• by Paolo Gaudiano , Op-Ed Contributor, October 28, 2014

The rapid growth in global digital advertising spending has led to an explosion in formats, tools and techniques: display, search, mobile, video, in-app, in-game, native, programmatic and so on. Consumers find themselves targeted by a growing array of promotional messaging that seems designed to interfere with anything they may be trying to do. In response, they flee from advertising-heavy sites and go find other sites, leaving publishers scrambling for new ways to attract and retain readers, while forcing advertisers to chase consumers across more and more sites.

How can publishers satisfy both their readers and their advertisers? How can advertisers determine the best format and placement of their messaging? I propose that a key to success is to focus on the perspective of how individual consumers behave. Specifically, I want to focus on how well an ad that is visible to a consumer matches his or her interest in order to drive engagement.

We can think of different forms of content as falling along a continuum of how effectively they engage consumers, ranging from indifference to intent. I call this the Engagement Scale. In the online advertising context, display ads are at the left end of the Engagement Scale: consumers largely ignore banner ads in rails. Search ads are at the right end of the Engagement Scale: consumers are much more likely to click an ad for a product for which they just searched.

In practice, as depicted by the shaded bars in the figure, both display ads and search ads cover a wide portion of the Engagement Scale: sometimes we see banner ads that are very interesting to us; and sometimes we get ads with search results that just make no sense. 

More importantly, the figure suggests that there is a substantial gap between display (indifference) and search (intent). This gap is evident in the relative performance of display and search ads: typical banner ads generate click-through rates (CTR) of about 0.1%, while keyword-based ads generate on average, about 2% CTRs. This gap is also evident in the pricing of display vs. search advertising.

What lies in the Engagement Scale “gap?” This is where consumers show interest: they are not indifferent, but they are also not showing intent. But where do consumers show interest? The most conspicuous example is social media: consumers spend a lot of time on Facebook and Twitter. Not surprisingly, both companies are gaining significant market share in advertising, and both the price and performance of ads on these platform clearly indicate that they fall in the interest gap of the Engagement Scale.

It is tempting to argue that the success of Twitter and Facebook ads is due to the implicit trust in content that appears alongside social media. However, I propose that Twitter and Facebook are so successful because they create a context in which consumers willingly explore content that interests them. As I have discussed elsewhere, exploration is what you do when want to discover something that, by definition, you did not know ahead of time; in contrast, search is what you do when you want to find something specific (such as the address of a restaurant). The value of exploration is evident from the success of other companies such as Pinterest, Instagram, Vine and StumbleUpon. These and other platforms populate the “interest gap” in our Engagement Scale, and in fact they all describe themselves as exploration or discovery platforms.

I am convinced that within a few years everyone will understand the difference between exploration and search, and how exploration can be leveraged to drive greater engagement. In the more immediate future, I hope that publishers and advertisers will use the Engagement Scale as a guide in evaluating how their editorial and technological choices impact the behavior of individual consumers.