The Future of Advertising will be Integrated

Posted on Apr 29, 2011 | 53 comments


This article originally appeared on TechCrunch.

Banner Ads. They first started in 1994 and are therefore almost as old as the Web itself. They were very effective back then, with the original ad garnering a 78% click-through rate (CTR)!  I guess from there we had nowhere to go but down.

Nowadays banner ads get on average 0.2% CTR meaning for every 1,000 ads that are served up only 2 people click on them. And as Jon Steinberg of Buzzfeed points out, the CTRs for social media banner ads are just 0.08%.

Holy Shiitake!

 

Despite its creation more than 15 years ago, banner ads have been surprisingly resilient despite their lack of efficacy. In the IAB study that revealed the graph above, brand advertisers indicated that their number one objective in online advertising was “creating awareness” followed by “creating purchase intent” or “likelihood to recommend” the product. Yet these seem to be the least effective attributes of banner advertising.

The fundamental problem with banner ads is a condition called “banner blindness” meaning that our eyes are really quickly trained to look at what is most relevant on the page – the content we want to see. Check out this chart from eye-tracking research conducted by the usability guru Jakob Nielsen published in this piece. It shows that our eyes are trained to focus on the text, not the ads.

I’m sure it probably resonants with how most of you read the web.

So I’ve spent the last few years checking out companies that are trying to solve for this problem. The global advertising market is estimated at around $475 billion / year with only 12% of this online and measurable. (some data sources have this estimate much higher.) We believe that the structural industry changes will continue to create big opportunities for technology firms that enable the changes in media consumption for television, radio, inbound calls, online & social media. We are investing heavily in these changes.

One company that I previously wrote about trying to change this industry is, Solve Media, (I am not an investor) has created an interesting ad unit designed to drive up brand “engagement” and recall. The idea is that if I can serve you an ad for a function that you already need to perform on the web anyways – a captcha – with a brand message I can drive recall. And market research seems to confirm this.

You’ll see a clear problem here. Traditional banner ads only drive 16% brand recall and almost ZERO message recall. So it’s hard to argue that brands shouldn’t worry about CTR rates when it doesn’t seem that banners are very effective for branded advertising or awareness either.

It’s no big surprise that the overwhelming majority of online spend has therefore been “direct response” advertisements (trying to elicit an action) rather than branded advertising as pointed out in this good summary by Jeremy Liew.

So people will spend money online to get you to sign up for credit cards or Netflix but not to change your laundry detergent. I decided to look up one branded company in the chocolate segment to get a sense for the magnitude of spend online. Hershey’s chocolates spends about $365 million in advertising per year. Just $460,000 of this is spend on online display ads (0.1% for those without a calculator handy).

The reality is that advertising has got to become more integrated with content in order to drive efficacy. I know that any time ads are mentioned it makes the blood boil on any self respecting technologist the same way it did when HotWire ran their first ad in 1994 and the way it made Google’s blood boil when Overture launched the sponsored search category.

Ask anybody if they like product placements in movies or TV and they’ll resoundingly tell you “no” but marketers know better, which is why the celebrity endorsement industry is a $50 billion industry.

But even for the consumer reality sets in. Firstly, we care more about getting cheap or free high-quality media than we do about whether we see ads. Give people massive price increases on most media and they’ll abandon it. So how people behave and what they verbally say they stand for are often at odds.

Integrated Advertising

I believe that “integrated advertising” is one of the more effective types of advertising out there. You have to find a way to get your audience to actually “engage” with the content in the way that Solve Media is doing, in the way that in-game advertising works for video games or the way that celebrity endorsements work.

It’s why I still believe passionate in companies like Adly (I’m an investor) who have created ways for celebrities to integrate endorsements “in stream” in a Twitter feed. Yes. Oh, sacred cow. In the stream. Integrated with where our eyes & attention are. I advocated strongly for this 18 months ago and my belief system is as ardent as it was back then. If you’re interested here is my case.

But the simple facts are:

  • Our attention is all in the stream. As evidenced by the eye-tracking studies – they will remain in the stream.
  • We know that celebrity endorsement works. It has for decades. Celebrities care about their personal brands so will naturally rebuff requests to sponsor inauthentic products.
  • The beauty of social media is that consumers can vote with their “unfollow button” so it has a natural self-correcting mechanism. If you get economic value out of having followers you don’t want to lose them over one ad.
  • And if you don’t follow anybody who Tweets ads you don’t see them at all!
  • Sure, there needs to be ad disclosure. And naturally we have built in quality controls like: frequency capping, automated measurement so we can pull ads that people respond poorly to, A/B testing tools, data analysis to tell celebrities & brands which products will resonate, etc.
  • But I can tell you as my firm invested in Overture who created the category of pay-per-search that Google perfected – our company underwent three years of ridicule in Silicon Valley until people looked at the performance data and realized that efficacy matters. The technology blogs will be aflutter with continued criticisms of in-stream ads while mainstream consumers continue to click on links provided by the celebrities they respect and will buy products accordingly. We already have the data that proves it.

    In Image Ads

    Another areas that I’ve been really focused on over the past 2 years is “in-image ads” as another form of integrated media. When you think about the eye-tracking we know that people care about the story and the images. And it is already an accepted fact that in many cases the ads & images are blended as any lady who reads Cosmo or Vogue will tell you. The big splashy image ads is part of their reading experience.

    So we put our money where our mouth was an invested in the largest in-image advertiser on the web, GumGum, whose network now reached over 100 million monthly uniques with 3 billion ad-compliant images, delivering an average CTR of 0.4% (2x industry average for banners). The eyes are in the image. We believe this is why Google Ventures invested in Pixazza.

    As you can see from this image, the ad is unobtrusive and potentially valuable to the reader. The ad unit is served up based on algorithms that determine what is actually in the image and also for whether an ad placement would impair the image. We could even target ads better based on who the end consumer was.

    What else is out there in the field of integrated advertising?

    Vibrant Media & Kontera have both built large and fast-growing businesses around text-based advertising and there are new entrants doing it in new ways like SkimLinks. Vibrant has a reach of 250 million uniques, making in the 12th largest ad-focused property online and has 3rd-party verified studies suggesting up to 50% increase in brand lift following their in-text ads (I’m not an investor in any of these companies). Text is shown to deliver higher CTRs than banners. Text is what we’re reading. It’s integrated.

    There is a whole industry being spawned in the Internet video world and especially in the integration of devices (second screen TVs) and the TV experience. Some of the interactive experiences I’ve seen in recent demos are simply mind boggling and are starting to form new opinions in my head about how we will consume big screen TV in the future (I’ll save that for a future post).

    The games industry has massively changed over the past several years to more of an integrated advertising / purchasing media with the growth of virtual goods and ads. An obvious example of integrated media would be the new Rio Angry Birds version. It’s actually very cool. There are increasingly incentivized offers to get more powerful swords & shields in battle games. This has proved far more effective than small crappy banners at the bottom of each screen.

    There will always be a tension between advertising wanting to reach audiences through whatever means they can to capture their attention and help them discover new products and consumers who claim a strong preference for ad-free products. Yet the other tension between ad-free products that cost more versus ad-supported models have a clear winner: ads. On products where I’ve seen data the “ad free” versions have converted at 4-6% of the user base at maximum.

    So the future of helping make the ad industry more measurable (and more online) I believe will be one of helping make ads both authentic & integrated. Trying to relegate ads to the least intrusive real estate of our computers is missing the point. Advertisers pay for efficacy.

    If not, we’d be telling advertisers to just leave all of their branded advertising spend on traditional television in the future. And to stick with their old adage, “Half the money I spend on advertising is wasted. The problem is, I don’t know which half.”

    • http://www.linkedin.com/in/repas David Repas

      As always, thanks for your insightful post.

      It has always perplexed me that advertising has become such a large and structurally important industry, and yet in many ways, it doesn’t directly serve its audience very well. How many people do you know that actually want to see advertisements? That look forward to seeing or hearing them? I would guess that the number is, at best, zero.

      Don’t get me wrong, I know that we all benefit immensely from advertising indirectly. In some ways we have made this implicit bargain, you support the content that I actually want to see and I’ll tolerate the unwanted noise that you so often push in front of me.

      I’ve actually been working on a radically different approach to online advertising for what feels like a lifetime in internet years. The question that we wanted to try and answer was: What if we could create a place where people don’t just tolerate advertisements, but actually seek them out? A place where a person gains real value by simply viewing ads. In other words, how can we get people to love advertisements?

      We haven’t launched just yet, but I think that we’re onto something really interesting. Hopefully one day we’ll cross paths because of it.

    • http://bit.ly/1upgJ6 Larry M

      FYI – It’s why I still believe passionate in companies like Adly (I’m an investor) who have created ways for celebrities to integrate endorsements “in steam” in a Twitter feed. Yes. Oh, sacred cow. In the steam.

      I think you mean the “stream” right?

      I’ve also seen companies that are doing integrated marketing within videos much like gumgum, but for videos. Not only does it provide better video SEO and analytics, it creates more user interaction.

    • http://twitter.com/lisahickey lisa hickey

      Great post, and important to understand whether you are an advertiser trying to reach an audience, a media company who is looking to provide the best user experience to its readers, or to media consumers who want “cheap, high quality media without the ads.”

      A few thoughts:

      For advertisers:
      “Don’t interrupt what people are interested in. Be what people are interested in.” from “helpful is the new viral” on blogspot. Integrated doesn’t mean interrupting people in the middle of what they are doing to tell them your message. Integrated means being a piece of content that is in the right place at the right time so people want to be receptive to the message.

      For media:
      What if you turned the idea of results on its head? That is, what if you thought of results as audience-based instead of advertiser-based? Search ads were so effective early on because they gave consumers results that were really valuable.

      Is there a way to do the same with display ads? There should be a better way of not just targeting ads based on demographics, but targeting ads with better algorithms based on what type of content people are reading, what their actions are and what their shared values are.

      I also like the idea of “Natural self-correcting mechanisms.” What if all display ads had either a voting mechanism to give advertisers information about what the audience liked and didn’t – AND, if a particular consumer voted down enough ads, they were then asked if they wanted to pay for content ad free. That is, put the buying decision for the purchase of ad-free media in the middle of an action where readers are consciously aware of how annoying the ads are.

      For Consumers:
      You want everything to be seamless – the way you get knowledge about products and services, your purchasing experience, the way the products work and are relevant to you once you get them. You want a brand you trust, recommended by friends (or celebrities!) you trust – and you want to think about the buying decision only when you want to think about it. So – acknowledge that, and be willing to pay for the experience that you want most (information, recommendations, buying experience).

    • http://www.uplaude.com Frank Fernandez

      Thanks for the post, Mark.

      Although I agree that most celebrities will not back inauthentic products, some definetly do. There are various types of celebrities. Some more popular than others. Some will take risks that others won’t and might back questionable products, in turn, creating noise. I think we all need to realize that social media can turn anyone into a celebrity. Not an Ashton or a Britney, but an average person that quietly becomes a small demi-celeb amongst their hundreds or thousands of followers. Adding an ad to their stream will be ignored just like the current ad placement systems. Their true power is in consumption. Their public use of products and services and the ligitimate conversations they have around them are what we really need to tap into.

    • http://twitter.com/georgelbowen George Lucas Bowen

      Nice article. In content celebrity endorsements have been around for decades. Look at Radio this was one of the first ways to monetize free content. I’m shocked this has not been more widely adopted online. It’s effective, efficient and relevant.

      There is a huge balance of niche target being current customers or closest to converting where you can be the content to the other end of spectrum where you are irrelevant and obtrusive but potentially generating demand or creating brand recall for when those people become closer to purchase. This is all about reach. Niche is small group high conversion and efficient, mass advertising is hugely inefficient with low conversion but has massive reach and also influences niche focus conversions.

      Something that digital media is creating is the potential to scale niche targeting to some degree. The challenge lies in creating the content to scale against niche groups.

      Pixazza and Gum Gum are doing great things moving engagement in stream and increasing relevancy. They also strike a good balance on reach and targeting.

      The future of engagement around TV is super exciting. Not sure how it will all shake out but there is going to be some really great innovation in advertising around and in content surrounding watching shows. Marketers will have to learn how to stack their advertising while consumers stack media.

    • Anonymous

      I have heard this a lot and have also heard the same statistics before, but I think its a little misleading. A couple of points from my personal experience.

      1) When you have a .2% CTR, that is just as likely to be one decent campaign and a lot of crummy ones.
      2) In fact, the vast majority of advertising can be considered “bad”. I would say in the same way in TV you show ads on the less popular tv channels.
      3) When display ads are done well, they can be interesting and functional. I am reminded of the combo ads from Apple on NYtimes.

      Which leads me to a question that I don’t know the answer to:
      What is the cause which is the effect? Did ad blindness come about due to bad ads or do we have bad ads because of ad blindness?

      Here’s the problem I have with the belief that display ads will die out. Everything you’ve listed as display ad problems can be exactly mirrored in print. In fact, most online layouts seem to take their queue from print. What makes the internet format so different as to be effective in the print form but not the internet form?

    • Dave W Baldwin

      Thanks for the info Mark. In working with the best in tech (AI/AGI), I needed to develop product toward what can market. This backs what I’ve been thinking about for the past few yrs.

      Banners are pretty well dead. You may be able to do something with them if they are part of a bigger ad strategy… but the vehicle to do that is not in the public at this moment.

    • http://inuvi.com Mark Westling

      Excellent post, Mark.

      My take on banner blindness is that publishers and advertisers are both at fault. What started this was the publisher’s desire to sell 100% of their ad space, no matter if there were good ads available for it or not. What publishers didn’t get is that this damages their own brand, leading to worse ads, lower rates, and the banner blindness we have today.

      I’m working on a version of integrated advertising — appending text ads to SMS alerts, notifications, and content — and I recently went on a rant when I saw the same thing happening in this space (http://blog.inuvi.com/index.php/2011/04/sms-ad-relevance-and-irrelevance/). Ads for “gossip alerts in Spanish” appended to college basketball scores? WTF?

      Appending SMS ads to alerts and content (as opposed to the dreaded SMS push ad) has great opportunities for targeting and I’m asking the publishers I work with to reject all ads they consider irrelevant to their subscribers. Luckily, they all agree that lousy ads are worse than no ads at all.

    • http://inuvi.com Mark Westling

      My guess is that the minimum cost of advertising in print is high enough to discourage any advertiser who doesn’t care about ad performance. This keeps all ads at a reasonably high quality. Publishers also care deeply about their own brands so they’ll reject anything not up to par. If the quality isn’t there, they’ll trim their publication size rather than accept second-rate ads.

    • Anonymous

      You’re only looking at one side of the table Mark :-). This is written entirely from the perspective of the advertiser, not the consumer. There are three players involved in her, the producers of the content, the consumers and the advertisers. There’s an implied contract between the producers and the consumers that the consumers will put up with some advertising since they understand that it costs to produce the material. This is true about TV, print media and online.
      There are plenty of ways to force the consumer to view ads like popups, flash movies, etc. Do this too much in a capcha or some other way, and consumer will vote with their feet.
      The best way to advertise is when a consumer is looking for a product as Google has demonstrated in search.
      Just my two cents as a consumer. I certainly don’t have any domain expertise in advertising.

    • http://twitter.com/FinancialBin The Financial Bin

      That’s an interesting concept, David. As I was going through the article, I couldn’t help but think that somebody needs to create a way to generate excitement for ads similar to the hype that comes during Super Bowl time. Hell, many people watch more for the commercials rather than the game. Sounds like you’re on your way to doing something of that nature. Good luck!

    • http://andrewgertig.com Andrew Gertig

      I agree with your statement: “The reality is that advertising has got to become more integrated with content in order to drive efficacy,” but as you say there are limits to product placement, though still effective. The flip side to higher ad integration with content is to create companion content that integrates with the ads. What if consumers wanted to be more engaged with existing ad placements? My co-founders and I at OtherScreen think that this is where there is real opportunity.

    • Anonymous

      There is a common misconception that CTR is a good metric for brand advertising. It’s a good metric at the time of purchase intent. Like on site or during search.

      Display advertising is largely brand advertising. Recall and perception are what you want at this point.

      Ad blindness is more of an issue, maybe. Difficult to say since there is limited public data on the impact of display advertising on brand perception.

    • http://www.facebook.com/people/Sid-Labs/100000804868370 Sid Labs

      An interesting piece, Mark. You have come up with some good options as alternative. IMO the days of CTR or CPM are over. Now time is to bring some “humanity” in Ads. We now need to have Ads which are being suggested friends and these Ads don’t need to appear like an Ad at all in form of text or Image or video. If a business get successful to convince some of my friend for his brand then the business will automatically get a “FREE” marketing guy on their behalf but the condition is, you gotta be honest. You can’t create fake market need or hype just by introducing “creative” and “innovative” Ads. In the era of social networking when people are desperate to find the “e-version” of their life are more interested to find stuff and consume it which is being recommended by their family members or friends. A “word of mouth” Ad which is being recommended by my friend has more meaning for me than a flashy and expensive video Ad.

      P.S: I am the guy who tweeted you as @kadnan

    • http://twitter.com/SeanAlex Sean Alexander

      Thanks for sharing Mark. On Xbox, we take an “Invite, don’t interrupt” approach to engagement on Xbox LIVE. We’ve found presenting consumers with a clear sense of value exchange (e.g. Chevy Volt, Camaro, and Corvette add-ons for Kinect Joyride or Hulu Plus for free to all LIVE members for a week via Jack Links). While this doesn’t scale the same way Display ads do, engagement can be as simple as a :30 or :60 spot.

      When you engage with consumers and brands in the “stream” and when they’re already emotionally engaged, unaided recall goes up – we’ve seen 90% on Xbox. http://www.microsoft.com/presspass/press/2009/dec09/12-09crossmediaengagementpr.mspx

      While not right for all brands and there needs to be a balance. We’re seeing great success with brands as varied as Porsche and the History Channel. Value exchange works.

    • http://www.twitter.com/allenkristina Kristina Allen

      This post could have a whole second section on the importance of campaign-specific landing pages and measuring conversion rates. The more targeted and personalized ads become, and the higher the CTR they generate, the more important campaign-specific landing pages will be to turn those clicks into leads or customers.

      “Half the money I spend on advertising is wasted. The problem is, I don’t know which half” can be answered by the ads that are performing best in terms of CTR, but even better answered by seeing which of their corresponding landing pages has the highest conversion rate.

      I’m not sure how it would work with in-stream Twitter advertising as it exists today, but with GumGum or similar platforms, I can see how it would be hugely beneficial to the marketer/advertiser if he/she could both A/B test ads but also create and A/B and multivariate test landing pages from within the ad platform rather than manage them in a different platform.

    • Brian Dear

      Banner ads first appearing in 1994? Hardly. I built an ad server and had graphical banner ads as early as 1988 at Coconut, my first startup. Pre-web online services. Prodigy also had ads. Heck, Viewtron had ads back in 1981.

    • http://www.wac6.typepad.com William Carleton

      Mark, no question advertising is *sigh* a necessary evil in the short term, but surely the real promise of social media, when it comes to retail consumption, is to end advertising once and for all.

      Already, artificial inefficiencies are being forced on systems that have the search capability, the UGC, the real time location information, to make it possible to skip the filtering sponsors prefer (demand) and unleash the authentic data that everyone else (but the sponsor) wants to see.

      ‘Gotta be a bigger vision for the future than to assume that manipulating people’s attention is as natural as a corporate lobbyist buying a legislator.

    • http://businessmindhacks.com AlexSchleber

      Sorry, but that is wishful thinking as far as I can tell. Print-based brand ads’ effectiveness has always been notoriously hard to measure, and there is no proof that quality has been “reasonably high”. These ads were simply bought by brands that were already large enough to 1) have the money to pay for them, and 2) not have to care how effective they really were, what their ROI truly was.

      I’d say print ads have been ignored for decades with the best of them (and print is dying after all, isn’t it?)… in that they are actually a sort of model for the similarly derived Web banner ads. It’s just that when Internet ads first appeared, it had a certain novelty for a while, like “hey look, there’s an ad here on the Web!?” And then it dropped from there, predictably, like a rock.

      The problem that print media content creators have the same as web media content creators, that they are giving away their share of the Attention Pie (the only scarce resource in an info economy) far too easily, too cheaply. They should be finding ways to creatively place in-stream, logically related, relevant offers, of products they have more of a financial interest in than the relative crumbs that are ad rates.

      Create your own products to place there. JV with the creators of products. Etc. Yes, it is all a lot more work than simply randomly, or semi-randomly throwing ads against the (content) wall and seeing what might stick. And the definition of “stick”, as Mark so points out so well, has been deteriorating at a frightening pace. But that work is where the value of ad effectiveness would be created.

      Offer people more of what they were already doing. THAT is the reason why those in-game ads for game add-ons/upgrades is working so well: It’s not an interruption, it’s something that is logically related and relevant right then. Yes, it takes creativity and work to set it up.

      If you are the content creator of a news article on the ongoing Libyan civil war say, end with an offer for: A special report on the current upheaval in the muslim world. A book on foreign policy, ideally North Africa related. A book by the author of the article, ideally related to something in the article.

      How about one of those ad supported, now further sponsored somehow Kindles with 5 foreign policy/history eBooks related to the article preloaded for $99? Then sell them many more things on that self-selected, pre-vetted attention platform. A little more low tech: Even mugs or T-shirts with anti-Gaddhafi slogans or humor, something that all newspapers should already have from one of their in-house caricaturists /cartoonists. Or sell a special free report on protecting yourself from rising oil/gas prices (in part due to the Libya story) by investing in oil futures. Asf.

      Any of those might be fine ideas worth testing, and better by far than trying to sell perfume, clothes, or cars against that same article. And if it just had to be cars, at least make it the car promising the absolute greatest fuel efficiency to combat the effects of rising oil/gas prices… if you cannot at least spin a half sentence that makes your ad logically related to the article, then you are interrupting, pure and simple.

      And while that might have worked for a while in the second half of the 20th century, because, well, it was hard to just switch newspapers, and you didn’t really have much of a choice than to at least glance at the display ads in your paper, asf. But in 2011, on the Web, we have options:

      We can find the another article or post on the same topic by tying a few letters and a few mouse-clicks. We can install a browser plugin that will actually block your display ad from ever showing up for us in the first place. Even if we just use the good old “trained ourselves to ignore” tactic, one way or the other you can end up on the “infinitely ignored list” as Gerd Leonard calls it very quickly…

    • http://businessmindhacks.com AlexSchleber

      Great points Lisa, the “don’t interrupt” mantra is something I’ve been arguing for for a long time. See here: http://businessmindhacks.com/post/online-ads-punishment-for-using-stuff-for-free

      Also see my notes in the reply a few comments down.

    • http://twitter.com/lisahickey lisa hickey

      Right. The best advertising has always mirrored the media it’s a part of.

      The reason fashion ads in Vogue work so well is not because print ads work – but because the audience is looking for fashion, and the ads deliver that – beautifully, elegantly, with the same style and flair that the magazine does so well.

      The reason the best TV commercials work (think Superbowl) is that the advertisers have figured out how to tell a story – funny, dramatic, engaging – using actors and editing and music and timing – the same way the best TV shows do.

      The best radio spots are theater of the mind. Transportive. The reason search ads work so well – they deliver search results. In the middle of the place where people are performing the action of searching.

      Then you get to display ads in online media. Are they all ineffective? No. I agree with fudouri, some can be interesting, some can be engaging, the results are skewed by relative effectiveness of the ones who do it well.

      But imagine this – you are driving along a highway. And you see not one billboard every mile, but thousands upon thousands of billboards on every road you drive on. Would ad blindness start to develop? You betcha. That’s the environment we’ve developed for display ads. And it sucks for everyone – advertisers, consumers, and online media companies.

      The best part about that is – it’s not sustainable. As online content becomes more interactive, more multi-media, more socially shared, more “in the stream”, so too will advertising. It has to – the only question is: “how quickly?”

    • http://www.hardanalytics.com Guy Barry

      From dealing with this issue on my site, yes, all true. I believe that image ads which get attention may be the way forward. But, the problem is that the more interesting the content, the less attention the reader will pay to the ads. Explicitly writing disclosed copy for products in interesting ways, may be a way forward as well.

    • Joseph Quaglia

      This is a great post. It makes me think harder about how we need to be more creative about delivery, rather than just analyzing mountains of data and market segments.

      Here is a post I wrote on the same idea a few months back:

      http://jquaglia.com/?p=68

    • http://www.facebook.com/people/Jeffrey-Todd-Wyckoff/1434180209 Jeffrey Todd Wyckoff

      David, your concept sounds cool. We should talk.

    • http://twitter.com/geoffw8 Geoff Wright

      Hey, I’m the founder of a business in this space. The first step towards the answer comes when you forget the word advertising, and think instead about monetization, relevance, usefulness. Banners will always exist, but they will become a secondary means of monetization.

      tl;dr “Advertising” isn’t the future of monetization.

    • Nils Koester

      As long as it is so cheap to advertise the way we do these days the hyper complex advertising ecosystem will not change at all :-)

    • http://polidigital.org Joshua Ansell-McKinnon

      Very interesting.

      Often brands tend to be directly selling most of the time. I think online marketing needs to shift strategy and focus on engaging consumers. Engagement is very difficult, but reaps amazing benefits. Engaged consumers become sales people for your brand.

    • http://twitter.com/140bill Bill Garber

      This will be a long-remembered and often cited article.

      Integration is a service of the experience provider. Advertising certainly has a problem as consumers take further control of their media experience. Consumers don’t like being interrupted, distracted, or otherwise taken advantage of.

      Was it Tim O’Reilly who said, If you didn’t pay for it, you are the product!

      That said, in the advertising business, there are numerous examples of advertising only media. Direct response television comes to mind. Advertising ‘shoppers’ that compete with regular newspapers, sometimes even owned by regular newspapers, and send only to non-subscribers.

      Advertising news as … well, news, may well be where advertising ends up. And it may just turn out to be terrific for advertisers as well as consumers.

      This could get very interesting and profitable in the near future …

    • Maris

      What do you suggest for a service that sells banner ads as requisite together with other ad components? I mean, that’s what I am required to sell and with those statistics at hand, i doubt how many more of my clients would like to buy? I have been constantly telling them to make the content interesting enough for the audience to click. You’re saying that in-text ads have higher CTR’s than banners. Can we perhaps apply some sort of principle of in-text ads to banner ads?

    • http://www.irisholidays.com/kerala/kerala-honeymoon-packages.html Kerala Honeymoon Packages

      This may be true only in US context. In countries like India print still has the reach and can be used to create awareness unlike online which is used mainly for branding and engagement . But agree that anyway future is integrated :)

    • Anonymous

      That is a good analogy. And it is a prevalent problem. In print, you can’t slap another 300×250 and expect an increase in revenue. On the web, that is the first thought for any publisher.

      In terms of “how quickly”, my suspicion is not quickly at all. Here is the problem. It is too easy to buy display ads right now. No other internet advertising form has so little friction.

      A 30s TV ad can run on any channel. A 300×250 can run on any site. A site takeover requires a lot of manual work (and hence significantly higher cpms).

      One of my theories is that 1) Banner ads will die (at least the uncreative ones). 2) They won’t die until another form factor can be run with the convenience that banner ads can be.

      My vote is cast toward a standardized site-takeover scheme. If I was wordpress, this would be what I’d be looking at for monetization.

    • Anonymous

      I evaluate this article only a half correct because of innacurate perception of Internet Advertising within advertising in general and also a false perception of some of the measures on the Internet.

      There is a mention of CTR decrease. Yes, there is a CTR decrease, but it is not crucial for a basic purpose of display advertising (which is branding). It is crucial for DirectResponse campaigns but in branding campaigns it is an additional value that display ad can provide and that is not reacheable trough offline medias.

      There is also a mention of banner blindness, but it was never measured in offline medias so allegation that only Internet display ads are not noticable is not quite correct. Many of the researches proved that display ads contribute to a branding which opose mentioned banner blindness effect.

      Considering this missinterpretation of CTR and banner blindness I would tell that the greatest problem of Internet advertising is that it is the most mesurable advertising media.

      Furthermore, there is comparation of DirectResponse, branding, online and offline spendings, but with few important facts missing. DirectRespons in offline haves very low competition so there is no wonder that a great number of the companies having DirectResponse as a primary advertising form redirected their budgets on the online advertising. Nevertheless spending measurement in offline DirectResponse campaigns is very hard to make, since most of those budgets are generated from a small and medium local companies and are spent on for example direct emailing, promotional pamplets etc and investment is pretty unmeasurable. On the other hand, on the Internet we can get much precise DirectResponse investment information. After effect is that now there are noticed new advertisers that invested in the past but it was not measurable. Also a great number of a large advertisers started to invest part of the budget for DirectResponse campaigns.

      Another perspective is that there are offline and online branding campaigns and display ads which in branding have the strongest competitors – TV, print.. result is DirectResponse having weak competition in the offline and branding having strong competition in the offline, so it is logical that it will take more time for branding to be accepted as it deserves. But if display advertising is efficionate does not depends only on how much it was noticed on the website (regardless the banner blindness allegations we know it is), but also how much units we can buy for a speciffic money amount and what result we will get in comparation with what results we can get for the same amount in other medias. This efficiency is different in each country because there are different advertising prices in each media. Few other reasons why display in online is behind are, including allready mentioned missinterpreted CTR, client education problem. Clients are acquaint with offline, but they know very few about online and which companies from the very start used offline and now they should also use online and many other things.

      As farr as for Solve media personally I like their way of getting attention, but what reach in target group and targeting alone they can offer to the clients? How many times in the day we are in contact with type in forms like this on the Internet?

      I would like to add just one info about me, I am a part-owner of a display advertising network company and intext advertising network company.

      For integrated advertising, you are demonstrating some interesting cases and suggestions. But as for all on the Internet, there is a lot of material to discuss every one of them.

      I find Adly very interesting but I don’t know enaugh about it to comment. I find a Charlie Sheen case and the concept seemed interesting and functional.

      GumGum is also interesting with great possibility of a large reach and great targeting. But as you already mentioned Google, question is how long would it take for them to make their own solution or simply to buy someone who already have the solution, integrate it into existing ones and offers on the world’s level. Maybe they will do it with Pixazza.

      I will not comment Kontera and Vibrant media because one of my companies is a competition but on much smaller market. Nevertheless rules are similar

      Skimlinks is by its nature a similar to a concept of the intext ads but it seems to me that the problem could be in a number of words that could be sold if their earnings are by CPA model. Questionable is how much profit they can generate. I think they need rarely large website network to make a good profit.

      Maybe I am wrong in some of the statements since we are working on much smaller markets so some of the rules are also a bit different.

    • Germain Bos

      Hi just a quick one here. I first thought that was an interesting post. However I feel really disapointed after reading it. Indeed, basically what you say is
      1) Banner / display ads are not efficient, because people don’t click them. Fair enough, but that is an outdated debate in my view, the real question is what will be the next standard, universal metric in the future to measure brand exposure and its impact not on sales or lead generated online, but on brand awareness, which will drive sales on the long run.
      2) Integrated advertising is good for direct response. Yeah, well, this is exaclty what affiliate marketing has proven (at least in Europe) along the last 10 years. And this is why there is a clear difference in formats used between traditionnal advertising (so called “media” / “branding” / “display”) and Direct Response marketing, affiliate and Lead generation marketing which use very little display formats, but e-mailings. They work with integrated ads, and that’s why it works, and how this business has grown and keep on growing in most parts f the world.
      One can argue on “performance based display advertising” which has quickly developped the last years, in my eyes this is an oxymoron.
      In other words, what I take from your post is : “banners suck, and is not the way of the future” and that looks like too long an article for such a self evident truth.

    • Anonymous

      I believe this already exists; it’s called search marketing.

    • Anonymous

      I’d expand this to the future of marketing will be integrated, not just the future of advertising. Its more important than ever for companies to have a presence on social media sites and engage with existing and potential customers. And in doing so they build up a reserve that allows them to leverage their streams for their own marketing messages.
      Also, I think its incorrect to just look at the click through rates for in-text advertising like Kontera and Vibrant. While at Adobe we saw high click through rates on those networks, but low conversion rates. And when you experience them in person, its not hard to see why. Ads that popup unexpectedly, with nearly impossible to find or click on close buttons mean that people click on the ads to get rid of them, and then close the window that opens immediately after clicking.

      http://blog.arkli.com/2011/05/02/the-future-of-marketing-will-be-integrated/ has a longer followup.

    • http://declandunn.com Declan Dunn

      Thanks Mark for the article, heard about it on Namesake, made me think about 2 things:

      1. We are still so direct marketing based (I’m from affiliate marketing, so clicks and conversions is in my blood as well), and think of everything as clicks on ads, which means we want to take people away from what they are doing – reading or searching – and move them on.

      For search this is great, but skews our view on the validity of text links – yes they work for Google searches, AdSense, and for display ad buys – yet if your purpose is to get someone to click, you want to take them away from what they are doing.

      Given that social and mobile media are so visually driven (love the idea of text integration with visuals), and the tools that are currently used by mostly advanced marketers like retargeting, attribution, and integration of social logins and the social graph into the user experience, we have a chance to do something to get those brand dollars.

      Then I see your examples – Kontera, Vibrant, and SkimLinks – and while all great companies, direct marketing are the common roots, and DMers rarely do branding well. Can’t someone connect the worlds of brand and revenue (what I call Brevenue in my upcoming book)?

      To give brands what they want, we have to move beyond the click.

      2. Integrating via gaming mechanics works when the user is in a game, whether Angry Birds of Farvmille, games without end in a way. Instead of looking at everything as advertising, to draw the user away, integrating into games is the first step. When someone integrates this beyond the game, into the user’s every day experience of reading, interacting, and providing ads that generate rewards for taking action as PART of their experience, and not as an interruption, I think the brand dollars will not only flock there, it will combine the power of TV’s longer experience for retention, gaming mechanics beyond literal games and into user’s experience, and the Net’s ability to convert purchase intent.

      My take away, the game is to identify purchase intent and provide a reward and opportunity for the person based on experience, not based on ad copy getting them to click away. Until we all grow up from a direct marketing medium, we’ll keep saying (like most I met at AdTech) that there is no world beyond what we’ve done so far…to me, and as one of those former guys, we are all looking at a flat earth, and the user sees a round, interactive planet they want to experience and be rewarded for that experience.

    • http://www.aaronklein.com/ Aaron Klein

      The integration of advertising is really great and important, but it seems like relevancy is just as much if not more critical.

      I see and recall even lousy banner ads that are relevant to me way more than ones that aren’t.

    • http://twitter.com/adamloving Adam Loving

      I’m curious to hear how social media (viral word of mouth) and gamification (loyalty programs) fit in here.

    • http://twitter.com/jonkaye jonkaye

      Mark – a well thought-out piece, but I think you gloss over the significance of a word you use in one of your last sentences: “make ads both authentic & integrated.” You mentioned integrated 11 times (including the title), but “authentic” really only once. To me, the successful ads either wildly stand out with humor or garner interest in themselves, or they fit an authentic experience that prospects can envision.

      I think the best way to be authentic is to demonstrate how your product solves some real problem that prospects have. I think this is similar to one of the comments below (Aaron Klein), who said “relevancy is just as much if not more critical.” To find relevance and authenticity, I suggest looking at product training as a starting point.

    • http://thesistown.com/writing/basics/dissertation-proposals dissertation proposal

      agree with you )
      i think that illustrations are awesome and very suitable! thanks to the author!

    • Elladyer

      Context is king or, in our case queen. We have had 1/3 of our users (http://www.fashion-ade.com/) click on a product link because we put it in the context of what she already owns.

    • Stephanie

      You should integrate Solve Media captchas into subscription requests for your newsletter :)

    • http://twitter.com/skiplogik Michael Dowling

      Mark, thanks for another great post. I’m curious, though. Do you believe that perhaps one of the reasons people aren’t paying attention to display ads is because the ads themselves aren’t all that well executed creatively? I agree that integration is one solution, however, it can cut both ways – improving brand association, but also tarnishing it. Much has to do with relevance and fit, which limits the overall integration opportunity. But, back to display advertising, the impact of getting 998 people to notice your ad is extremely valuable, no? How to get noticed, then, is the question. Every other media – from print to television – tests their ads with consumers, testing copy, messaging, creative materials — prior to executing media buys. The same isn’t true for online – likely due to the notion that the internet is inherently more measurable – with the click-through rate once at 78%, why would you need to? The other impediment to testing online advertising is the idea that much can be achieved through A/B testing, but again, that (and many other analytic solutions) are all geared towards achieving stronger click-through behaviors. Is it really time to throw in the towel on display advertising (more rhetorical and not suggestive that you are saying so)? I don’t think so. We just need a better way to get those 998 users to notice us. Testing online advertising prior to buying is one way – and, advertisers will definitely follow because it something they are accustomed to and familiar with.

    • http://www.facebook.com/alphaanimal Avid Avini

      Your really have a great way to write inspiring stories. Thanks a lot for that.

    • http://twitter.com/rahulcee Rahul Chitrapu

      Mark, What about Groupon, LivingSocial and other other daily deal sites? Aren’t local businesses turning to daily deals to draw customers in instead of advertising on local newspapers or local websites that potential customers might see and might decide to try out?

    • http://profiles.google.com/wdisman William Disman

      As an online advertisement startup myself, one of the main
      challenges we face is described in this article: getting your attention. However once we have your attention we have
      an additional challenge, can we make you want to click on the ad? The problem of course is that what makes you
      want to click doesn’t always make me want to.
      We have trained ourselves to avert our eyes from advertisements because
      they aren’t often relevant.

      Another field that emerged as a result of the inherently low
      CTR of the industry was behavioral advertisement. A behavioral ad works by “paying attention” to
      your actions on the internet to best serve an ad that accommodates your “web-surfing
      personality.” This model has some early
      issues due to the techniques advertisers use to “pay attention” to you. These privacy issues have even reached the agenda
      of the government, vowing to help consumers navigate the waters of the new
      internet technologies. The
      consumer/advertiser relationship is extremely delicate, with my data privacy concerns
      I’m not sure I want advertisers “paying attention” to me even if that means
      more relevant advertisements.

    • André

      Reminds me of tv shows in the fashion of “World’s funniest TV Commercials”

    • http://www.esrati.com David Esrati

      I agree with Lisa- the problem with online display ads is they litter sites- we, as consumers can’t process that much advertising on a page.
      There is no elegance with most display advertising- which is what Apple is trying to bring to it’s iAd system (with limited luck- due mostly to limited bandwidth).
      You should always have your own ads on your own site- if no where else. I’m amazed at how many companies don’t do this.
      As to the future is “integrated”- hasn’t it been all along? We’ve just added more to integrate.
      The real powerful players online understand the most important part of online marketing is having great profiles of your customers- much deeper info than just typical demographics- likes, preferences, friends- that’s why Facebook is becoming the most dangerous player- eclipsing Google, Amazon, Apple, Netflix- who all had relatively good ideas about who they were marketing to.
      If you don’t include CRM as part of your comprehensive integration plan- you are kidding yourself.

    • Anonymous

      Mark, really thoughtful post and greatly appreciated.  In my experience with our (expansion stage software/internet) portfolio companies, the content marketing-based marketing online seems to be the most effective.  I was interested to see your view and data, as it again seems to point to content-based marketing techniques and why pay to be part of the content stream if you ARE the content stream…

      Thanks for your continued great posts!

    • http://anyessays.com/ Essay writer

      Good article! Clearly the line between user assistance and user interface is diminishing. Specialists in either of these fields will need to look at both domains very closely to be efficient.