By now we've all heard the good news. The declines of 2001 and 2002 appear to be fully behind us and once again online advertising is on the rise. Rich media, standard ads, paid search and paid inclusion are growing quickly. Offline marketing dollars are moving online and the industry's forward growth prospects are encouraging and a relief to all of us. According to some projections, online advertising spending will be approaching $10 billion by 2007. Welcome news it certainly is.
All of that said, there's no room for complacency in a surging industry. Leadership is an absolute necessity, as is vision, and the industry needs an educated, strategic view on trends and directions that will emerge.
The next several years will see behavioral targeting and the delivery of qualified audiences evolve as key differentiators and revenue drivers in the online advertising space. The reason is simple. Advertisers in other media buy via audience demographics. In this medium, traditional age and gender measures can and will be augmented by anonymous, behavioral information that provides publishers with new data to sell with, providing advertisers with another tool to execute buys with and consumers with ads relevant to their interests.
In order to best prepare for and take advantage of this development, certain aspects of the supply and demand equation between advertisers and publishers must evolve to begin creating a market where data is easily accessed, immediately actionable and impactful for all the participants.
Advertisers' Changing Focus
A quantum shift is developing in online advertising, specifically among marketers for whom "return on investment" is a near-religious mantra, not simply a luxury. The traditional method of evaluating advertising opportunities, based almost solely on content adjacencies and historical CPMs, in addition to click rates and other metrics, is being replaced by a growing demand for actionable analytics to define audiences, the ability to segment and target audiences by behavior, serve ads or content to those audiences, and monitor progress via robust reporting mechanisms.
While an expensive, content adjacency-only campaign may yield acceptable levels of customer traction, the associated costs and inefficiencies make this approach less than optimal. This is, after all, a personally-addressable medium and should be treated as such. A campaign that targets well-segmented and favorably-predisposed audience groups will yield significantly better customer traction, limit the inefficiency and consumer impatience associated with irrelevant ads, and provide a significantly increased return on an advertiser's marketing investment.
In short, actionable analytics and better targeting yields increased advertiser ROI. In the coming months, advertisers increasingly will look for such high yield opportunities and, frankly, most will be disappointed. The simple reason is that multiple systems that attempt to provide a comprehensive technical solution are still multiple systems that are difficult to make seamless.
The Publishers' Quandary
Economic realities and the shift in advertiser focus will place a growing and significant burden on the online publishing community. Like all companies operating today, publishers actively are engaged in managing their bottom lines. Boosting profitability by eliminating waste is their first priority. Two years ago this meant cost cuts. In the future, it will mean finding the most impactful way to have employees deployed against customer and company needs. Having multiple vendors, sets of numbers and the related headaches has to go. What replaces it will be less friction between systems, better data that is immediately actionable, and the ability to align employees with real revenue opportunities.
Publishers are also facing top-line challenges. Every publisher has those areas which are consistently sold out and those that are consistently less than sold out. Today's efficient publisher tends to focus limited sales and support resources against the high demand areas, leaving the less demand areas begging. Behavioral targeting, where sold out inventory can be extended via anonymous profiles and unsold inventory filled with relevant ads based on the same profiles, is a plan whose time has come. The benefit to this is that advertisers will be able to reach audiences critical to them outside of content adjacencies and publishers will have increased the value of those audiences.
Where to Begin
With every business quandary comes business opportunity and vendors are lining up and choosing sides. Most are focused on the advertiser, providing research and measurement tools to gauge campaign effectiveness. Clearly, the advertiser, and the agency, need tools, data and focus from solution providers. However, few companies target the publisher.
Having the advertiser as the primary focus of solutions is not practical if the industry is going to ramp revenues quickly and efficiently. The publisher is the one who has the direct and daily relationship with the audience. The consumer visits the publisher regularly and the properly equipped publisher can create a tremendous amount of actionable data about that audience. They can do it anonymously and without violating the letter or intent of privacy. This data can then be used by the advertiser to target and re-target that audience, building audience-targeting data from the bottom up. We all know that building something from the bottom up is better than from the top down.
Developing the Solution
The appropriate solution to the publishers' challenge is a comprehensive technology platform that seamlessly integrates audience targeting, ad serving, results tracking and campaign analysis. This platform can be used for both ad targeting and content targeting, making the system enhance the relationship a consumer has with the publisher and the publisher’s audience has with the advertiser. Such a platform would enable publishers to better understand consumer patterns and thereby increase the size of "packaged" audiences, increase inventory in key areas, boost margin on low demand inventory, and create unique, revenue driving ad campaigns based on highly targeted audience groups.
In turn, offering advertisers targeted and unique opportunities generated by a seamless technology platform would enable them to realize significantly greater ROI from their efforts and automatically track and report the progress of their campaigns. The advertiser and publisher interests are both common and inextricably linked. Both want to serve an audience, providing relevance in all aspects of a consumer’s experience and need trade to occur in order for both businesses to work.
In addition, such a platform would significantly increase the efficiency of the publishers' advertising operations while at the same time decrease costs. Sales forces could be better deployed and would have more to sell. Ad operations and customer service could spend time focusing on the goals of a campaign, not getting two sets of numbers to balance.
The Ultimate Target
Online advertising will always be a dynamic, multi-faceted proposition. The popularity of current vehicles will ebb and flow as the space matures. New, cutting edge technologies will further change the face of the industry. What will not change is the core business belief that a value proposition cannot be accurately determined without tipping one's hat to the ultimate target -- increased revenue. Did that campaign generate additional sales? At what cost did those sales come? What was the return on our investment?
By leveraging a comprehensive technology platform to help publishers address their business and operations challenges, and in doing so, creating ROI-laden advertising opportunities that address the analysis, targeting and reporting needs of marketers, an even brighter and more profitable future for the online advertising industry will be charted.
David Hills is president -- media solutions at 24/7 Real Media.
