Online Advertising Starts to Come of Age

25 November 2014

There is no doubt that the coming of online advertising has changed everything. OK so it hasn’t turned out to be the panacea that some zealots thought (some still think) it might be; and no we haven’t yet properly worked out how commercial communications can work best within social media channels; but those bumps in the road don’t change the underlying fact that things are very different now.

When technology first met advertising the resultant conversation was a dialogue of the deaf. The truth is that traditional advertising people didn’t really understand all that much about how the technology worked, and thus what it could do for them, whilst the technologists understood little about advertising beyond it being the source of the cash and thus a necessary evil to be humoured and tolerated.

The media agencies more than most did listen and did understand. Good for them – they certainly grasped how the technology could be used to benefit them and their clients, and thousands of theoretically strong plans were written reaching loads of people gazillions of times for pence. The problem has been that when the media plan is so far in front of the creative idea the final output can be a great plan with a poor creative execution.

Then there’s the infrastructure. Where’s there’s chaos there’s margin. There have been too many middle-men doing too many over-complicated things and charging way too much for them. Eventually something had to give; some shake-down has always been inevitable.

It seems the mists are starting to clear, even if just a little. Early adopters within marketing have realised that they can use online activities for more than direct response; suppliers have worked out that any realistic future must include display advertising from the largest players. Some of the early DR-like metrics – like click-through rates – have as a consequence been overtaken by measures of far greater relevance to large advertisers.

The next stage is to tidy up the supply chain. At the moment this is less a chain and more a maze. There are so many steps between publisher and advertiser that both data and value leaks away as the maze is negotiated. One large publisher has estimated that once you factor in fraud and lack of viewability on top of the so-called technology tax what’s left of the advertiser’s online budget for the publisher is in the single-digit percents. This chimes with Kraft’s statement that it ‘rejects’ up to 85% of online advertising placed on the Company’s behalf.

Value leakage is a well-recognised phenomenon, data leakage perhaps less so but none the less serious for that. Publishers own a great deal of data of value to advertisers. If publishers’ data is leaked at various stages along the maze, as it is (for example) aggregated then properties lose value.

The mixing of publisher data with advertiser knowledge and insight can be a potent one. The natural home of such mixology is the media planning agency and thus, as an excellent piece on Mediatel by Dominic Mills points out the agencies are well-placed to flourish.

The issue for the agencies is how to combine their unquestioned planning skills with the rise and rise of the trading desks, with their attractive margins and their less-than-attractive reputation amongst so many large advertisers?

And why would one source of valuable data – the publishers – agree to a situation within which they allow their data assets to be accessed by a trading desk just so that they can be paid less?

Two scenarios seem likely. Either the major publishers by-pass the agency and the majority of middle-men altogether to create bespoke and creative programmes directly with the advertiser. Or any initiative co-created with the media agency planning team will need to be executed outside of that agency’s trading desk.

The next Cog Blog post will dare to predict the future for agency trading desks.