By Davey Alba for WIRED.
You’re inching home alongside four lanes of fellow commuters when a digital billboard blinks to a video ad for the latest model of the car you’re driving. Oh yeah, you think, my lease is up next month.
Fifteen minutes later, you’re home. You grab your laptop and sink into your couch. You check Facebook and distractedly tune into a new Facebook Original Series. You’re only mildly interested, but down in the corner, a little red notification pulses: a new batch of tickets from Lin-Manuel’s latest musical has just become available! You drop everything and click wildly through the online checkout process. Got ’em — yesss.
The only thing that’s slightly ruining your mood right now is your hair. (It’s really hard to tame curly hair when it’s this humid.) But hey — as soon as you switch on your TV to stream your favorite network sitcom, an ad comes on for shampoo specially formulated for curly hair. The brand rings a bell — maybe a friend recommended it once? — so you decide to give it a try.
Welcome to the near-future of advertising. In this world, social networks don’t reign supreme anymore as the dominant mediators for online ads. Instead, they act like old-school television networks. In the meantime, the makers of old-school entertainment — companies like Disney and Fox — are acting a lot more like the Silicon Valley companies that seemed poised to replace them. And, oh yeah, billboards matter. It’s a world where smarter versions of traditional advertising make a comeback in no small part because the precision-guided online ads that were supposed to torpedo old media once and for all turn out not to be the cure-all to marketers’ problems. Welcome to the age of Big Video: when Hollywood can make the same data-centric pitch to advertisers as Google and Facebook. When brands matter again. When TV ads come back like they never left.
A Broken System
Online ads are broken.
Sites that peddle fake news spread rapidly on social media, and thanks to the automated nature of online ad networks, they can cash in on their falsehoods. Often, ads for specific brands and products appear on these scam sites without the knowledge of the advertisers themselves.
At the same time, advertisers on the world’s biggest platforms keep learning their ads might not be reaching the people they thought. Facebook has acknowledged multiple times that it’s mistakenly inflated its ad metrics, from how much time users spent watching video clips to how many people visited publishers’ pages and how long they spent reading their articles. Google, meanwhile, failed to update its measurement model in time for an accreditation deadline. Both companies say they’re taking steps to fix these problems. But these snafus raise a deeper question: what if advertisers’ decision to pour money into these platforms is based on a wobbly premise? What if they don’t deserve all the ad dollars they’re getting?
Right now Google and Facebook account for than two-thirds of all digital ad spending in the US, according to industry research firm Pivotal Research. Close to one-fifth of the world’s population checks Facebook daily. Google has had a hold on over 80 percent of search revenues for a decade.
The magnitude of their combined influence is hard to overstate. Nearly 37 percent of US paid media investments are expected to have gone toward digital channels in 2016, industry research firm eMarketer predictedin November (the final results aren’t yet in). By 2020, analysts forecast that this share will surpass 46 percent, all at the expense of TV, print, radio, and outdoor advertising.
Yet some in the ad industry believe that less of a reliance on hyper-targeting—the foundational pitch of advertising on Facebook and Google—would be a positive development. “We’ve had years of obsessing about precision marketing, precision targeting, and the ultimate accountability of digital marketing,” says Tom Denford, chief strategy officer for the marketing consulting firm ID Comms. “But I think we’ve seen brands go too far down that.”
Denford argues that digital-obsessed advertisers, in the search for the perfectly targeted consumer, have lost sight of the importance of context to conveying an advertising message. He says that marketers can’t build brands through precision one-to-one targeting alone, purely between the brand and the consumer. “That misses the third side of the triangle, which is the rest of your peer group, the rest of society,” Denford says. “Brands are not defined by one person in isolation. They’re defined in the context of the world.”
Denford imagines a future where advertisers broaden their sense of how to advertise on Facebook — a platform that’s not just a social network but potentially the world’s most popular broadcaster, one that commands a uniquely captive audience. At the same time, traditionally dumb advertisers, such as billboards, become smart and networked—charging a premium to target ads at an audience they can make some well-informed guesses about, because of the environment the billboard is in. “This all goes to the radical, old-fashioned principle that actually, the environment of your advertising messaging is really important,” says Denford. “We’ve kind of forgotten about that.”
The problem with hyper-targeting
The problem with hyper-targeting for brands is that in seeking out the perfect potential customer, advertisers risk ignoring the wider pool of possible customers. If a high-end luxury brand targeted its $10,000 dresses and $200 perfume only to those who were absolutely in the market for such products, then no one else would hear about the brand, Norman says: “They could target themselves into invisibility.” Targeting does work better in many cases — when you market curly-hair products to the curly-haired or a new car to people at the end of their car leases. But ultimately, according to Norman, the crucial math comes down to what makes for the best ad mix — a math problem Big Video could make easy to solve.
When the makers of TV start to know who their viewers are as well as Google and Facebook know their users, a power that could made possible by the ongoing transition to ‘over the top’ television — that is, TV over the internet — you can start to target TV ads in ways that go both far and wide. At the moment, Norman says advertisers’ demand for such “addressable” TV ads far outstrips the supply.
On the one hand, that demand means traditional media companies are going to be pushing to make their own advertising products smarter. On the other hand, that means Facebook and Google have an incentive to become more like TV. Norman suspects most of the growth these digital giants are now experiencing is coming from the “long tail” of advertisers — the local pizzeria, not the 10 biggest brands. By now, big advertisers aren’t pouring lots of new money into digital; they’re tweaking their ad-buying mix in search of what works. They’ve decided how much they value Facebook and Google, and they could simply be changing which ad buying opportunities within these worlds to allocate more money to. This happened with P&G, for one, which reportedly scaled back its Facebook targeting efforts where some of its brands got too narrow (though it did not cut back on Facebook spending on the whole).
As that mix reaches an equilibrium, the tech giants will have to do everything they can to gain an edge that will sustain their now-slowing growth. This means innovating and pushing into new kinds of content — probably something much more like television ads tied to original programming. Facebook and Google have already sucked money out of markets from newspapers to the yellow pages. Taking a chunk out of TV seems to be within their power. But TV has powers of its own. Either way, Big Video seems likely to prevail. Everything that’s old will be new again. It’s the new getting old that Facebook and Google need to watch out for.
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