The column below, by John Burbank, CEO, Nielsen Online, was recently published in Adweek.
Want a firsthand lesson in the health of the Internet? Ask a friend a simple question: “What’s your favorite online ad?”
Chances are they’ll have a tough time giving an answer. Some may mention a dancing girl seducing you to refinance a mortgage; others may bring up one of the online executions of the Mac vs. PC television campaign.
But many people cannot recall any online advertising, despite all the time each of us spends on the Web and the thousands of ads we’ve all seen.
Why isn’t there more memorable advertising on the Web? The answer is multifaceted, but the bottom line is simple: While the Web is working fine for search and direct response advertisers (”What’s your credit score?”; “Rent from Netflix!”), it has yet to blossom for products that aren’t regularly searched for or purchased online.
This latter type of advertising, called “brand” in the lingo of the Web, relies on compelling, memorable creative to open the hearts or minds of consumers. Brand advertisers like Procter & Gamble use TV as their standard for creative excellence, and so far, the Internet hasn’t met the challenge, despite its potential. Pages are too cluttered; consumers have grown “blind” to the industry-standard spaces; and metrics like “page views” or “impressions” encourage sites to expose us to as many ads as possible during our time online.
So, while brands continue to invest in the Web, and there have been many documented cases of ROI, the real money continues to stay in traditional media — TV, radio and even print — despite the Internet’s gains in audience.
Combined with a crappy economy, this presents a very bleak situation for great sites like Yahoo, AOL, Facebook, and The New York Times. These sites must profitably cover their investments in content and innovation, yet they can’t compete with Google for search dollars, and what they earn from direct response advertisers typically comes in the form of pennies-on-the-dollar remnant sales via ad networks.
The big sites need brand advertisers to come onto the Web and pay premium prices for the privilege. Fat chance in today’s environment.
So, what is to be done?
First, sites must devote better — not necessarily more — real estate to advertising, and reduce page clutter. As long as publishers offer small ads in a cluttered environment, advertisers will continue to invest elsewhere.
Second, publishers need to consider selling on the basis of time, not just impressions. A small ad blinking away for a few seconds may be optimal for direct response advertising, but it won’t help Oil of Olay convince you of the benefits of its latest age-defying formula. Sure, video advertising may help solve this in the future, but it cannot drive enough revenue to support the rest of the Web. And frequency — showing the same weak ad 12 times — doesn’t make Web advertising more compelling.
Lastly, the industry must avoid pinning shortfalls in revenue on the bad economy. Sure, the economy will have some effect. But unless more of us can easily name our favorite online ads, the problem is clearly more fundamental. Let’s use 2009 as the year to set the Web on the right course for long-term profitability by improving its effectiveness for brand advertisers.
Adweek is a unit of the The Nielsen Company
John,
Great piece in addressing problems of publisher mindset, especially the idea of reducing advertising pollution! But why don’t you go one step further and suggest putting consumer and audience value BEFORE advertiser and publisher self-interest? That’s the fundamental problem — a lack of purpose and integrity. Limiting the discussion to the idea of clutter is a huge step in the right direction, but incomplete on its own. Google’s most important innovation was to put its consumer users first, and advertisers second. Veering from that idea is what kills companies.
And sure, measuring time in addition to impressions is better than measuring impressions alone. But that’s still a mindset of “input proxy” versus “outcome and result”. Why not reach further and move media valuation and planning to “propensity to convert”? That’s what true effectiveness is. The idea of goal-based advertising shouldn’t be limited to direct response lead-generation and point-of-sale situations (i.e., Google); it should expand to propensity to hit certain goals, like the ability to prompt consideration or invite prospects in. I know, that’s extremely hard to measure, perhaps fuzzy. But driving science, attribution and accountability to goals further upstream in the sales funnel should be the vision to advance day-to-day pragmatism.
Lastly, agree with you completely on the bad economy — it’s not an excuse for failure. I look at our economy as a period of cleansing, where extraneous and unsustainable advertising models face their due scrutiny. In fact, it’s bigger than that: the bad economy is driving scrutiny over what BUSINESSES are truly of good experience and value to society. That is the true root of brand health. More than ever, your brand is who and what you are and do — less so a facade you try to create and manage. The laws of physics and the golden rule are catching up with us — finally. The true leaders will survive and grow stronger.
To conclude, following are 10 trends in advertising to consider as we build for the future. (These are among my re-occurring talking points.)
1. Media are commodities: Media are commodities, but media companies often fail to acknowledge that. The fact is that media units are more likely to be sold through open-floor trading, in transparent marketplaces at fair prices. The notion of media sales organizations actively promoting and managing artificial scarcity is eroding.
2. Premium is over: Defenders of “premium” inventory are losing because, still, nobody can define what it really means. Indeed, this is not an absolute rule. The idea of premium is something that probably will hold far more gravity, but in far fewer circumstances. Publishers no longer have a universal right to premium.
3. Remnant is the new premium: “Inventory may be so-called remnant, but there’s no such thing as a remnant customer,” one high-ranking exec at a huge CPG company told me recently. Value matters, and value is result minus price. The fact is that remnant can work very well — and be valuable — if it is managed and optimized to performance. Several ad networks are poised to benefit.
4. CPMs plummet: O.K, this really is a cold, hard fact. CPMs are plummeting and they will continue to drop amidst exploding inventory and marketers’ migration to performance. Nobody knows how far this will go, but it’s reality for the foreseeable future.
5. Demand dictates: “Media supply used to lead demand, but now demand leads supply,” former AOL Media President Michael Kelly recently told me on a panel at Web 2.0. It’s a simple statement, but it describes well the role-reversal of inventory and demand. The relevance of that principle expands everyday.
6. Buyer resurgence: When demand leads supply, it means that advertisers are garnering the power to dial up or down according to their business goals — for no other reason.
7. From clicks to profit: It’s shocking how many marketers still manage advertising based on efficiency of output (i.e,. cost per click) versus goal-based business outcomes (i.e., profitability). However, it appears that advertisers are moving in the latter direction, through best-practice enlightenment and tools that allow tighter management and optimization. Marketers are placing faith in analytics.
8. Instant gratification: For better or worse, tolerance for discovery and latent ROI decline in deteriorating economies. Marketers will be more inclined to experiment, because it’s a best practice that leads to greater profitability. But they want impact that can be tested and optimized with immediate outcome.
9. Economic decisiveness: In case you haven’t noticed, we’re now officially in a recession — and have been for a year. Everything I posed above is already happening fast, but continuing economic downfall will accelerate it.
10. Optimism wins: Despite personal concerns around the economy, I believe we’re entering an important period of business cleansing and rebalancing. There’s too much clutter, waste and distrust. Now, more than ever, it’s important to focus on fundamentals, especially deeper purpose. It is a return to purpose and customer value that will separate advertising companies and models that win versus those that die.
Thanks for sparking thought! Disagreements and debate are welcomed from this reader, should you be listening.
Warm regards,
Max Kalehoff
(Btw, we met at Pete’s book part at Karen’s house. And I was an early BuzzMetrics guy, now at another start-up, Clickable. The reason we exist is to make online advertising simple and profitable for small and midsize businesses. Businesses are getting killed by online advertising complexity.)
Nice column. I particularly like what Pandora is doing with online advertising where they devote an entire side of the page to one big, colorful Ad; I think this will be the future.
You’re right that people who are advertising on websites should reduce page clutter.
It’s very often that I will browse off a site if it is cluttered with advertising.
Great column. I’m a creative director that oversees the production of hundreds of online ad banners. And I ask every designer/copywriter I interview— what is your favorite online ad? There is always a long pause and a mumbled answer. Imagine, they are interviewing for a job to create ads, and even they can’t recall any. I’ll then ask, “what do you think the average click through rate is for an ad banner?” What’s funny is they usually guess anywhere from 5-50%. (for run of network, it’s closer to .03%) When I ask how many ads they’ve clicked on they will reply none, because “I’m not like most people who will click on anything”. I think that’s the problem with many advertisers and online ad agencies. They think they are above the average user out there who will click just because a banner is there. Almost no one is clicking or even noticing the ads. Burbank is right in that the way to get people to notice is to reduce ad clutter and really make the most of the real estate the website has. There’s a lot of innovative ways to do this. Publishers (websites) just have to be willing to put the extra work into accepting/creating these new formats and not assume they’ll be able to slap on a 728X90 banner and they’re done. Another factor– make the actualy ad itself really cool, interesting, and organically related to the product. No matter how great the format is, no one is going to click if the ad is one big snooze.
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