven.

Shared By Plus Subscriber

Tom Corbett

READ ALL THE PLUS REPORTS

This is Baekdal Plus content. It is shared with you for free by a member. Please reshare it.

Share on

Thomas Baekdal

Thomas Baekdal

Founder of Baekdal, author, writer, strategic consultant, and new media advocate.

Follow    

Check out my book: THE SHIFT - from print to digital and beyond? Free for Baekdal Plus subscribers, $8.79 on Amazon.

There is always more...

The Economics of Individual Media »

ONLY FOR
SUBSCRIBERS

31
PAGES