It’s a scam.
It’s a grand deception.
It’s a colossal failure.
It’s a mass of data confusion and contradictions rammed down the throats of individuals, businesses and industries.
It doesn’t work. It has no future.
“It” is digital advertising.
You’ll remember the promise of the glorious future of online marketing and advertising. A mere decade ago, news media, entertainment, sports, retail and countless other businesses banking heavily on the concept that content delivered on digital platforms would dramatically build the bottom line and rescue businesses and industries that were losing more traditional advertising dollars.
Silicon Valley touted digital marketing as the next golden age of advertising. And in this new digital age, thanks to technology, advertisers and marketers would not have to dream up creative and sophisticated campaigns to lure and connect consumers to their products.
Digital advertising would use technology to deliver an advertiser’s message directly to the audience most likely to buy their products or services, or related products and services.
In this modern age of advertising, your digital history — searches you made, websites you visited, your online purchases — are the click bait advertisers use to reach you. They know what product or service you’re interested in because you already looked for that product or service, or your online habits reflect the interest.
On your smartphone, desktop computer or tablet, your top-of-mind preferences would be delivered directly to you. The technology will find you; the advertiser will make the pitch.
But does it work?
How many consumers intentionally click on an online banner or display ad, and absorb the pitch?
How many are watching that entire video ad on YouTube? Or are they just counting the seconds until they can skip through it and reach the content?
How many are comfortable with their consumer “preferences” or “needs” following them on whatever digital paths they take?
FAULTY METRICS GROWING
Facebook and Google are the prime vehicles for digital advertising, which increased 22 percent in the US during 2016, reaching a record-setting $72.5 billion, according to the Interactive Advertising Bureau. And most of that surge in revenue, which came on mobile platforms, was gobbled up by Facebook and Google.
And, according to eMarketer, Facebook will make $34 billion and Google $73 billion in digital ad revenue this year.
That’s about 46 percent of the entire digital advertising market.
For several years now, as the Financial Times reported (21 March 2017), “…Google and Facebook have cut a conquering swath through the market for digital advertising, snatching ever more business from legacy media companies such as print newspapers and magazines.”
But Facebook and Google also are the primary keepers of the data — the complex, multilayered metrics used to determine ad placements, rates and effectiveness.
And in recent months, as the Trends Research Institute has been forecasting and analyzing, the faulty data being uncovered are beginning to support the anecdotal evidence that digital advertising does not reach the audiences promised. It is not effective.
Facebook, in a series of announcements, was forced to acknowledge it miscalculated some metrics vital to the interests of publishers and marketers counting on digital ads to reach target audiences.
Among other “misstated” metrics, Facebook admitted in September 2016 that it over-reported video advertising’s viewing time for two years. The social media giant disclosed that its measurement for the average time users spend viewing was vastly overstated. Why? Because, Facebook said, it was measuring video-viewing time of only three seconds or more.
According to the Wall Street Journal, Publicus Media, a major global ad-buying agency, said Facebook’s method of tracking users online overestimated the average time spent viewing videos by between 60 percent and 80 percent.
That’s a stunning number.
Marketers, advertisers and publishers, for two years, made ad buys and content decisions in the billions of dollars based on grosslymiscalculated metrics.
But Facebook, which about 2 billion people use each month, weathered that storm with only limited — and temporary — impact on its stock and reputation. It made it in and out of the news in a day.
Until, that is, another spate of critical Facebook digital-advertising metrics proved false.
In November 2016, Facebook again came clean, saying it had discovered several more false metrics. This time, citing “bugs” in the systems it uses to track consumer habits, the faulty data “overstated” how much time users were actually watching online videos.
Facebook, after acknowledging the faulty data, vowed to audit their numbers more closely, and use third-party checks on the actual traffic they’re generating.
But marketers are growing more untrusting of Facebook and digital advertising overall. According to a survey by Advertiser Perceptions, 50 percent say they are reluctant to advertise on “risky” digital platforms and two-thirds of respondents are rethinking Facebook as a viable platform.
WASTED ADVERTISING BUCKS
Moreover, earlier this year, major advertisers, with distinguished and well-established brands, became concerned that their digital ads were unknowingly and routinely appearing on so-called “fake news” or other sites that were contrary to the marketers’ message, as well as YouTube video platforms that could tarnish their brands.
As such, JPMorgan Chase, apparently riled about this revelation, conducted an experiment with, for the digital marketing world, unexpected ground-shaking results. Again, reported one day, out of the news the next day.
As a March 30, 2017 headline in The New York Times read: “A Bank Had Ads on 400,000 Sites. Then Just 5,000. Same Results.”
And as The Times reported the same day: “Now, as more and more brands find their ads next to toxic content like fake-news sites or offensive YouTube videos, JPMorgan has limited its display ads to about 5,000 websites it has preapproved…”
And what happened? No detectable change in advertising-response metrics from 5,000 select websites to 400,000 automated digital-advertising posts.
Advertisers, upset that their ads were published on undesirable websites or platforms, led to bigger news: Does digital advertising work at all?
It’s not a new issue. It’s a trend we have been monitoring for years.
Even newspapers, in a desperate attempt to stem financial losses from declining readership and plunging print advertisements, began a grand march to the digital frontier a decade ago.
But digital-advertising revenue streams did not make up for the declines in print ads. Newspapers were forced to make deep, irreversible cuts, largely in their newsrooms. The ax slashed away 60 percent of newsroom staffers in a decade. And the toll is still growing because digital-ad revenue made only a dent in the losses from print ads.
Digital advertising became such a rallying cry for the very survival of the Fourth Estate, it irreversibly transformed how newsrooms approached their First Amendment responsibilities.
As we wrote in the Fall 2014 Trends Journal: “With alarming frequency, reporters are being judged by how many tweets and Facebook postings they make, how many instant videos they produce, how many two-sentence updates they post and, ultimately, how these and other metrics contribute to the newspaper’s overall audience share. This type of journalism is akin to sales representatives being judged by how many cold calls they make and how many potential clients they take to lunch.”
In theory, digital news and information would drive enough digital advertising to compensate for dramatic revenue losses in print circulation and advertising.
Digital ad revenues for newspapers, while now occupying about 25 percent of the overall revenue pie, is starting to slip. Digital ads for newspapers declined about 2 percent in 2015, according to the Pew Research Center.
DIGITAL ADVERTISING LOSING SUPPORT
What happened to newspapers trying to transform from print to digital is now being seen in other media and across a spectrum of businesses and industries — more evidence that digital advertising doesn’t work.
Moreover, the digital-advertising dominance of Facebook and Google limits profits for newspapers and other media. It also puts control of the metrics — from determining ad rates based on confusing, conflicting and downright false data to where and how digital ads appear — squarely in their hands.
The sales pitch for digital advertising propagated by Google, Facebook and others was irresistible on the surface: With television and especially newspaper and magazine audiences in sharp decline, move your ad dollars to digital. That’s where, they promised, you can directly reach the customers most interested in what you have to sell.
And how is that measured?
Impressions? Click-through rates? Completion rates? The amount of time spent viewing? Cost-per-mill (CPM, or the fee for every 1,000 views) rates?
There is no true universal, evenly applied metric by which digital advertising’s effectiveness is measured. How many of those click-throughs were bot-driven? How many of those impressions were users’ attempts to get rid of the ad and get to the content?
Facebook and Google have become grand masters of manipulating the metrics that determine, they say, whether ads are working.
The JPMorgan Chase “experiment” has cast light on the underlying value of blanketing the web with digital ads seeking out potential customers by throwing a wide net across the web universe.
MORE CLUTTER THAN CONTENT
The institute’s research is showing that consumers are becoming increasingly put off by online advertising clutter. They effectively have become numb to its presence.
It’s in the same vein from a generation ago, when printed-newspaper readers would strip out the bulky advertising inserted in their newspapers before sitting down to read, or when consumers would immediately throw out the direct-advertising circulars cluttering their mailboxes. Digital ads, the mounting evidence shows, are discarded even more quickly.
Digital ad clutter plays a significant role in the growing ineffectiveness of digital advertising. There’s too much of it — and too much of it is either irrelevant to the user’s needs and interests or too cumbersome to navigate.
Since we’re bombarded with hundreds of ad messages each day, we become immune to their message. While marketers have known for years that digital ad clutter was clogging up websites and slowly ruining the viewer’s experience, bulk and frequency in digital ad placement is what drives revenue. And that came first.
But as the ineffectiveness of mass digital advertising becomes more commonly accepted, coupled with the low share of gross revenues businesses receive from Google or Facebook ad-sharing models, companies will increasingly seek more control over the ads they run. They’ll want more precision in determining and reaching the targeted audience.
This trend is taking shape. In particular, media companies are either rebranding traditional advertising platforms, such as print or broadcast, as more effective. Or they’re developing their own online platforms where they can control the advertising quality and quantity.
While technology, especially virtual reality and augmented reality, will provide new frontiers for the future of advertising, the immediate trend line drifts from mass digital advertising to more customized platforms and business models to more reliably reach targeted audiences.
As one of the grandfathers of advertising, John Wanamaker, said a century ago, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
The Trends Research Institute’s analysis is increasingly demonstrating that both halves of the mass-aggregated and automated digital-advertising pie are largely wasted. TJ