Are Online Ads Dying?

Online Ads

The ad industry has been deeply transformed by advances in technology. Have these advances done more damage than good to the industry?

The internet brought a turning point for the entire advertising industry. Search engine banners became the new billboards. Marketing technology grew 5000% in number since 2011, and data moved to the center of the new advertising model.

The fundamental advertising model remains the same. Ad space owners sell the spaces to business owners looking to promote their businesses to an audience. These spaces could be in newspapers, on television, on the radio, or across the internet.

What has changed is reach, engagement, and targeting. Data has completely transformed how the ad industry approaches their target audience, and how much they know about them. And this is not restricted to the ads you see on your favorite social media channel.

“The digital ad ecosystem is becoming truly omni channel,” says Lakshmi Harikumar. Harikumar is the Marketing Director, Southeast Asia, at intelligent customer engagement platform MoEngage.

“We’re talking about QR codes which are mapping online and the offline worlds together, we’re talking about ecosystems where social media plays a huge part, we’re talking about this ever connected lifestyle where you’re watching a television show on Netflix, you want to share it on Twitter, which is then reshared on Instagram and you’re live streaming the same thing on a different channel,” she adds.

Harikumar goes on to add that this depth of data available on consumers puts marketing and advertising professionals in the “driver’s seat.” But from a consumer’s perspective, this data ecosystem is not exactly working out to their favor.

There’s more chaff than wheat when it comes to online ads

If one had to single out the biggest problem with online ads, it would be privacy and personal data protection. The issue of privacy has erupted into a contentious debate, even as social media and search engine giants continue to relentlessly collect data on users.

Some marketers point out that data can be used to create meaningful engagement and meet consumer expectations better than a non-data-supported model could enable. Harikumar echoes this thought.

“It’s about understanding your users’ needs at that particular point in time and then using data and personalization to your advantage,” she says, adding that, “consumers globally are receptive to sharing information about themselves, which would be used in the right context to personalize [promotions].”

What Harikumar is saying is that data can be used to help the right content, offers, and ads reach those consumers who are actually looking out for them, vis-a-vis a broad, general public. And while that is true, companies also need to “tread that line extremely carefully.”

The data economy has evolved into an invasive “surveillance economy.” Poor regulation, data dominance, and loose privacy policies fuel this ecosystem.

Cookies, for instance, are the focus of ad surveillance. Cookies are tracking and identification tools. These text files track and store user information, often used to track online behavior. Search for shoes on an e-commerce site, for instance, and you’re likely to continue to see related ads for that search well after you’ve left the website. Cookies enable much of the behavioral targeting that goes on in the ads space these days.

Google recently made moves to do away with third-party cookies. Their proposed replacement is called Federated Learning of Cohorts, or FLoCs. FLoCs aim to do away with privacy issues surrounding cookies. But they don’t quite do away with tracking. They simply shift the tracking tool of choice, from cookies to the browser itself. No surprises for who gets the biggest slice of the cake.

The data argument aside, treating people as numbers has put purposeful advertising in the back seat. 42.7% of the internet users worldwide use ad blockers. Tellingly, the excessive number of ads and their irrelevance were the top most reported reasons that people used ad blockers.

And it’s not just consumers that are losing value. A U.S. study finds that programmatic advertising (automated purchase of online ad space) and social ads were the top two media types most susceptible to ethical concerns or brand risk.

In other words, corporate marketing executives are looking over their shoulders. And they’re finding that some of the most popular advertising avenues online are some of the riskiest as well.

“Social media is about 5% of P&G’s marketing spending, but it’s 150% of our problems,” The Wall Street Journal reported Marc Pritchard, Chief Brand Officer at P&G, saying during a conference.

Add to this the fact that online ads are perhaps not as effective as they are touted to be, Director of the MIT Initiative on the Digital Economy Sinan Aral noted. Conversion rates (how many of those who clicked on the ad actually bought the product or service) are disputable, and FMCG names such as Unilever and P&G have actually slashed digital media spends.

Giving “purpose” to online ads

All of this points to a crisis of trust within the current online ads landscape. It also demonstrates that online ads are losing the element of relatability — ironically, the very issue that personalization aimed to enable.

“It’s important that the business understands the context in which I’m browsing, and then engage with me meaningfully,” Harikumar says. “That context to marketing and advertising comes with data, and consumers globally appreciate that… It’s about reading that line very carefully, not invading consumers’ privacy, and using [data] for a more meaningful personalization.”

In her article, Aral explains how brands such as Unilever and P&G were able to improve their digital strategy despite cutting media budgets. They did this by shifting from evaluating results in terms of simple conversion, to making their ads strategy more meaningful. This meant reducing the frequency of ads, reaching new and infrequent customers, and fine-tuning their targeting.

The example Aral gives demonstrates how marketers can add purpose to their digital ads from a strategic point of view. It also highlights the marketer’s plight — they used “granular, individual level, personal data” to do this, Aral points out.

Contextual advertising has risen as a worthy alternative. It has demonstrated the ability to capture the nuance and context that marketers aim to get through behavioral targeting, while avoiding privacy invasions. The New York Times, for instance, was able to actually increase its ad revenue by switching to contextual and geographical targeting, and closing the door on behavioral ads.

Trends such as these are pointing towards what could be a reboot for the online ads industry. Consumers and companies are disgruntled alike. Ad space owners, dominated by Google and Facebook, have been slow to respond (understandably so because of the billions they make from the current model).

The online ads industry must respond to a need for relevance, meaning, and ethical boundaries. While the current model may be dying a slow and stretched out death, these expectations are likely to guide the birth of a newer avatar.

Images by Glen Carrie on Unsplash and azerbaijan_stockers on Freepik

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Sharon Lewis
Sharon is a Staff Writer at Jumpstart

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