Commentary

Forget Targeted Ads -- I'd Rather Pay For Content

To pay or not to pay -- that is the question many folks in the media have been asking themselves over the past several years. While online publishers continue to grapple with this issue, one thing is clear - consumers overwhelmingly prefer free content.

The Federal Trade Commission's recommendation to legislate a "do-not-track" list may force publishers into a decision they might regret later. It may also force a polarized opt-out solution where compromises are not clear to consumers. The government should be clear and up front when talking about all the ramifications of "do-not-track" with consumers and say what it really means: I want to pay for my content, so please don't serve me targeted ads.

Consumers can't have it both ways, and given the choice between paying for content and being served targeted ads, they would choose the former over the latter. Every time a consumer visits a site, the content being consumed is supported through ads. From TV to radio to print, it's a system that has clearly worked and has been performing the same value for the Internet. So do consumers love ads? Most will tell you no.

Think about the difference between the TV ad model and the Web ad model. In TV, you are forced to stop enjoying content in order to watch several minutes of ads. On the Web, the ad experience is more integrated and more targeted. There are only two ways that advertising grabs attention. Ads can become more relevant or more interruptive. The job of ad targeting is to reduce the amount of ads a consumer would see by showing the relevant ones.

The more monetization a publisher can get from an ad, the fewer ad slots that publisher will need to put on a page. The alternative is to go untargeted but interruptive -- think interstitials or pop-ups). So, given a choice, a consumer wants free content and fewer ads. Without targeting, the consumer would suffer both outcomes -- more payment for content and more ads per page.

Subsidizing content for consumers with targeted ads should not give marketers a free hand to do whatever they want with data. Madison Avenue and federal regulators have every right to be concerned. In order to meet the needs of both consumers and publishers, the advertising community must work in concert with lawmakers in providing practical bookend solutions that give choice and transparency to consumers that take into account the benefits of ad-supported content and the need for broad opt-out tactics.

We have already witnessed strong progress on the industry's part in applying consumer-friendly standards to online behavioral advertising across the Internet through such programs like Online Behavioral Advertising (OBA) and the Digital Advertising Alliance (DAA).

The online advertising community can do more, like working with publishers on developing their own data collection disclosure standards in building more transparency with their users. This will provide the reform the government is demanding and looking for, and enable a thriving digital ad economy to continue on its path to recovery from the Great Recession.

While the rise of government interference has been based on the need for more transparency in regulating online marketers in tracking the behavior of consumers, what federal regulators are not saying is that there's a cost to their intervention. Let's not forget that advertisers pay top ad dollars to reach target audiences, who are more likely to buy their products. Eighty percent of online ads rely on third-party cookies for some form of audience targeting.

Without the ability to offer audience segmentation, publishers will be faced with increasing pressure to find new ways such as pay-wall mechanisms to generate revenue and remain solvent. And it's a price that many consumers are not willing to pay.

According to a recent survey by Marketing Sherpa, 87% of more than 1,300 consumers surveyed said that they would accept receiving ads based on their tracked online behavior, as long as the content they were viewing was free.

Further, the paid wall strategy doesn't come with any guarantees. Last year, when The Times of London and Sunday Times started to charge readers for content, their readership decreased by more than 60%.

Ad-supported content has proven to be the most reliable and added government regulation will only exacerbate this shift to a paid content model. This will have a profound impact on the publishing industry and the community it serves, and it will cannibalize audiences highly coveted by advertisers.

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8 comments about "Forget Targeted Ads -- I'd Rather Pay For Content".
  1. Clive Page , February 16, 2011 at 4:54 a.m.

    This articles makes me think of the ars technica article on ad blocking. Their conclusion was that viewing ad funded content while actively blocking the ads is tantamount to stealing (http://goo.gl/hY9if). You could apply a similar theory to the do-not-track.

    With reference to the Times of London, the "more than 60%" drop in readership was more like 90% (http://t.co/fOfGvI4).

  2. Douglas Ferguson from College of Charleston , February 16, 2011 at 8:05 a.m.

    What some call stealing, I would call being a smart consumer. Must I pay retail because many others avoid deep-discounting? Who makes these rules -- people obsessed with the flawed notion that life must be "fair"? No, I will not watch ads because I should. My ad blockers simply improve the experience. Any industry based on "forcing" people to view ads is itself morally suspect, without denigrating its audience. The uncomfortable truth is that there are now too many voices and too many choices, such that the consumer has the power. Thanks to the Internet, there will always be a source of quality information without a paywall, because the barriers to entry have largely vanished, thus encouraging new content providers to give it away for free in hope of eventually making a buck (at least until the next free provider takes its place).

  3. Paula Lynn from Who Else Unlimited , February 16, 2011 at 9:41 a.m.

    Consider when the ad the consumer gets and gets over and over again, ad nauseum, because it is so targeted and sold so that other persuaders do not enter the other's ring of fire, and the consumer already uses that product regularly. There is no chance of increasing usage. Be careful what you wish for. Just another thing to add to the mixture.

  4. Jeffrey Chester from CDD , February 16, 2011 at 10:01 a.m.

    The suggestion that we can't both protect consumer privacy and ensure robust online publishing revenues is a false--and misleading--argument. Consumers need to be allowed the right to decide what data can be collected and how it can be used--and not let, for example a Bluekai collect reams of user intent data so (in its own words) "advertisers can target individual consumers independent of their media choices...to reach anyone, anywhere on the web..." Consumers should be able decide what publishers deserve their support and what data can be collected. They may say, I don't want you to collect information about my race/ethnicity; financial status or interest in a serious disease--but everything else is ok. They may that they don't want a certain site to have any data at all without fair compensation. Or that a site they support can take it all. Or they may choose to be "left alone" using a Do-Not-Track system (we will have to work out the proper relationships between publishers, advertisers and users). But the author should know--and be willing to publicly state--that the online data collection marketing system they helped create is out of control. We don't need to hear scare tactics that the Internet will go dark if privacy is protected. The latest incarnation of self-regulation is ineffective; public policy is required. The fear expressed about "government regulation" suggests that --like the people who sold too many Americans unaffordable subprime loans (using online lead gen., among other methods), digital marketers have a lot to hide. It's time to put the online marketing and privacy equation in balance for consumers.

  5. Doug Garnett from Atomic Direct , February 16, 2011 at 6:10 p.m.

    Interesting discussion and good questions.

    But, you bought into two fundamental fallacies that the "web promoters" need to be called out about. Both can be found in this line:

    "In TV, you are forced to stop enjoying content in order to watch several minutes of ads. On the Web, the ad experience is more integrated and more targeted."

    I agree that TV interrupts programming with an advertisement. But to paint this contrast to the web utopia you had to ignore reality.

    1. On the web, advertising often forces us to stop enjoying content. Read the highly commercially successful HuffingtonPost. When you go to a page, it's random whether it will pop down then back up seconds later as aggressive top of the page banner ads expand. Or this expansion/contraction happens randomly as you move your cursor around the page. Or look at how many times we have to click to get rid of "forced view" advertisements. How many times we have to open windows to ignore pre-roll.

    The truth appears to be that advertisers are desperately searching around online formats. Perhaps they are trying to recover the power to move consumers that they lose when they leave TV.

    2. Targeting is also a fallacy of the web. For two decades, web developers have promised that we'd see an advertising revolution because web ads would thrive being "highly targeted".

    Reality is that click-through rates are miserably low when compared with the response rates for (apparently) much more targeted advertising like direct mail. Facebook advertising CTR is 1 click for every 2000 presentations. Direct mail typically gets one response for every 100 presentations (and that response is much more significant than a throw-away click).

    The web should be much more powerful than it has become. It's only by challenging these fallacies that we can make it so.

  6. Keith Huntoon from LiftEngine , February 16, 2011 at 6:52 p.m.

    Jeffery and Doug are both correct. Consumers don't complain about targeting or receiving ads-few click-thru anyway.
    Consumers are upset about being tracked across the web and their lack of choice in the matter. Publishers and advertisers who offer choice to consumers and targeting to advertisers will be the big winners.
    Those who cling to the fallacy that tracking is in the consumers best interest, despite consumer wishes, are doomed to the same fate as Mubarak.

  7. Gautam Tandon from ellipsis solutions LLC , February 26, 2011 at 2:07 a.m.

    Nice article. Google Adwords has become a de-facto standard for almost any business wanting to advertise their products and services over the Internet. Ever since Adwords was launched (almost 10 years from this day as I am writing this blog), Google has defined benchmarks for the online advertising Industry. Overall, they have done a great job. However, over the past few months (or perhaps an year or more), I have seen the quality of Ad targeting from Adwords going down. Is that because of the rising competition? Too many keywords to worry about? Too many bids going on for high traffic and areas on web pages marked as hot by heat maps?

    Thanks,
    GT
    http://blog.ellipsissolutions.com

  8. Sarah Downey from Abine, Inc. , June 19, 2012 at 2:34 p.m.
    Interesting that a previous version of this article, which is still cached on Google (see screenshot here: http://i.imgur.com/S65wt.png), has Omar Tawakol stating that “eighty percent of online ads rely on third-party cookies for some form of audience targeting.” If that's true, then OBA would have accounted for only $5.58 billion out of the ad industry's total $31.7 billion revenues in 2011. Guess that kinda kills the ad industry's argument that Do Not Track will "kill the free Internet."