As the proliferation of user generated content (UGC) continues, the amount of Web real estate available for online display advertising is increasing exponentially. However, unlike the days before UGC, the quality of the impressions on these newly generated pages is not necessarily as valuable. This paradigm leads to a significant industry realization; there is in fact an impending “future shock for Internet ads.” However, it is not likely one that will be experienced equally by all online advertisers.
While it is easy to blame the decrease in online display advertising on the abundance of UGC and the current economic climate, the real culprit has gone unmentioned. Roughly ten years of paid search advertising has taught us that we should expect more than branding and impressions from our online advertising investment.
With tightened budgets and an increased focus on quantifiable return on investment, it is simply unreasonable to think that advertisers will continue to fund the purchase of impressions on the off chance that the branding impact will lead to a downstream conversion. It is this reason, and not a “depreciation of the Web’s currency” that has primarily caused the downturn in the sale of online display advertising.
So, does this mean that all advertisers should only allocate online marketing budget to paid search? Not even close! Paid search, while extremely effective at acquiring and converting customers at latter stages of the conversion funnel, is not very effective at creating awareness. Plain and simple, if a customer does not realize they are in the market for a product / service or they have not considered your product / service as a possible solution for their need, they will not conduct a search that presents your company and product as an option.
By understanding (and optimizing for) the role that online display advertising plays in the conversion path, it is not only possible, but a requirement that display ads continue to receive a significant share of the online advertising budget. However, in order to provide the cost justification for display, advertisers need to move beyond the “last click” methodology of analytical attribution, where all credit for a conversion is given to the last advertisement that is experienced prior to the conversion event, to a model where weighted attribution is given to all customer touch points throughout the conversion funnel. Advertisers who embrace online marketing attribution will not only be able to justify their investment in display ads, but will truly reach the promise land of marketing mix optimization.
In order to best utilize online display advertising, an advertiser must also revisit the primary factors that have led to the success of paid search; interaction accountability and consumer targeting. Unlike traditional CPM display advertising payment models where you pay per thousand of impressions, paid search allows you to pay only when the desired result (a click through on the ad to your Web site) occurs. This approach introduced a whole new level of accountability for advertising and forever changed the game.
Paid search marketing also introduced new levels of targeting and refinement, including: geo-targeting, contextual targeting, day-parting, and even behavioral targeting in certain search engines. All of these tactics served to make paid search even more accountable and effective at delivering quantifiable business impact; not just branding.
However, hope is not lost for display ads. Based on the wisdom gained from paid search, many publishers have begun offering alternative models to the traditional CPM deals. When display ads are sold on a cost-per-action basis (versus cost-per-impression) or targeted to those consumers who have expressed an interest in a particular topic, previously visited the advertiser’s site, or when the ad appears in context with relevant information, the likelihood for success skyrockets.
So, despite many of the recent “woe is me” industry articles that have received considerable press coverage, the reality is that online display advertising is simply going through a maturation process. Advertisers who are sophisticated enough to employ advanced tracking tools for attribution management and those who seek out the more targeted display advertising opportunities will continue to reap rewards, even as their competitors pull back their involvement.
Trends to Watch in 2009:
1. Sites will start to reduce the number of available ad impressions, while increasing the CPM for the remaining units
2. More engaging ads, like multimedia and video, will continue to replace traditional image and Flash creatives.
3. Sites and ad networks will continue to transition to performance-based pricing (CPA, CPC, ROI) as opposed to more traditional CPM model
4. Marketing attribution management will become an industry standard practice, instead of rarity championed by the enlightened.
For answers to any online display advertising questions you have, please contact us.
