Advertising Needs to Become Harder to Buy

Can we shift to fewer, more expensive ads?

Source: YouTube (Storyful)

We trust television ads far more than online ads. We’ll get back to that in a moment, with some hard numbers.

Google built the world’s easiest-to-use advertising system, which now nets them over $67 billion in ad revenue per year (2015). Almost anyone with a credit card can start buying ads for a few dollars, and send traffic to a website (which can now be setup for free or very little, with free or low-cost tracking and optimization software — heck, Google Analytics is free!).

According to the Wall Street Journal, in addition to automated systems that stop many pattern-matched bad ads from ever being placed, “more than 1,000 of Google’s 60,000 employees monitor and remove ads”. And yet, while Google’s advertising growth was 13% from 2014 to 2015, the growth in the number of ads it removes was 3 1/2 times higher than that.

In 2015, Google removed over 780 million ads from its system! And undoubtedly, a lot of them were being uploaded by many of the the same questionable advertisers, popping up again and again. And for publishers, supply platforms/exchanges and networks without some of the scalable automation Google uses, it’s even more difficult to manage.

“Ad operations”
Source: WSJ, Google

Online advertising has also become easier to buy via other companies and intermediaries working with them who have launched self-service buying systems on top of ad companies’ APIs, like Facebook’s and Google’s.

In addition, “content ad” companies like Taboola, Outbrain, and RevContent aggregate thousands of small (sometimes fraudulent, and often whack-a-mole) advertisers themselves, and help them end up on premium publisher websites. Publishers throw up their hands and disclaim responsibility for what ends up on their site, except perhaps if the little image accompanying the ad is too NSFW.

Consumers still trust television advertising far more than online advertising — and their “trust” (loaded word that is) for online ads skews high because of the incredible depth and breadth of information available online (as seen by trust in search engine ads being higher than in other online ads). By the way, Nielsen’s 2015 Global Trust in Advertising Survey points out some significant differences between US and European users. Both groups have similar trust in recommendations from people they know, but Americans are far more trusting of all forms of advertising than Europeans are.

That said — at 63% vs. 39% for Americans, for TV ad trust compared to trust in mobile ads (62% higher), and 45% vs. 26% for Europeans (73% higher), the phenomenon is of a similar scale. But trust is a fragile thing, and can easily be lost.

Darke and Ritchie, 2007

In their widely-cited article in the Journal of Marketing Research, “The Defensive Consumer: Advertising Deception, Defensive Processing, and Distrust”(2007), Peter R. Darke and Robin J. B. Ritchie find that all advertising suffers when consumers encounter deceptive advertising, and that we then revert to some of the negative stereotypes we may already have about advertising and its claims in general.

Even the best advertisers thus suffer when bad advertisers push consumers to distrust advertising. What is the solution? Could it be to drastically reduce the number of ads (which will increase consumer attention and response rates) while increasing the hurdles to buying them, not by inefficiency in creating or buying them (which has been a problem many online platforms have looked to address), but instead by drastically lowering the number of ads available online and increasing their prices.

While it seems easier than ever for people to get themselves onto (reality?) television, there’s evidence that we still judge the money it takes for a brand to get onto television as a barrier worthy of according some trust to (“why would they spend all this money to lie to us?”).

Source: American Association of Advertising Agencies’ Television Production Cost Survey

The average cost for producing a national 30-second TV commercial rose at a rate similar to inflation over the past 20 years, to over $350,000 in 2011. What’s important to note is that they did NOT come down significantly despite rapid technology changes over that time period — the barrier to creating big-screen advertising remains high. But of course, our point here is to mainly examine online ads, not television. The cost of creating an online ad, if video, could be significant, but on average it is a lot closer to zero than to $350k.

Big Brands Don’t Have TV Advantages as Easily Online

Brands could have (but typically don’t exercise) a lesser- but significant advantage of being able to spend lavishly to build a high-impact, super-engaging digital ad, that they are used to (and in fact, have to be) doing in the television world. But I think they’re afraid and confused, perhaps rightly so, because their spend is routinely marginalized by direct response advertisers who know when they can put in a dollar to make three, and have found that they can sometimes piggyback on others’ production values (by straight-up cheaply copying the look and feel of legitimate websites) and they aggressively ferret out the online ad spaces that convert into weight-loss or muscle supplement subscriptions, auto insurance quotes or mortgage applications.

In TV, the top 200 national advertisers account for two-thirds of TV spending…

Source: Ad Age

Change is Hard

Nobody is going to get rid of the advertising dreck overnight, and big advertisers aren’t going to suddenly pay 5x higher prices… unless that is, there is an immediate step-function change in advertising space and availability. People will have to be able to make hard decisions and weather the storm of temporarily reduced revenue.

One way that is happening (sort-of) is via adblocking, but the problem is this:

A 50% reduction in ad space because 50% of people are blocking ALL ads is NOT the same as everyone blocking 50% of the ads they would otherwise see

One problem with adblocking is that blocking is currently mostly an all-or-nothing proposition for an individual. We need to reduce ad supply and increase demand as response rates presumably increase, but we also need to create innovation and new models that split up the results of this binary-adblocking-decision users are (being pushed into) making.

That said, we’re going to have to get rid of 60+% of the ad space out there, maybe even more, and with increasing prices and improving consumer acceptance and response rates, I think we have a shot at a stable or growing ad market if we do it right. I don’t know exactly how it’s going to happen, just that it has to: time to start thinking creatively once again.

PS. Here’s a longer version of that cat gif