Commentary

Why Digital Advertising Doesn't Scale

by Joe Marchese , June 1, 2010

There is a lot of discussion on why advertising spend within digital media has not grown in proportion to the amount of time people spend in digital media. But have a discussion long enough about advertising in digital media, and you are bound to end up in the same place: effective advertising in digital media does not scale efficiently. Simply stated, it is hard to spend a lot of money in digital media.

Why is this so? One reason is that there is not enough consistency in the form advertising takes in digital media. And while it seems that simple standardization could help solve this problem, the industry has yet to figure out what to standardize to. However, because digital has not found its version of television's "30 second spot" -- that is, a universally accepted and effective advertising unit -- advertisers feel that they get the best value by doing custom integrations, and publishers therefore make more money from doing custom integrations. Add to the mix that many publishers see their "custom" ad formats and layouts as a differentiator, in an endless sea of digital competitors, and custom is going to be the norm. Anytime "custom" is the norm in an industry, scaling is going to be a problem.

To get a good idea of exactly how complicated the lack of standardization makes things, check out this graphic of the "Display Advertising Technology Landscape" by the IAB and Savvian. The complexity of the system advertisers are forced to operate is necessitated by the fact that for every various form of delivery of their marketing message, there has to be another system to check and compare delivery metrics.

They say a picture is worth a thousand words, and when I saw this graphic, it put into perspective exactly how complicated scaling digital advertising still is. What does the image say to you? Drop a comment on the post, or drop me a line on Twitter @joemarchese.

advertising, commentary, digital

12 comments about "Why Digital Advertising Doesn't Scale".

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Michael Mcmahon from ROI Factory / Quick Ops, June 1, 2010 at 4:13 p.m.
Is this the tired, old "Dumb Things Down If You Want More Money" argument? I have a few questions:
1. What is the connection between inability to scale media spend and technologies like DSPs, Ad Exchanges and Optimization engines. Don't those tools make it MORE likely we'll start to achieve scale, given the increased automation and decrease in human capital necessary to purchase, display, and optimize digital ads?
2. Do you really believe that 30 second spots are an effective advertising unit? The Advertising Research Foundation has been saying that 30s have less impact than 15s and 60s for a very long time. Most people I know think we are still dependent on 30s because that's what the creative teams want to create. Similarly, custom ad units are often driven by creative teams who simply want to do something cooler than standard ads.
3. Does there have to be a correlation between time spent on a medium and the amount of ad spend? If TV buys are grossly inefficient, and digital buys are significantly MORE efficient, wouldn't you expect the ratio of media spend to time spent on the medium to be lower for digital?
I agree that the IAB slide is compelling in showing the complexity of digital advertising technology and the emerging tools to help increase spend and effectiveness, but I have to disagree that the growth of advertising technologies has been an impediment to moving more dollars to digital.
Reply

Jeff Einstein from The Brothers Einstein, June 1, 2010 at 4:50 p.m.

Joe, the real reason why the major online ad networks can't offer big brand scalability to big brand advertisers is pretty fundamental: they all distribute ads, a product no one wants and everyone is equipped to avoid.

You simply cannot scale a product no one wants and everyone is equipped to avoid (see my latest article "The Search for Scalable Reach: razing the digital ghetto" on the brotherseinstein.com blog).

If a picture is worth a thousand words, anyone interested in scalable big brand reach for big brand advertisers would be well advised to check out the Vidsense Video Snack Network at Vidsense.com. As far as I know, Vidsense is the only major network (including Google, Yahoo, MSN and AOL) that can deliver millions of qualified visitors -- per day -- to any specified advertiser URL. Refreshingly, it does so without distributing any ads whatsoever across its entire network (20,000+ safe-for-work websites, delivering more than 11 billion monthly pageviews). Further, it does so without the deployment of any stealth targeting technologies.

The Vidsense model replaces the ads (that no one wants) with instant access to licensed, short-format video clips (which everyone wants), and delivers both the visitor and the video content directly to a paying advertiser's website, where the video is consumed within an exclusive (and totally risk-free) brand environment.

Again, we can't scale what no one wants. Check out Vidsense for a glimpse of what's possible when someone actually takes the time to replace the impossibly complex with deliberate simplicity.

Alexandra Hinz from JL Media, June 1, 2010 at 4:57 p.m.

Scalability has arrived - for banners. The DSPs have revolutionized the industry by figuring out how to monetize the glut of banner impressions on the market. They took a commodity that didn't have an efficient marketplace and made it efficient. True Scalability doesn't exist yet for digital video because demand outstrips the supply - the marketplace doesn't have the same glut of quality inventory as it does for banners.

David Ross from dave ross , June 1, 2010 at 5:11 p.m.

yes, there is no standard. but in a world where everyone is equipped to avoid online ads, does there need to be? should there be?

Vidsense may make sense. so too Interpolls(.com).

at the risk of over-simplifying... as for tv inefficiency vs. internet efficiency; ads on tv screens vs ads on computer screens ... not even streaming the internet to the tv will change the huddle from tv content to internet content. but... once "real and engaging and entertaining long-form content" comes to the web - then maybe the masses will huddle around the "tv screen" to watch it.

Thomas Kurz from EFP, June 1, 2010 at 5:12 p.m.

I look at that chart and think to myself "really?"

I don’t know that I am prepared to accept the underlying premise that it’s “hard to spend a lot of money in digital media” and I'm not certain that custom creative means that we need a landscape that looks like that chart.

I also don't think we necessarily require the equivalent of a 30 second spot for online publishing (although 15 and 30 second video pre-rolls seem to be working effectively). Digital media is an altogether different outlet from television yet we seek to apply the same thinking when it comes to standardization of messaging although we apply altogether different standards when it comes to measuring success.

I agree that uniformity makes it easier for planners to plan but a verifiable audience should be worth something and building a custom plan to reach that audience should be worth something. It’s not clear to me that all the pieces represented in the chart are necessary for achieving either of those goals.

Unfortunately what I see here is a playing field that is geared towards driving down pricing and devaluing content and audiences. This won’t benefit publishers or advertisers over the long run.

David Ross from dave ross , June 1, 2010 at 5:12 p.m.

yes, there is no standard. but in a world where everyone is equipped to avoid online ads, does there need to be? should there be?

Vidsense may make sense. so too Interpolls(.com).

Mike Blacker from Feeva Technology, June 1, 2010 at 5:46 p.m.

The Savvian slide surprised me as well. This industry has become more and more complex as technology advances. We know from the large brands that buying digital media is far more complex than it should/needs to be. This is the reason that large brand marketers like P&G, Kraft, Unilever, J&J, etc. only spend less than 2% of their overall budgets online....even when consumers spend more time online than with TV.

We are not getting scale online because we are not giving marketers what they want....accurate geo-location and demographics. This industry is highly dependent on two antiquated technologies, cookies for tracking users and IP addresses for geo-location. Neither were intended for the purpose that they are now used. Cookies are increasingly deleted by consumers at a rate of 30-40% a month. The IP Address simply does not provide accurate geo-location and with pending privacy concerns is likely to be banned as PII.

Many of the companies on the Savvian slide have created interesting business models, but unfortunately most are work-a-rounds and still dependent on cookies or IP addresses. After 15 years of incredible innovation for online advertising and we still don't have a solution to deliver marketers what they have been begging for....accurate geo-location and demographics!

David Carlick from Carlick, June 1, 2010 at 6:18 p.m.

Joe, thoughtful article, as always.

I have long maintained that the artificial 15% to agencies (long pushed down to 10% or less by purchasing departments in the agency contract process) is the culprit.

So what if online media is fragmented and rich in choices?

You are talking about tailored messages for tailored audiences in environments (websites) that can be unique and valuable.

Way back when, I coined the phrase "1:1 Marketing, Millions At A Time." I was wrong.

What you are offered online is a wealth of niches, which can be exploited with more results than ever, but not for under 10% of the buy. Even proper buying on a giant like Yahoo means exploiting the niches, which takes time. (Or just let them load you on their mail client for frequency.)

Maybe DSP/RTB/Audience buying will help, but not if it is just the same message to different people, and not if the buy doesn't consider the environment.

True 'scale' will require much more development of automation to have bid/ask platforms where the value of the environment, the data on the consumer (or the consumer lookalike) and the matching and testing of creative is handled, in order for 'scale.'

Until then, and it is coming, the irony of our online digital media world is that much of it still needs to be hand crafted -- the complexity is more than the machines can decipher.

There is this continuing, and annoying, hope that somehow the digital world of 100% 'tailored to me' will somehow, on the advertising end, just behave like mass media. Why?

Jen Hanks from AdMonsters, June 2, 2010 at 8:27 a.m.

AdMonsters has been involved in simplifying the digital ad technology space for advertisers, agencies, and media companies for over 10 years. The proliferation of companies between Publishers and Agencies is sort of amazing, often confusing, and definitely ever-changing. It's one of the reasons that understanding and managing ad technology has become core to digital media organizations in the past few years.

If we are going to see more brand dollars move to the internet, I think we need to see investment in streamlining the 'digital vacuum' between publishers and agencies and them taking the lead. I agree with what others have said that the middle ground devalues the value of content for the most part, its up to publishers and agencies to change this.

Jeff Einstein from The Brothers Einstein, June 2, 2010 at 10:46 a.m.

To a man with a hammer, every problem looks like a nail. To a digital marketer, every problem can be traced to insufficient technology.

The inability to deliver scalable reach online cannot and should not be blamed on our technology. The inability to deliver scalable reach is simply the wall we hit when we distribute tens of millions of ads to people who just don't want to see them and are thoroughly equipped to avoid them, irrespective of the technology. Our inability to engender meaningful online reach reflects a deep existential dilemma, not a mere technological snafu.

No one wants the ads, no matter how "relevant" we in the industry think we can make them. Besides, what constitutes relevant or irrelevant is not our decision to make in any event; all commercial media are and always have been on demand, and relevancy is something the audience and the audience alone decides.

Still, in our arrogance we prefer to target the audience with high-tech ammo, when we would be much better advised to attract them with high-quality, low-tech bait. Better to fish for prospects than hunt down customers like wild animals. Better to pull, not push.

The entire advertising-as-intermediary ad model is collapsing because it relies on the distribution of a product no one wants and everyone avoids. Big brand scale solutions will emerge online the moment we realize that in commercial media we don't reach the audience as much or as effectively as they reach us.

Mark Burrell from Tongal, June 2, 2010 at 5:30 p.m.

All I know is that with a fragmented marketplace, shorter half life for content, a demand for more engagement, scalability and a cost effective solution to obtain video, you are going to need a community of people able and willing to create.

Would like to believe we are one of those communities.

Mark
Tongal.com

Paul Burani from Web Liquid Group, July 28, 2010 at 10:12 a.m.

Thanks very much, Joe. I agree that at first glance, 'complexity' is the first word that comes to mind when looking at this chart. :) It will be interesting to see how this chart evolves in the next 12-24 months. I'd love it if someone would do an animated visualization of logos fusing together as technologies evolve and companies merge. Google already has about nine of these logos under its umbrella.

We put together a text version of this list, so people can click through to the companies themselves: http://www.webliquidgroup.com/blog/online-word-of-mouth/display-advertising-technology-landscape/