The evolution of online advertising (and why it’s dying).

At the dawn of the Internet, there was light. Wait, that is how a different story starts. At the dawn of the Internet we realized that to make it profitable, there would have to be advertising and lo and behold, the banner ad was created. A tool born out of necessity, in a rush to fill a function it was poorly designed to do… This post isn't really about how the banner ads pollutes the web, but rather how advertising online has evolved over the years and why it is dying on us when instead we need it to be more effective.

Talking about banner ads isn't necessary because we all know how ineffective they are. Some estimates that you are more likely to actually be hit by a meteorite than to click an online ad and, I wouldn't question it, I have never purposely clicked on an ad. Ever. And I have a feeling that you haven’t either. So let’s get down to the story and talk about how it was constructed in the beginning for online advertising.

At the start Publishers, the ones owning websites that had the real estate available for ads, sold directly to advertisers or agencies representing them. Over time as the amount of websites rapidly grew we were left with a lot of real estate being unsold. The Ad networks were born to help combat this. They repackaged the unsold inventory and brokered it to the agencies making it easier to target who we wanted to target. This gave rise to a problem as the amount of ad networks grew. Hundreds of competing companies trading inventory forth and back making the process complicated for the buyers and sellers (but very profitable for themselves) as you could pay for the same audience several times.

This gave rise to a new model, the Ad Exchange. Publishers could now sell their audiences instead of inventory. It became a much smoother process as advertisers could pick their audiences and bid on them. The winner of the bidding process could now have their ad displayed for the right audience at the right time. Advertisers and agencies created Agency Trading Desks (ATD) or invested in Demand Side Platforms (DSP) which gave them the ability to trade on the ad exchange in real time with data to influence their decision making. For the publishers it looked a bit different. Some publishers sold directly on the Ad Exchange while others turned to Sell Side Platform companies (SSP). This all happens in real time and thanks to cookies we get served ads that are relevant to our interests at the right times. The model for how it looks like can be seen below.

As you can see the system has evolved and thanks to how advanced data that is possible to collect now compared to 10 or even 5 years ago it is much more sophisticated, but the system is still dying because what is being offered hasn't changed at all.

We are still served the most idiotic ads at the most uninteresting hours. The system might be light years more advanced and can serve predictions of what we actually are interested in, but it still falls short because it is build around selling. If we continue to use online advertising as selling points for our products rather than brand recognition and awareness then we will continue to see a decline in interest because no one impulse buys a new car. Ever. Even if my interest is cars and I have the money AND I have been looking to buy a new car, I won’t make the decision to buy a new car at 21.00 after a long day at work. It just doesn't work that way.

We use social media and blogs in a completely different way, because we have understood that that is how we get to interact with our customers. We create loyal followers yet when it comes to online advertising we throw our arms up in the air (and wave them like we just don’t care?). Online advertising has to evolve towards a more friendly and humane interaction, much like social media and blogs are. To make people love our brands first, then sell them things. We have to turn online advertising into a brand recognition machine to see its profitability grow.

A small note about why online advertising is dying can be attributed to Adblockers. The topic about Adblockers is immense so I will just mention them quickly here at the end, but we wouldn't have seen those kind of plug ins if it wasn't for how poorly online advertising actually is doing. If ads weren't so intrusive, annoying and ugly, why would people have taken Adblockers to heart?

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