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Thoughts on smart marketing from Zone

BGF News 10.18.2015

In a piece initially published in the Observer, Zone CEO Jon Davie warns the traditional advertising model that print media has tried to take online is already obsolescent, and could soon be totally redundant…

For many of you, waking up, going to the newsagents and buying a newspaper is part of the Sunday morning routine. And once you’ve shelled out the cover price, you’re free to consume – or ignore –the contents at your leisure.

If you choose to stay in bed and read the online edition, however, it’s a slightly different story. Because you haven’t coughed up for the content, the publisher only makes money from the ads. You’ll likely see a banner ad – the letterbox-shaped image above the masthead. You’ll spot a square ad over on the right-hand side of the page. And you’ll find another ad buried somewhere in the middle of the feature. And those little feature boxes represent the business model for most publishers in the digital world.

There are, however, a number of problems with this model. Firstly, the chances are that many of you won’t see the ads. And not just because of the phenomenon known as banner blindness – a mental filter that web users have evolved, whereby your eyes simply ignore the ad spots completely. It’s also because around 20 per cent of you are likely to be using some kind of ad-blocking software, according to research published by PageFair last month.

Secondly, every single time a publisher hits go and adds another page to their website, the amount of advertising space increases. With many thousands of pages created every day, the supply of advertising inventory is essentially infinite. With near infinite supply, the price inevitably falls. So even as readers desert the print edition in favour of laptop, tablet or mobile, digital advertising pounds don’t come close to replacing lost print revenues.

And thirdly, the response of the media industry to these trends has made things worse. On the one hand, publishers have created ever-more annoying and invasive formats, trying to counteract our tendency to ignore the ads. On the other, they are using sophisticated technology to try and make the ads more relevant to you – and therefore more valuable to them.

It’s worth pausing for a second to explore how this process actually works. When your browser requests an article from the server of a publisher, the page also has to work out which adverts to serve. The first point of call is generally the ‘ad server’ for the publication’s own sales team – is there a campaign running that meets the criteria for this reader? If you’re a registered user, the information used to make this decision might include any of the data that you’ve shared with the publisher – from your postcode or date of birth to your preferences or browsing history.

Typically, only a fraction of inventory can be sold by the publication directly. Which means the server then goes off to an advertising exchange – a real-time market where supply and demand are traded using an auction model. In a matter of milliseconds, the ad exchange will pass details of the page request to a number of demand-side platforms (DSPs), each of who will check the campaign parameters for a portfolio of advertisers, before returning a bid – the amount that each advertiser is willing to pay for that impression. DSPs will look for as much data as they can find to calculate the optimum price, before the ad server selects the winning bid, retrieves the appropriate creative, and records whether or not you engaged with the ad.

In theory, this results in the advertisement being more relevant to you, which in turn is more valuable to the advertiser, which therefore creates more revenue for the publisher.

The reality, however, is very different. Many readers will feel uncomfortable with the way their personal data is being used during this transaction, and don’t like the idea of individual advertisers targeting them based on the websites they have visited, the content of their emails, or the people they are friends with on Facebook. It means web pages have to carry more and more tracking code, which takes longer to load and consumes expensive mobile data.

The newspaper industry loves nothing more than writing about itself, so the news that Apple is planning to enable ad-blocking functionality in the latest version of their mobile operating system has been widely reported. Some commentators have presented the rise of ad-blocking software as a response to invasive and inappropriate abuses of personal data by publishers and advertisers.

But the truth is that people have always sought out ways to avoid advertising, personalised or not. DVR services like Tivo and Sky+ allow viewers to skip the ads, while subscription services such as Netflix and Amazon Prime invite us to gorge on content without enduring the commercial breaks. Many advertisers make use of ‘skippable’ pre-roll formats, which give users the option to skip the ad after just a few seconds. Typically, up to 94 per cent of them choose to do so.

All of this leaves the digital publishing business in a sorry state. Unless they can persuade customers to pay for content – or persuade advertisers that their content is so valuable that it merits a premium – the trend towards lower rates seems inexorable. And the inevitable cost-cutting that follows creates a vicious circle, with a smaller, less-skilled editorial team finding it harder and harder to produce content with genuine value.

But for smart marketers who know that advertising is only part of the marketing mix, there’s an opportunity. They know that great products and fantastic service can create genuinely useful experiences, and that customers can easily share the good (and the bad) via social media. They know that the internet allows them to build direct relationships with customers, rather than relying on audiences assembled by publishers.

And they know that building brands is about being useful and relevant to the lives of your customers – a lesson many publishers would do well to heed.