The online ad market is ready to implode

SKIMMERS SUMMARY:

  • The real trouble with digital advertising is that most of it doesn’t work. Display ads are usually reported to have an overall click rate of about five clicks in ten thousand ads served. If you want to know why the web is so appallingly littered with ads, it’s because to get five clicks, and you have to run 10,000 ads.
  • You’re more likely to complete Navy Seal training than click on a banner ad. According to research company Lumen, only 9% of banner ads are even noticed for a second
  • Hundreds of thousands of companies compete in a cascade of auctions to show you their ad. The process, known as “programmatic” advertising, occurs in milliseconds, tens of billions of times each day. Only automated software can manage it.
  • One recent study found that ad tech intermediaries take as much as a 50 percent cut of all online ad spending.
  • Even when targeting works as promised, and the ads are served to their intended audience, many are never seen because they load somewhere out of sight, like the bottom of a webpage.

The online ad market is going to implode and it’s going to be a sound that echoes at every agency and brand.

Programmatic advertising is ripe with fraud and results are so poor yet brands continue to pour money into it. According to former Google employee Tim Hwang, “the reasons are manifold and overlapping. To begin, most of the people responsible for ad spending have no idea where their ads are actually running, let alone how they’re performing, and certainly have not brushed up on the latest research papers. I spoke recently with the owner of a successful online audio equipment store who had recently learned, thanks to a chance encounter with an expert, that 90 percent of his programmatic ad budget was being wasted on fraudulent clicks. Most other merchants simply never find out what happens after they send an ad out into the world.”

Advertising agencies engage in arbitrage, buying ad inventory at a discount from publishers and selling it at a markup to their own clients. So, too, do the digital platforms that serve as middlemen between buyers and sellers. There is no independent arbiter. The nearest thing, the Media Ratings Council, includes both Facebook and Google as members, along with other ad tech companies. The council is supposed to set objective standards to measure ad impressions, but in practice, its role may more closely resemble that of the credit-rating agencies that slapped AAA ratings on junk mortgage securities.

Tim Hwang

Changes in Privacy

Google has vowed to block cookies completely on its Chrome browser, which is used by around 70 percent of the world’s desktop computer owners, by the beginning of 2022. Google says it has solutions to allow advertisers to keep showing relevant ads but in privacy-protecting ways. Taken together, the company’s proposals are meant to let Web publishers, e-commerce companies, and advertising agencies continue using targeted ads to make money while assuring regular Internet users their data isn’t being stockpiled by an ever-growing list of companies and websites. Of course their way benefits them.

Advertising technology companies such as the Trade Desk have already taken the matter into their own hands, banding together to create new tracking tools that use email addresses. Other major companies have shown signs of pushing back against Google’s proposals, such as Amazon, which is currently blocking Chrome from collecting data on which users go to its websites.

A Google spokeswoman pointed to a company blog from March, where Marshall Vale, a product manager, said the company’s goal with FLOC and its other projects is to make cookies obsolete while also helping web publishers grow their businesses

 Google. solution is something called FLOC. FLOC stands for Federated Learning of Cohorts. Under FLOC, instead of letting websites drop cookies into an individual’s browser, the browser itself watches what they do online. It then uses artificial intelligence to assign them to a cohort of several thousand people that the AI determines are interested in the same kinds of products. Then, instead of buying access to individual people, advertisers pay for ads to show up for users in a specific cohort.

Competitors to Google argue the company is pulling the ladder up behind it. Google used cookies to help it build a massive advertising business, but because YouTube and Google Search — which don’t need cookies — are its biggest moneymakers, it can afford to live in a cookie-free Web.

So where do we go from here?

1ne: Online advertisers are going to have to get back to basics. They are going to have learn all they can about their target audience and place ads that align with their audience’s psychographics and demographics.

2wo: The creative is going to become a lot more important. CTR’s are not a good measure of an ad’s effectiveness. Brands need to deliver a message that will resonate with a relevant audience when they are visiting websites.

3hree: Online ad visibility will become essential, and brands are going to have to pay to ensure premium placement.

Those of us in digital marketing were aware of the coming changes and were trying to warn clients but the ad industry has allowed itself to crawl into bed with the weasels at Facebook, Google, and the rest of the devious adtech squids. It makes us look like fools. Every week there are alarming reports of fraud, corruption, privacy abuse, and security failures in online media and we shrug our shoulders and duck for cover.

The online ad market is ready to implode

About richmeyer

Rich is a passionate marketer who is able to quickly understand what turns a prospect into a customer. He challenges the status quo and always asks "what can we do better"? He knows how to take analytics and turn them into opportunities and he is a great communicator.

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