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| Have We Reached Peak Advertising? Posted: 18 Jun 2014 10:42 PM PDT The internet runs on advertising. Google is funded almost entirely by advertising. Facebook , likewise. Digital marketing spends continue to rise:
Search advertising spend comes out on top, but that's starting to change:
The growth area for digital advertising lays in mobile:
Prominent venture capitalist, Mary Meeker, recently produced an analysis that also highlights this trend. So, internet advertising is growing, but web internet adoption is slowing down. Meanwhile, mobile and tablet adoption is increasing fast, yet advertising spend on these mediums is comparatively low. Nice opportunity for mobile, however mobile advertising is proving hard to crack. Not many people are clicking on paid links on mobile. And many mobile ad clicks are accidental, driving down advertiser bids. This is not just a problem for mobile. There may be a problem with advertising in general. It's about trust, and lack thereof. This situation also presents a great opportunity for selling SEO. But first, a little background.... People Know MoreAdvertising's golden age was in the 50's and 60's. Most consumers were information poor. At least, they were information poor when it came to getting timely information. This information asymmetry played into the hands of the advertising industry. The advertising agency provided the information that helped match the problems people had with a solution. Of course, they were framing the problem in a way that benefited the advertiser. If there wasn't a problem, they made one up. Today, the internet puts real time information about everything in the hands of the consumer. It is easy for people to compare offers, so the basis for advertising - which is essentially biased information provision - is being eroded. Most people see advertising as an intrusion. Just because an advertiser can get in front of a consumer at "the right time" does not necessarily mean people will buy what the advertiser has to offer with great frequency. Your mobile phone pings. "You're passing Gordon's Steak House….come in and enjoy our Mega Feast!" You can compare that offer against a wide range of offers, and they can do so in real time. More than likely, you'll just resent the intrusion. After all, you may be a happy regular at Susan's Sushi. "Knowing things" is not exclusive. Being able to "know things" is a click away. If information is freely available, then people are less likely to opt for whatever is pushed at them by advertisers at that moment. If it's easy to research, people will do so. This raises a problem when it comes to the economics of content creation. If advertising becomes less effective for the advertiser, then the advertisers is going to reduce spend, or shift spend elsewhere. If they do, then what becomes of the predominant web content model which is based on advertising? Free Content Driven By Ads May Be An Unsustainable ModelWe're seeing it in broadcast television, and we'll see it on the web. Television is dying and being replaced by the Netflix model. There is a lot of content. There are not enough advertisers paying top dollar as the audience is now highly fragmented. As a result, a lot of broadcast television advertising can be ineffective. However, as we've seen with Netflix and Spotify, people are prepared to pay directly for the content they consume in the form of a monthly fee. The long term trend for advertising engagement on the web is not favourable. The very first banner advertisement appeared in 1994. The clickthru rate of that banner ad was a staggering 44% It had a novelty value, certainly. The first banner ad also existed in an environment where there wasn't much information. The web was almost entirely about navigation. Today, there is no shortage of content. The average Facebook advertisement clickthrough rate is around 0.04%. Advertisers get rather excited if they manage to squeeze 2% or 3% click-thrus rates out of Facebook ads. Digital advertising is no longer novel, so the click-thru rate has plummeted. Not only do people feel that the advertising isn't relevant to them, they have learned to ignore advertising even if the ad is talking directly to their needs. 97-98% of the time, people will not click on the ad. And why should they? Information isn't hard to come by. So what is the advertiser providing the prospective customer? Even brand engagement is plummeting on Facebook as the novelty wears off, and Facebook changes policy:
Is Advertising Already Failing?Our industry runs on advertising. Much of web publishing runs on advertising. However, Eric Clemons makes the point that the traditional method of advertising was always bound to fail, mainly because after the novelty wears off, it's all about interruption, and nobody likes to be interrupted. But wait! Isn't the advantage of search that it isn't interruption advertising? In search, the user requests something. Clemons feels that search results can still be a form of misdirection:
He who pays becomes "relevant":
The companies that appear high on PPC are the companies who pay. Not every company can be on top, because not every company can pay top dollar. So, what the user sees is not necessarily what the user wants, but the company that has paid the most - along with their quality score - to be there.
Similarly, the organic search results are often dominated by large companies and entities. This is a direct or side-effect of the algorithms. Big entities create a favourable footprint of awareness, engagement and links as a result of PR, existing momentum, brand recognition, and advertising campaigns. It's a lot harder for small companies to dominate lucrative competitive niches as they can't create those same footprints. Certainly when it comes to PPC, the search visitor may be presented with various big player links at the expense of smaller players. Google, like every other advertising driven medium, is beholden to it's big advertisers. Jacob Nielsen noted in 1998:
If Interruption Advertising Is Failing, Is Advertising Scalable?Being informed has changed customer behaviour.
If the advertising is not scaleable, then a lot of content based on advertising will die. Advertising may not be able to support the net:
A lot of Adsense publishers are being kicked from the program. Many are terminated, without reason. Google appear to be systematically culling the publisher herd. Why? Shouldn't web publishing, supported by advertising, be growing?
Prices tumble when consumers have near-perfect real time information. Travel. Consumer goods. Anything generic that can be readily compared is experiencing falling prices and shrinking margins. Sales growth in many consumer categories is coming from the premium offerings. For example, beer consumption is falling across the board except in one area: boutique, specialist brews. That market sector is growing as customers become a lot more aware of options that are not just good enough, but great. Boutique breweries offer a more personal relationship, and they offer something the customer perceives as being great, not just "good enough". Mass marketing is expensive. Most of the money spent on it is wasted. Products and services that are "just good enough" will be beaten by products and services that are a precise fit for consumers needs. Good enough is no longer good enough, products and services need to be great and precisely targeted unless you've got advertising money to burn. How Do We Get To These Consumers If They No Longer Trust Paid Advertising?Consumers will go to information suppliers they trust. There is always demand for a trusted source. Trip Advisor is a great travel sales channel. It's a high trust layer over a commodity product. People don't trust Trip Advisor, per se, they trust the process. Customers talk to each other about the merits, or otherwise, of holiday destinations. It's transparent. It's not interruption, misleading or distracting. Consumers seek it out. Trust models will be one way around the advertising problem. This suits SEOs. If you provide trusted information, especially in a transparent, high-trust form, like Trip Advisor, you will likely win out over those using more direct sales methods. Consumers are getting a lot better at tuning those out. The trick is to remove the negative experience of advertising by not appearing to be advertising at all. Long term, it's about developing relationships built on trust, not on interruption and misdirection. It's a good idea to think about advertising as a relationship process, as opposed to the direct marketing model on which the web is built - which is all about capturing the customer just before point of sale. Rand Fishkin explained the web purchase process well in this presentation. The process whereby someone becomes a customer, particularly on the web, isn't all about the late stages of the transaction. We have to think of it in terms of a slow burning relationship developed over time. The consumer comes to us at the end of an information comparison process. Really, it's an exercise in establishing consumer trust. Amazon doesn't rely on advertising. Amazon is a trusted destination. If someone wants to buy something, they often just go direct to Amazon. Amazon's strategy involves what it calls "the flywheel", whereby the more things people buy from Amazon, the more they'll buy from Amazon in future. Amazon builds up a relationship rather than relying on a lot of advertising. Amazon cuts out the middle man and sells direct to customers. Going viral with content, like Buzzfeed, may be one answer, but it's likely temporary. It, too, suffers from a trust problem and the novelty will wear off:
It's not just about supplying content. It could be said newspapers are suffering because bundled news is just another form of interruption and misdirection, mainly because it isn't specifically targeted:
Eventually, the social networks will likely suffer from a trust problem, if they don't already. Their reliance on advertising makes them spies. There is a growing awareness of data privacy and users are unlikely to tolerate invasions of privacy, especially if they are offered an alternative. Or perhaps the answer is to give users a cut themselves. Lady Gaga might be onto something. Friends "selling" (recommending) to friends is a high trust environment. A Good Approach To SEO Involves Building Consumer TrustThe serp is low trust. PPC is low trust. Search keyword plus a site that is littered with ads is low trust. So, one good long term future strategy is to move from low to high trust advertising. A high trust environment doesn't really look like advertising. It's could be characterised as a transparent platform. Amazon and Trip Advisor are good examples. They are honest about what they are, and they provide the good along with the bad. It could be something like Wikipedia. Or an advisory site. There are many examples, but it's fair to say we know it when we see it. A search on a keyword that finds a specific, relevant site that isn't an obvious advertisement is high trust. The first visit is the start of a relationship. This is not the time to bombard visitors with your needs. Instead, give the visitor something they can trust. Trip Advisor even spells it out: "Find hotels travelers trust". Telsla understands the trust relationship. Recently, they've made their patents open-source, which, apart from anything else, is a great form of reputation marketing. It's clear Telsa is more interested in long term relationships and goodwill than pushing their latest model on you at a special price. Their transparency is endearing. First, you earn trust. Then you sell them something later. If you don't earn their trust, then you're just like any other advertiser. People will compare you. People will seek out information. You're one of many options, unless you have formed a prior relationship. SEO is a brilliant channel to develop a relationship based on trust. If you're selling SEO to clients, think about discussing the trust building potential - and value proposition - of SEO with them. It's a nice side benefit of SEO. And it's a hedge against the problems associated with other forms of advertising. Categories:  |
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