Jul 14, 2020
Digital advertising is a behemoth. Is it waiting to fall yet?
Have you ever walked in a crowded Bazaar without someone throwing their wares at you every 50 meters?
Having advertisements thrown at your face almost feels the same. Every few digital seconds a merchant from a far far away land tries to entice us with his wares. Most of us do not like advertisements (unless they are too good!).
The matter of the fact, however, is that advertisements fund most of our free offerings. We do not currently pay for Twitter, Facebook, Google, and so many other products we use daily because someone else (advertisers) is bearing the cost.
In the early days, businesses hired town-criers who would wander around the town glorifying the wares. People roamed around streets playing the flute to sell candy. Then came the era of modern advertising with the advent of the newspaper back in the 16th/17th Century. Newspaper agencies started carrying advertisements in an attempt to defray the cost of production and distribution. The attraction of the offering obviously was its reach to the masses. A lot of eyes gazing over ads amidst consumption of the recent happenings was highly likely to bring in traffic to businesses.
The underlying assumption here was that “Attractive images and offers would catch the eye as people consumed their daily news”.
The Classifieds or what was then called “Want Ads” did things slightly differently. It attracted the people who were looking for something — the intent to spend was higher. We could say that the targeting of the audience was more effective.
Fast forward a few years (read centuries), the internet had become the talk of the town. Any information could be sent to any part of the world and in minutes. The constraints of reach and cost had been solved to a great extent and it was time to redefine the industry. However, now that everyone could see everything that was “Available” in the world, catching consumers’ attention was now becoming an increasingly difficult task.
The Newspaper model of simply publishing advertisements and hoping its readers from across the world would act upon ads would no longer be as effective. Getting visibility to the right people became the new game.
Google prospers today because it solved this problem. Rather than surfacing random ads to all users, Google waited and watched. The moment a person searched for something, Google interpreted that “Intent to spend” or interest was high. This was the perfect opportunity to bring up some relevant ads.
And then came Social Media. Social Media leveraged the value proposition of peer to peer reach across the globe and amassed a huge crowd onto platforms. Thinking of the around 2 billion people using Facebook today, most of them came to Facebook with the intent to be in touch and communicate with their friends, not to see advertisements. Leveraging the exploding number of active users and powerful analytics of its users, Social Media has successfully managed to attract a thriving ecosystem of businesses that want to reach this audience.
The range of businesses that thrive on advertisement money varies across a spectrum of “I show relevant ads to people when they intend to spend” to “I show people ads and expect them to spend”. Google Search lies on the former end of the spectrum while most social media platforms like Facebook, Twitter on the latter. Amazon leans towards the Google end while Instagram towards Facebook’s.
The “Intent to spend” is a powerful factor. Getting customer attention where it exists or creating it, both work tremendously.
If successfully done, both ends of the spectrum have led to successful business models. The effectiveness of the advertisement, however, relies heavily on the elegance of execution. Any business which successfully captures user attention for a substantial time can, in theory, monetize heavily on advertisements but here are some real facts:
- If Netflix, where we spend quite some time today started throwing up ads, I am sure it will affect its subscribers adversely.
- Facebook has shifted considerably from its initially proposed value proposition. From being the social connector to ads occupying at least 25% of feed, its users show their disappointments freely.
- Twitter, with around 140 million daily active users, does promotion in a very subtle manner.
Some of the more inspired ideas that have managed to do it well are:
- The influencer model — Trusted influencers inspire the audience, and their recommendations are seldom considered advertisements.
- The idea/inspirations model — When users are on a platform to get inspired, they are open to ideas and the recommendations that come with it. Pinterest is a very good example where advertisements do not have the bear the tag and pass off as inspiration.
- Subtle Product placements in short movies make users indifferent to the presence of the advertisement while the product gets certainly noted somewhere. This model is any day better than abrupt interruptions on the video to present a related or unrelated ad.
Multiple fashion websites attract audiences and tempt them with in-vogue styles with a slight nudge towards purchasing by providing links to the items the reader was just admiring.
In the end, what really matters are just two factors — The ratio of content to the advertisement, and the amount of disruption it creates in the user experiencing the products. The most graceful means to the end would be to surface ads without them seeming like ads.
Special mention also goes to our favorite Operating Systems that enable Advertising by providing user behavioral data to enable targetted advertising. The key players — Apple and Android have the power to shape the advertising industry by just a few moves.
