Commentary
Online Ad Industry's Identity Complex: Medium Or Method?
- by Dave Morgan , Featured Contributor, March 1, 2012
I was a guest at the IAB Annual Leadership Meeting in Miami earlier this week. It was very well attended. There were awesome speakers, lots of great networking, important announcements. But as I reflected on the meeting while flying home, I couldn’t help but think that the online ad industry isn’t in the place yet that it would like to be. I don’t think we’ve decided yet whether we want to be an ad medium or an advertising method.
Many things are going great for the industry. Online ad revenue is up. Online usage of all kinds is going up. We’re launching more and more ad units that are more robust for brand advertisers. We’re making real inroads in Washington, D.C. with regulators, legislators -- and even the White House. We’re attracting more and more investment capital and more and more attention from the business and trade press. We have made enormous advances in best practices across dozens of critical areas in our supply chain.
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However, it’s also quite clear that many in the industry are a bit disjointed, and maybe a bit disoriented.
Are we a medium or a method? When we talk about online advertising, are we talking about the PC? That’s where virtually all of our revenue is delivered today. Or are we a method of content delivery, interactivity and measurement? What was once a personal computer-centric advertising world is now a world that will be increasingly shaped by tablets, smartphones, televisions -- and, thanks to Google, maybe even digital "heads-up" display glasses. Can we be both a lean-forward, personal-computer-based medium and a method for managing advertising?
Online display market may get really
ugly over the next few years. Many analysts anticipate that expenditures for online display ads in the U.S. will grow by $8 billion or so over the next five years. The same analysts call for
Facebook to grow its own online display business by about $8 billion annually in the U.S. over the next five years. Google is said to grow its display business $2 billion to $3 billion in the
U.S. over that time period, and social media services like Twitter, Tumblr and Pinterest to may pick up a billion or so in display ads dollars a year by that time. Does this mean that all the rest of
the players are going to be fighting over a display ad pie that is effectively shrunk – or crowded out -- by several billions of dollars per year in five years?
Cost of
creating online audience impressions going down -- way down. Two-year-old Tumblr currently delivers 18 million monthly page views -- half of the size of AOL’s – with fewer than 75
employees. Services like GumGum, Pinterest and Instagram are launching and exploding, capturing billions of engaged audience page views and operating on tiny cost structures. Like it or not, the cost
of incremental content-based display impressions is going to get down to pennies cost-per-impression.
Social media doing their own thing. The top social media companies are
not racing to be an integrated part of the broader online ad ecosystem. Facebook, Twitter, Foursquare and others are clearly super-powerful commercial communication platforms, and are already running
quite a bit of advertising. But, for very good reasons, they are doing it their own way, with their own systems, in their largely walled gardens -- as does Google in search. If they don’t come
to the party with everyone else, will that party matter in five years?
Direct response or brand? At the same time the industry was launching powerful, unique and custom
new branding units in Miami, we had a panel of mathematically driven, program-buying trading platforms talk up their businesses. Aren’t they mutually exclusive?
I believe that folks need to decide if they are building a medium or a method. I don’t think they can do both at the same time much longer. What do you think?
Dave this was a great snapshot of a very important meeting of the minds and you raise some very difficult questions that need to be answered -- but one under current we seem as an industry to continue to ignore is that of privacy -- the opt out process in place is nothing short of a joke -- have you clicked on a double verify logo and tried to "opt out" -- it's 32 pages long and many of the companies listed tell the user they need to opt out manually -- there is no way users will figure this out or spend the time required to do so and this joke will ultimately be on us unless we come to grips with the errors of our ways -- you mentioned the inroads made in D.C. etc but consumers will grow to "hate us" b/c of our lack of respect for them -- this is a core problem that needs fixing well before we decide if we are a method or a medium.
Ari, I agree that many sites and networks are still doing a lousy job managing notice and choice with respect to privacy. I believe we should follow the guidance of the FTC's Jon Leibowitz and dramatically shorten and simplify our privacy policies. However, I also think that the industry should get a lot of credit - and particularly the IAB and other orgs - for their recent work to build the self-regulatory structure.
As usual, a profound perspective and presentation of the big issues, Mr. Morgan.
No doubt some people will side on either a medium vs. method approach, but for many the distinction could just disappear given the rapid and continued evolution of technology in all layers of the stack. A case in point is HTML5 that simplifies coding and presentation across PCs, tablets, and mobile phones. Semantics, ontology, XML schema, and natural language processing (NLP) are cross platform technologies using SOA or APIs to deliver advertising and content solutions.
Also for some, like an e-mail marketer, the medium is the method (and the method is the message ;-). I expect those in the app business would also consider themselves medium/method agnostic with the executable running locally or in the cloud.
Regarding the declining cost of impression creation, it might be an interesting thought exercise to consider where monetization will come from: the eyeballs or the data?
Larry, excellent points. I agree with you that HTML5 and apps are making channel distinctions go away. Data v. eyeballs for monetization? Both,relatively equally, I suspect.