Growing Pains

Growing Pains

In the beginning, online advertising was somewhat simpler than it is today. Even without going back to the Paleolithic Era of the Internet (remember rotating GIFs and flashing "Click Here!" text?) the job of policing online display ads - making sure embarrassing snafus and horrifying ad adjacencies didn't happen - was once the domain of actual humans. These humans were called ad traffickers, a holdover from a pre-Internet time when the role's toughest task was simply to make sure that the Chrysler ad didn't run right after the Lincoln spot during one of "Dynasty's" commercial breaks.

But display advertising quickly outgrew these traffickers. Placing online ads now has little to do with living, breathing humans. Instead, the industry has long been immersed in an automated process involving networks, exchanges, optimizers, servers, DSPS and so much more - as epitomized in the ad tech ecosystem chart from Luma Partners' Terence Kawaja.

And those horrifying ad adjacency problems have yet to be eradicated. But, while media reporters have had a lot of fun playing gotcha games of "Deeply Unfortunate Ad Adjacencies," we generally read each story and move on, chalking the errors up to growing pains.

Display advertising is going through puberty, we think, and sure, these growth spurts can be awkward and painful - but wait until it's all grown up. And one sure sign that our little guy is getting there is that he's moved on from his paper route and is about to start bringing in some serious coin.

According to eMarketer, U.S. online display-ad spending will reach $21.99 billion by 2015 (up from $9.91 billion last year) and surpass the spending on search (projected to be $21.53 billion) for the first time. This growth is mainly driven by banners and, especially, video ads: From 2010 to 2011, spending on video ads in the U.S. jumped more than 52 percent to $2.16 billion.

But, like a rambunctious teenager whose brain hasn't quite caught up to his body, video ads and new types of expandable banners can sometimes get themselves in trouble. They just don't quite fit into the ecosystem yet, and occasionally they get a case of raging hormones, leaving the consumer to wrestle with an ad that refuses to close, or two video ads doing battle on the same page.

Then throw in mobile, that toddler going through its terrible twos, and you arrive at real chaos in the display advertising family.

Family Values

The goals of display advertisers are, of course, varied. Mention click-through-rates (CTR) to any researcher or marketer and you are likely to get an eye-roll of epic proportions; most would like to leave this metric to the direct-response campaigns from which it arose.

Rather than focus on CTR, which has held steady at .10 percent, marketers point to such engagement metrics as time-spent to support their argument that display works for much more than direct response. And, as media goes social, mobile, local and real-time, display has the opportunity to move further down the purchase funnel - melding its art (the catchy and attractive ad) ever more inextricably with the science of data and the morass of all those ad-technology companies vying for slivers of the pie.

"With video becoming a big part of the ads we deliver, whether in-banner or in-stream, our time-spent benchmarks have grown year-over-year," says Cat Spurway-Helper, senior vice president of strategy at PointRoll. "On average, people are spending 14 seconds on ads served by PointRoll - that is a long time. And we've dug into those numbers, thinking about why these have gone from maybe nine seconds in 2005, to 10 to 11 to 12, and now we're at 14 for 2010. A lot of it has to do with watching video content - and users now knowing 'I can roll over this ad.'" (DoubleClick, meanwhile, reported average interaction time dropping from 10.5 seconds in 2008 to nine seconds in 2009.)

"Display media is at a critical inflection point," Kawaja declared at Google Zeitgeist in late 2010. That was before Google swallowed one of the biggest fish in the pond, AdMeld, for a rumored $400 million. "There is this movement toward thinking about display advertising in much more of a branding context," says Andrew Lipsman, senior director of industry analysis at comScore.

Many credit ad-verification technologies, primarily used as auditing tools at present, with helping to make brands feel safe online. "While auditing is now considered table stakes for a verification provider, the real power of these technologies is still being realized," wrote Forrester senior analyst Joanna O'Connell in a report. Forrester expects pre-impression decision-making (currently being tested by DoubleVerify, AdXpose and AdSafe) to become standard, with audience verification of the sort promised by Datran Media and Click Forensics (most well-known for its click-fraud solutions) to be a bit further off, but not by much.

"It's always been a challenge for brands to justify spending money online because of the unclarity about the metrics," says Eldad Persky, vice president of product planning at MediaMind. "It sounds counterintuitive, because digital is widely assumed to be the most measurable medium. Online you have a lot of data, but not specifically on the actual impact."

"Some very large advertisers that don't really sell products online, consumer packaged goods for example - say Kraft or p&g," notes Lipsman, "now have more incentive to bring more of their dollars online, because they realize there's this branding value."

There's really only one metric that counts. "The bottom line," Lipsman says, "is that there's a reason why display advertising exists: it does work. It may not work in every case, but certainly there's the opportunity for it to work." Especially with larger campaigns, Lipsman points out, there's the potential for much greater measurement of the deeper effects.

"Ultimately you have to map back to a campaign objective," says Lipsman. And display catching up to search in marketing dollars makes perfect sense. "Essentially you're reaching consumers through targeting lower down the funnel. Kind of hitting that point between a traditional large-scale display campaign and lower down the marketing funnel toward search."

That efficacy is a result of the relationship between the various ad-technology players. "It's a partnership between the ad technology companies and the publisher," says Spurway-Helper. But it all comes back to the brand's goal. "What am I trying to accomplish? It's that marriage: making sure you have the right ad for the right audience at the right time." And in the perfect marriage, the couple is good-looking and has perfect timing.

"Automotive really gets it," says Spurway-Helper, offering that vertical as an example of technology and creative coming together to serve both branding and direct response ads at the right time and in the right way. For the branding goal, he says, the marketer's aim is "Let's show the car, let's show images of the car, let's show pictures of the interior, let's get someone excited about the look and feel of the vehicle." Then, the direct response goal becomes getting potential buyers into the dealership: "Let's give them that localized offer and make it less about the time spent with the ad and more interactive to get them into the store." So it's more about functionality than format.

The industry on the whole is getting a lot smarter about ads, says Lipsman: "In the early days, what you had was the 'Spray and Pray' approach, where basically these display ads were treated as commodity impressions and you just put them anywhere and hoped they worked. And also people were typically measuring them by click-throughs." Now, he says, with more eyeballs online, a rapidly multiplying inventory with which to reach them, and much better methods for doing so, brands are doubling down and appreciating the lift they see from campaigns beyond just clicks.

"Inventory is exploding," says Persky. "If a few years ago, people were exposed to 100 ads, today they are exposed to 1,000. So, advertisers clearly need to work on the effectiveness of the ads, and [on] providing really tailored messages."

Yet Spurway-Helper worries that "we've become a little algorithm-obsessed lately, and we're sacrificing creative in doing that." She's concerned that "Spray and Pray" has been replaced, to some extent, by "Program and Pray."

Lipsman is confident the market will correct for any bad actors in this drama. Kawaja would likely agree with him (and come up with a simpler chart once Atlas is done shrugging).

All Families Are Dysfunctional

"Online there are so many channels - between earned and owned - it's become extremely challenging to have some kind of a sensible conversation with the consumer," says Ariel Geifman, principal research analyst at MediaMind, "to ensure that your message makes sense, that it's consistent with the previous exposure. And that goes back to the management of data."

Geifman says that a lot of companies are trying to "aggregate the data in one place, reduplicate it [and] normalize it so it can be used to drive marketing activity and optimization and activity across the multiple channels." In the end, for consumers, it means "a consistent conversation that makes sense and creates a continuous conversation with the brand."

And therein lies one of the principal challenges for display advertising: tracking how consumers behave across multiplying and fragmenting channels and devices.

"While today online advertising is pretty dominant, we are seeing the mobile platform becoming more and more significant," says Persky. "Advertisers need to figure out how to combine multiple screens and how to track and understand consumer behavior across different devices."

Geifman adds that getting a comprehensive view of roi in different channels, including social, and of how they interrelate, will be increasingly important in the coming years. "Most people don't even try to see the connection between the display campaign and the search campaign and the social activity that corresponds to it and to plan those activities in a concerted way," he says. "Those are things that are yet to develop."

"As the user hops between screens, each one would have its own trait, characteristic or opportunities for engagement," explains Gefen Lamdan, senior manager for product planning at MediaMind. "Eventually it should be the same messages that cross - and create some consistency between the advertiser and the consumer."

Landman points to the e-wallet as being a potential game changer in data collection, and one that could ultimately result in being able to measure display campaigns in much more solid ways. "Mobile activity will make it easier to connect between online activity and offline conversion," he explains, and the e-wallet "will affect the way we look at online/offline data." For example, such marketing activity as couponing can be done through display advertising and connected to actual in-store real-time buying.

Then there are tablets. While the new gadgets may have publishers fired up, they're a bit of a conundrum for display advertisers. Neither mobile nor pc, they offer a new set of challenges and opportunities. Tablets are leisure-time devices (which may play to dayparts, as opposed to the worktime use of PCs). They are portable, but not always-on like smartphones.

Spurway-Helper notes that touchscreen devices require a different kind of metric analysis: "You have to tap to expand, and from a metrics standpoint, these [are] more akin to 'click to expand' ads on a laptop or PC than they are [to] rollover." And perhaps an even more important tablet metric from a branding perspective may be elevated view-times.

The Creative, Angry Child

One online ad area that has largely resisted automation into the convoluted ecosystem is the creative. And most parties agree that online creative has been improving greatly.

As Spurway-Helper says, "PointRoll was built with the idea in mind that no one goes online to look at ads. So it has to be about the user experience. By protecting that user experience, the advertiser and publisher can create stronger favorability and ultimately stronger performance for the ads by thinking about the user."

Consumers can react with disinterest at ads, but discussion of display advertising's current golden goose - retargeting - can make them confused and angry. As one commenter on a recent marketing story extolling retargeting's virtues wrote, "As a consumer, all i see retargeting (legalised spam) as, is more crap thrown at you which just turns you off, when i get 'retargeted,' a 10% discount for returning is rubbish, if i didnt buy fist time i will not return."

"If you ask consumers, in a lot of cases they'll say they don't like advertising," says Lipsman. "But then when you frame it and you say, 'Would you rather have advertising or pay for content?,' the vast majority of them say they'll take advertising."

Then there is always the consumer who says, 'Screw you guys,' picks his ball up from the field, and takes it home. This is where Ad Block Plus comes in. Ad Block Plus is not a pop-up blocker, mind you, but a browser extension that prevents any display ads whatsoever from showing up. It's been around for a few years now, in one form or another, but seems to be gaining momentum as of late.

And it's picking up steam at the same time that some industry players, like Adkeeper, Moat and Spongecell, are banking on exactly the opposite user reaction - that consumers will be so psyched by improved creative they'll increasingly want to share and even save online ads.

Ad Block Plus ironically received a Member's Choice award this year from Online Publishers Association member and New York Times-owned, a site that relies on display ads for its existence. The extension is coded and updated by a group of volunteer programmers with no discernable upside or profit motive. They are seemingly driven by nothing more than a desire to disrupt the display advertising marketplace.

Perhaps Terence Kawaja should add them to his chart.

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