Making Online Advertising Work

I love the internet.
Online advertising makes the internet work.
Therefore, I love online advertising.

That’s not meant as a confession, but more a statement of wobbly logic to introduce something very close to any online business: online advertising.

An advertiser and a publisher have a huge learning curve to tackle if he or she wishes to use the latest innovation in ad technology to unlock the promise of higher returns on ad spend (for the advertiser) or yield (for the publisher). The great catalyst for this innovation over the last 5 years must surely be ascribed to the increases in cheap, scalable computer power and digital storage. It’s a full time job now to keep abreast of new ideas and technologies, especially if you are trying to derive an income from online advertising, lead a marketing department or talk to an ad agency. Encouragingly, many a conference speaker continues to implore the world to look beyond the technology and focus on the online value chain (it’s just a deal between buyer and seller after all!). That’s all good sentiment, but you still need to figure out your ad servers from your trading desks, your DSP’s from your exchanges.

Those brave conference speakers then talk of using behavioural targeting and programmatic buying to increase the effectiveness of an online ad campaign, buying the best set of eyeballs for the best price at that exact moment in time, delivering an experience finely tuned to engage and convert those eyeballs at the checkout page. You following them?

Don’t blame you if you’re not

Why care? The gap between the technology used to deliver an ad on a web page has grown in sophistication. Massively. Unfortunately, your average set of eyeballs hasn’t and many people do not appreciate or understand how and why something is shown to them. Fortunately for this self-regulated industry, we’ve come some way in people’s appreciation that advertising isn’t necessarily evil.

Anyone involved as producer or consumer must care because we’re working towards a future where an ad ‘experience’ needs to be 3 things:

  • relevant: it makes a connection to my wants and desires at specific times, like shopping for a present, replacing a washing machine;
  • engaging: it uses non-intrusive, non-interruptive ways to get my attention and move from awareness to desire and action with the appropriate speed and urgency. Next year’s vacation is not as urgent as my wedding anniversary tomorrow;
  • seamless: by allowing me to move across all my connected devices I don’t get treated with a multiple personality disorder just because I’m moving constantly between my TV, PC, iPad and phone.

Ignore any of these 3 goals and it will damn us to clutter and noise in the online world and a degradation of content. There is a reason advertisers will pay more money to be associated with well-presented, interesting content. And advertisers will innovate to make sure that spend is used creatively and with as little waste as possible. The result is a virtuous cycle of increasingly great content powered by increasingly engaging advertising. Call me naive, but that sounds worth the effort for ‘our Web’.

Not so easy

Having spent time in the world of online advertising, I can tell you that this gold standard of relevance, engagement and seamlessness is very hard to get right. No-one is even close and that makes this an exciting challenge. First thing to remember is that these goals are really metrics or scores and each attempt to push the envelope brings greater rewards for everyone, it is not a winner takes all situation. Second thing to remember is the trade off between technology and complexity is very real. Each push forward must not result in ever-increasing complexity otherwise we’re heading dangerously close to the cliff of diminishing marginal returns. Lastly, the real test of progress is the extent to which we reduce waste.

Think production line and operational efficiency if you want, but reducing waste is more human than that. Each ad that is ignored is waste. The technologist in the room won’t care as he built his systems to scale to billions capable of carpet bombing the world wide web. But care we must because waste is the ultimate metric for measuring relevance, engagement and seamlessness.

Where next

There appears to be a trajectory that online advertising is following. I’ve thought many times how the ecosystem in advertising reflects that of financial markets. Maybe it’s because I spent too much time in banking and I’m biased. But I’ll happily put money on the fact it won’t be long before an advertiser can buy future audiences to help smooth a publisher’s income stream, or perhaps buy an option on an impression next time some relevant content breaks on a website. It seems innovation in the world of massively scalable online platforms is the same if you’re talking about trading bonds, books, hotel rooms or ad impressions.

Display advertising – the universe of banner ads and skyscrapers filling up the edges of your web pages – were arguably the first to arrive and the easiest to innovate. Next time Stephen from accounting looks up the price of printer ink, an advertiser can use data on a variety of sources to effectively set a price and bid on that impression in real time. If that bid is successful, the advertiser can adjust the content of that ad – again in real time – to be hyper relevant to Stephen, what he’s looking to buy and the context of the page on which the ad will sit. What’s truly amazing is that this can all happen in mere milliseconds as the web page is loading with about 30 different technologies all talking to each other across 20 separate organizations.

What’s driven the economics (and resulting scale) of display advertising is the immediacy of feedback. If Stephen clicks the big, red ‘Buy Now’ button on the ad, success! If he doesn’t, failure. Simples. Naturally this has appealed to performance-driven ad people focusing on transaction value. But the advertising world is changing. Enter mobile phones and tablets with their ability to be location aware and immediate. Enter social networks with their ability to dig deep into our digital selves and use our actions and those of our friends to get up to date signals about the things we care about. And most importantly, enter video.

Video, Videmus

Video advertising will soon employ all the advances from display advertising in how data is used to buy, target and optimise advertising creating the most relevant experience. Video has the promise to be the most engaging medium for online advertising. Will any advertiser prefer a picture if they could use short-form video and audio to send a brand message or call-to-action and engage a user instead? Running on all my digital platforms, from my connected TV to my mobile phone.

Relevant. Engaging. Seamless.

In a follow up post, I want to put some data to this progression and explore video advertising and how it is being used.

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