A misleading, but very viral headline that is going to misinform a lot of people about the state of online advertising . . .
Let's look at the data:
a) "The collaborative studies focus on an understanding of how U.S. Internet users click on display ads." - so we're talking about "display" not contextual, search, mobile, or any of the other high-engagement / high-relevancy ads that are among the highest-growth areas fueling online advertising's growth?
b) The inventory available for "display advertising" has SKYROCKETED - from 2007 to 2009 thanks to the popularity of social media sites which we all know has notoriously low CTRs. Facebook alone contributed hundreds of millions of users and showed them hundreds of billions (trillions? more?) of units of display advertising during that time period.
If you want the real goods on online advertising trends I reccomend you read the PWC IAB Advertising Revenue report:
The data reflects a much more solid foundation for sustained growth in the online advertising marketplace than you may conclude from this link-bait from Comscore.
One of the reasons I'm skeptical about advertising going forward (among several) is that as metrics get good enough, advertisers are going to want to stop paying for people like me who are minimally affected by ads. ("But you're affected subconsciously like everybody els..." Yes, thank you, I said minimally.) And we're not going to be randomly distributed. You might be able to make an ad-based business in bulk or on a band fan club site, but technical sites are going to be in a lot of trouble, I think. Can you imagine being kicked out of a site because you never click on ads? The tech is coming.
Whenever I do that (rarely) I surf around the linked site a little bit. Will Google cancel accounts because the advertisers have low conversion rates? I could see them canceling accounts when a lot of visitors clicked the ad and stayed on the linked page for only a few seconds but I’m honestly wondering whether they will also cancel if a lot of people merely buy nothing.
Product placement may play a bigger role. Apple has already shown the world how effective buying/trading your products into 4 out of 5 TV shows and movies can be. I don't know how active major brands are in online placement, but the FTC disclosure rules are generally considered easy to skirt or just plain ignore by smaller players.
Looking around at tech blogs and social media it's easy to spot dozens of pieces a day that might as well be ads for firms like google, microsoft, samsung, amazon, apple etc. In many ways these are far better than display ads because of the engagement of reading and sometimes commenting on a piece. The measurable difference between some of these brand's #1 fans and paid promoters seems quite small. How sure are we that some of them aren't just ads already?
Wouldn't the solution be better approaches to ads? Something like AOL's Project Devil (http://advertising.aol.com/creative/projectdevil) seems to be the way web advertising should work going forward.
Tech sites will still run PR pieces, and the audience is valuable enough that many will run ads just for impressions. (eg. Microsoft, Apple, etc), or shift towards running more PR based ads. (eg. Corporate culture, etc)
You'll never be kicked out, at worse you'll be offered to upgrade to a paid account. Also, how much value is there in the people unaffected by ads commenting, submitting articles, linking to the site, etc.
The ability of tracking to get better is almost unbounded; the ability of advertising to get better is probably not. Given the way things are distributed, there is a segment of the population who will simply never respond to advertising the way advertisers would like and sooner or later they're going to be able to notice us.
And while I will (and did) concede that I am not magically unaffected, as I am human, I will point out that my actual economic decisions tend to come from non-advertising sources. When I have actual money to spend I look for reviews and the experiences of others. "But reviews are just ads too!" Not all of them, and I have gotten pretty good at finding the ones that aren't. I'm even pretty decent at reading through the reviews that are mostly ads. It's not that I'm unaffected, it's that I take paths they don't want me to take and I don't plan on stopping.
The ability of tracking to get better is almost unbounded; the ability of advertising to get better is probably not
Advertising will stop getting better once the only ads you ever see are for things you need right at the moment, in the exact place you need them.
my actual economic decisions tend to come from non-advertising sources. When I have actual money to spend I look for reviews and the experiences of others. "But reviews are just ads too!" Not all of them, and I have gotten pretty good at finding the ones that aren't. I'm even pretty decent at reading through the reviews that are mostly ads.
The perfect advertising system will be something you trust enough to substitute for reading reviews. You might think it's unlikely, but there are numerous precedents for it (eg, financial advisers advising you on things they are paid to sell).
It's true that there is an inherent conflict of interest between an advertising system and giving accurate advice. However, in the type of system envision the future value of your transactions though the system will be enough to provide a counter-weight to outright bad advice.
Then the ads got good enough that they started to advertise something that I might actually want.
The same thing will happen to you at some point - either it will be groceries that you can get cheaper at some other store or some product there really isn't a replacement for (say the Roomba, which as far as I recall is the only autonomous vacuum cleaner) which will save you a lot of time and/or effort.
i doubt they would kick anyone out--the site would just close.
sites like stackoverflow are possible because hosting costs are cheaper than advertising. even as ad profit per user decreases, hosting costs per user decrease as well.
similarly, i wouldn't underestimate the value (to the advertisers) of impression advertising--the masses of people who watch TV and click facebook all day define pop culture by these impressions.
The only ads I can ever remember clicking on were accidental.
The only ads that really make sense, I think, are the branding/image/guiding type ads, not the performance-based CTR ads that have taken over the tubes.
Toyota did a whole damage control series during the purported uncontrolled acceleration debacle, and I noticed them and it influences your opinion. As do ads that build an image or general awareness: If I know about a brand of SSDs, maybe I'll search for that brand the next time I'm looking.
Ads that succeed or fail based upon a click have always been dumb. Remarkable that Google built a whole empire on it.
One of the reasons I'm skeptical about advertising going forward (among several) is that as metrics get good enough, advertisers are going to want to stop paying for people like me who are minimally affected by ads.
Anecdote time..
Podcasts are still attracting plenty of advertisers, even with non-trackable generic ads, leading me to believe some advertisers don't care for tracking.
Check out Dan Benjamin's 5by5 family of podcasts - they're pretty much funded by advertising and most of it is poorly trackable. I don't know what he charges but from other similar podcasts I do know the figures for I have reason to believe it's higher than $50 per 1000 listeners per show - this is astronomical compared to trackable forms of advertising online.
I listen to a lot of podcasts and the ads they do register in my brain. I usually listen while doing the dishes or some such and I don't fast forward past them. Unlike visual ads, I can't look past them either. So I am consciously aware of almost all of them.
Some of his advertisers (and I have heard this in other podcasts, too) seem to be handing out discount codes (usually the name of the podcast or something like that) which would allow them to track their success fairly well.
I think cost of influence is a more important metric for judging how serious advertisers are than the overall size of a market.
Take television, for example:
"during the 2007-08 season, Grey's Anatomy was able to charge $419,000 per advertisement"
Independently, I found the viewing figures were 17-18 million per episode for that season. So about $24.65 "CPM". And that was one of the best mainstream, regular ad returns on TV (CSI had a higher audience and far lower charges per ad). That's half of what I know even minor podcasts are making..
On the flip side, a TV show tends to have many ads packed in whereas a podcasts runs with a few at most but in terms of CPM, they seem to trump most TV.
fascinating. I wasn't aware of the ad rates for podcasts. Are they for american audiences or overall audiences?
Because I would see Australian ads if I watches Grey's Anatomy or CSI -- but I hear the generic ads when I listen to TWIT.
My point was more that TV/etc is a fundamentally less trackable audience. (agreeing with your point that some advertisers don't require tackable ads).
Google's (core) ad business has less in common with traditional media advertising, and more in common with paying the store to put your product in a special display. They realized that people were using their search engine as a big storefront, and adapted the same basic model.
Display adds have definitely made an impression on me. But, for whatever reason, I tend not to click on the adds, but to open a new tab and google the product. I'd click on them if doing so did that process for me. I.e. "Click here to google <random product/service>."
I remember those ads. Every time one came on, my first thought was, "Oh yeah, this is that company that sent out those cars that tried to kill their drivers."
This has been an open secret in the industry for years, since AOL released a rather disturbing report on "compulsive clickers".
Anecdotally, I theoretically could (but, as stated in my privacy policy, refuse to) identify a small handful of users from my site who get to it through "the best result" on the blue Googles every single time. (AdWords is profitable in aggregate so I've never given this issue serious thought with regards to assessing how much money it costs or whether it would be worthwhile to educate that population to save money.)
Anybody that makes a substantial portion of their income on ads or plans to do so had better take notice.
The one good thing is that with performance based advertising it doesn't really matter who clicks the ad as long as there are sales it's a win for both parties. The inherent problem with performance based advertising is one of trust, do you trust party 'x' to truthfully report which sales were attributable to your ad inventory or not?
Ad revenue is increasing year on year. The sky isn't falling.
> "The inherent problem with performance based advertising"
Again, as someone who has made a lot of money from performance based advertising over the last 10 years, this isn't really an issue. You factor it into your ROI.
I've never clicked a TV ad, direct mail flier, or billboard. That doesn't mean those ads are worthless. This is often a somewhat silly metric for measuring advertising depending upon the goals of that advertising.
Quote from the article:
“Today, marketers who attempt to optimize their advertising campaigns solely around the click are assigning no value to the 84 percent of Internet users who don’t click on an ad. That’s precisely the wrong thing to do, because other comScore research has shown that non-clicked ads can also have a significant impact. As a result, savvy marketers are moving to an evaluation of the impact that all ad impressions – whether clicked or not – have on consumer behavior, mirroring the manner in which traditional advertising has been measured for decades using reach and frequency metrics.”
I used to think that I never click on ads, and it's true in that I never click on Internet ads, but I've found that ads I receive on Steam are vastly more effective for me.
If you don't know how Steam ads work, when you first log in to Steam, it will pop up a window with several pages of ads for different deals and promotions going on. Given how low some games on Steam cost, I find that I very frequently will click through and buy the games advertised (things like $5 for an otherwise $50 game can be so attractive!)
I guess the criteria I use for ads is relevance. The only thing I really ever buy over the internet is games, so advertising on the internet for anything that ISN'T a game just won't get my attention, no matter how well you write it.
I think that for high volume customers with offline purchases, such as Tide who are essentially augmenting their traditional advertising with online this could be true. However, for low volume customers with online purchasing such as most startups it's probably best to stick to CTR.
Indeed, it would seem a new 'revelation' in online advertising that depreciates the value of a click would be highly valuable to web properties with notoriously low CTRs. I think it's primarily a puff piece to generate increase revenues for properties with low CTR. (I'm looking at you Facebook)
Google purports to do something similar on its display ad network - they call it "smart pricing". If it's a low quality placement that is "unlikely to produce an actionable business result" (their words), the CPC an advertiser pays is lowered below the natural auction price. The whole system is pretty opaque, but as you mentioned, it likely allows Google to keep millions of poorly performing pages in its display network without harming the overall network (too much.)
Advertising just makes more sense in some places than others. Google capitalizes on this because they have such a broad audience.
I also rarely click on ads, but one example where I always click search ads is - when I'm looking to hook up new Internet service. The best deals seem to inevitably be available from search ads on Google.
I think if the 8 percent making up the 85 percent of clicks are accidental, well...this will shake out eventually as advertisers try to optimize their spending. But it doesn't mean there won't be places where advertising is online is highly profitable.
I think some of this has to do with proliferation of ad-blocking software (I hardly know anyone anymore who doesn't run AdBlocker Plus or an analog thereof), but perhaps even more to do with a more savvy audience.
Ads were once an avoidable consequence of watching TV. When I visit my parents, I have noted they have entirely altered the way they watch TV so that they can skip any and all ads with DVR. I can't help but think that active avoidance of ads in other mediums like this would perhaps lead way to passively avoiding ads (ignoring their presence) on the web.
FYI this is referring only to display ads. Also, I'd take this with a grain of salt since the study itself states that view-through impacts are not to be ignored.
>> FYI this is referring only to display ads. Also, I'd take this with a grain of salt since the study itself states that view-through impacts are not to be ignored.
Actually, a different study than the one linked by the OP states this. A study they are careful not to elaborate upon in this press release. I worked for StarCom 1997-2000 in their new & shiny online advertising group. StarCom is heavily incented to produce research proving the effectiveness of all types of advertising. And they own a much larger share of online display advertising than they do of paid search engine marketing. I can't prove that their current research is biased. But when I worked there, we were quite careful to present our results in the best possible light. For example, we ran a very large banner ad campaign for a Proctor & Gamble product. There were two reasonable ways to determine if it was effective: Ask an online panel if the recalled seeing the banner ads in question. Or look at the actual grocery store / drug store sales data to see if the banner campaign caused any lift in sales. The first argued that the millions spent on this campaign produced OK brand awareness; the second demonstrated that it did nothing to move the product. Guess which of these two results went into our sales and marketing materials and which was omitted.
Glad to hear I'm not the only one who's skeptical. Not that I don't believe that view-through can't provide a measurable lift--I've just seen that the splitting the marketing budget between channels can get political. And attribution based on seemingly qualitative factors feels a bit hokey to me when you can really nail down ROI on a lot of the other marketing channels.
>> I've just seen that the splitting the marketing budget between channels can get political.
One of my favorite stories involved a very successful online marketing campaign for Oldsmobile. When they launched the Alero, there was amazing testing of TV vs. Print vs. Outdoor vs. Direct Mail vs. Online. They tested for scale - how many sales were produced - and cost per channel. The results were that Online came in #2, with print a distant third. Before the test, print had a $5mm spend and online was just shy of $1mm. After the test, Olds tried to move their entire print budget into online. The agency team at Leo Burnett (LB owned StarCom at the time) that was responsible for print hit the roof and waged a successful campaign to have much of their budget restored. They didn't want to lose their jobs, I guess.
I've seen view through do some pretty amazing things first hand. It depends very heavily on the advertiser and the vertical, but in some cases it's astonishing what a few million dirt cheap impressions can do to drive sales through other channels.
I find this truly bizarre. Who are these 8%? Is there some new, widespread form of obsessive compulsive behaviour that involves clicking through EVERY link on EVERY page?
The thought process of non-technical people is truly fascinating. These are people who type "www.google.com" on Google, have 5+ toolbars and smiley screensavers installed, and generally act on any call to action that is presented to them (including fake antivirus warnings).
As web entrepreneurs we need to learn how to exploit these people and make as much money as possible from them. It's the right thing to do to preserve the natural selection process and ensure the proper evolution of the Homo Iunctus. /kidding
>>>and generally act on any call to action that is presented to them...
There is also the exactly opposite behavior : non-technical people who are uncomfortable with computers and scared of doing something wrong, and thus do nothing. People who don't read dialogs not because they are lazy, but because they're sure they won't understand a single word of it. They never click, never never try to fix the problem themselves (and find out there's probably no real problem) or understand what's going on.
My dad is in that 8%. I guess the more you're a computer illiterate, the less you're likely to get the difference between a genuine and an advertising link.
That's a lot of traffic from a single source, scary!
The point is that as soon as your service was down the ads were the more interesting content, as long as the site was up that apparently wasn't the case. I think most advertising based websites will see this effect, I'm sure that there is a way to figure out just how much 'strategic downtime' you can get away with :)
One reason why nobody should get panicky about opt-in ad-block browser plugins draining ad revenue. Those people (me) were never going to click on your ads anyways.
there has been some discussion about how google has incentive to lead people to spammy sites, because people click the adds. as people get better at the internet, spammy per-click adds become less profitable.
i speculate that advertisers are over-paying for per-click adds, and as that market settles, google will no longer have incentive to send people to spam pages, and make more money by sending people to legitimate sites with clean adds.
Let's look at the data:
a) "The collaborative studies focus on an understanding of how U.S. Internet users click on display ads." - so we're talking about "display" not contextual, search, mobile, or any of the other high-engagement / high-relevancy ads that are among the highest-growth areas fueling online advertising's growth?
b) The inventory available for "display advertising" has SKYROCKETED - from 2007 to 2009 thanks to the popularity of social media sites which we all know has notoriously low CTRs. Facebook alone contributed hundreds of millions of users and showed them hundreds of billions (trillions? more?) of units of display advertising during that time period.
If you want the real goods on online advertising trends I reccomend you read the PWC IAB Advertising Revenue report:
http://www.iab.net/insights_research/947883/adrevenuereport
The data reflects a much more solid foundation for sustained growth in the online advertising marketplace than you may conclude from this link-bait from Comscore.