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A free billion dollar problem

When I first joined Advertising.com, one of the calculations that led me to join was that it seemed like the market was poised for explosive growth, far above and beyond expectations.  Here was my off-the-cuff theory:

  • Online was 5% of US media spend
  • Online was 17% of US media consumption
  • Until those two numbers are the same, people are getting better value advertising online than anywhere else (arbitrage), so those two numbers will gradually come into alignment.

That made me think that the market would grow 20%+ YoY for several years, because I didn’t think that 17% would get any smaller.

Lo and behold, I was right about that, at least.  Today the numbers are headed in the right direction:

  • 12% of US media spend is online
  • 30% of US media consumption is online
  • So, far from coming together, these two numbers, while increasing rapidly, are actually diverging.

My new theory as to why this is: Advertising online sucks.  It simply doesn’t work as well as advertising on TV.  So TV is getting a disproportionate amount of advertising dollars relative to its media consumption because it works better than online advertising.  And that is not too surprising.  728x90s suck.  They don’t tell a story.  They are like tiny magazine ads.

TV ads have a story arc.  They have punch lines.  They are visually stimulating.

Targeting and measurability and all the stuff that most people in online advertising do is great.  They create a situation where advertising theoretically could work better by being more personalized.  Flight prices to Vegas from your city are not what we are talking about, though.  Without a fundamental change in the kinds of creatives that big brands can put out there, online ads simply won’t work as well, at least in a subjective sense for advertisers.

Solving this problem is hard.

First, we must overcome prohibitive expense.  People already spend way more outside of buying media when prepping an online campaign then they ever did for TV.  You build some web site with some viral thing on it, and all that stuff.  That is great.  If a consumer wants to engage with your brand, you want that brand experience to be awesome.  But the first step in engagement is seeing an awesome ad.  If you asked the top X agencies today if they would prefer a consumers first interaction with a brand be via a 160×600 or a 30 second spot, I think you would struggle to get anyone to say the web banner.  Making these great ads is expensive though and someone has to do it.

Second, there must be a visionary industry breakthrough.  Even if we knew how to do it all affordably, I don’t know that we would crack the nut anyway.  What do awesome ads look like?  Punch the monkey captured the imagination.  I just named a 728×90 ad that people actually recognize (although I don’t know what they were selling).  Dancing Lower My Bills ads?  These caught the eye but in a way that left me angry and bitter.  I don’t think Teracent or Tumri is solving this problem.  Making the ad green or blue or blue-green may increase the odds that I click, but it doesn’t vault the ad into the pantheon of great advertising moments.  At least not mine.

Everything that I see in the market is evolutionary and incremental, but this is not the time for incremental.  We are in the first inning.  You are not standing on the shoulders of giants, you are standing on a speck of dust.  There is so much room for change that we need people to swing for the fences.

Let this be a call to entrepreneurs.  If you figure out how to make great ads online, you get a billion dollars.

8 Responses to “A free billion dollar problem”

  1. Greg Hills Says:

    Great post, I totally agree.

    “728x90s suck. They don’t tell a story. They are like tiny magazine ads.”

    Great observation, though usually ignored. I see plenty of attempts to tell a 30 second story in a 728×90 banner. It doesn’t work, people move too fast on the web. Despite higher production costs, these animated ads are sometimes outperformed by humble static ads.

    I wonder if there is any way for brands to tell a story in an advertising medium that is non-linear and highly dynamic. I tend to think that in-stream advertising on digital properties like Hulu is the only way to tell a deep narrative.

    Personally, I do find the big pushdown, expandable 728×90 homepage banners effective. I also don’t find them annoying like interstitials.

  2. Jonathan Mendez Says:

    It’s time people realize brand advertising is never coming. How much did Nike spend in media to reach 16 million people online with their World Cup ad? $0. That’s the size of the audience for the NBA finals game or few million MORE than the finale of Lost.

    I posted about this a month ago: http://bit.ly/9M7Hry

    It doesn’t mean spends will not continue to grow. Local advertising will drive these spend numbers higher over the next few years as will the bottomless spends of performance based advertisers. Still, most of that will go to Search or other response channels like Facebook. For crying out loud how many publishers are even doing basic SEO! There’s so much upside in investment in the click economy it dwarfs the cookie economy (more on that here http://bit.ly/asVRgc )

    The only thing that can save display is a new architecture. A ground up rebuild of the content delivery and measurement systems. The current paradigm is old technology and antiquated intelligence. It’s not woven into the underlying content and data collection systems and we are witnessing the scaffolds crumble in front of our eyes. Yes Brent, we *need* disruptive innovation but “display advertising” and “internet visionary” have never been seen before in the same sentence.

    Sadly, most of all, I don’t think the support is there for a revolution. Evolutions have so much less risk.

  3. Online advertising sucks and we need to fix it « ECPM BLOG Says:

    […] advertising sucks and we need to fix it I’m a believer in everything that’s written in this post over at Cogblog.  I believe it so much that I’m surprised I didn’t write it: My new theory as to why […]

  4. Zach Coelius Says:

    For once, I totally agree with you. We desperately need bigger ad units so that creatives can start telling stories with advertising and make them fun. 300 x 600 is just the start, we need to go to ads that take up half the screen.

  5. brent Says:

    It makes me sad to hear that you don’t always totally agree with me.

  6. Niraj Nagpal Says:

    I agree with many points in this article. However, some parts of the industry are working to address the problem of creating a stronger brand experience with the rise of branded entertainment studios; where brands are seamlessly integrated into custom distributed programs that grab the users attention. I believe there will be an increase in branded studios to compete with the existing market place solutions (BBE,Red Lever,Tribal Fusion,DBG etc).

  7. Gustav von Sydow Says:

    Dead on.

    What’s needed is probably for someone to do what Apple did for mobile (I know, I know – this metaphor is getting reeeeaaaaaally old). That is, optimize the entire *experience* of making, buying and measuring online marketing.

    But just like Jonathan points out, this is a lot more risky than putting another layer of polish at the current model, with everyone spending waaaaaaay too much time on figuring out the differences between media agencies and ad networks, DSPs and trading platforms, exchanges and supply side brokers etc etc etc.

    If someone has a better/alternative idea on how things could they’re certainly not telling anyone ;)

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