Despite the ups and downs that digital advertising has faced over the years, it is still the primary method of monetization for most online companies. According to the Interactive Advertising Bureau, the global online advertising business reached $31 million in 2011, growing 20 percent over the previous year. As the internet continues to become an even more pervasive force in peoples' lives, arguably the biggest challenge facing the online advertising industry today is the proliferation of devices people use to access information online.
By 2020, the number of global internet users is expected to quadruple to 4 billion, and most of these new users will come online using multiple devices. Increasingly, the device of choice for many users will likely be a mobile device, rather than a PC tethered to a desktop. Not only will existing usage shift from computers to mobile, but smartphones, tablets, smart TVs -- and who knows what other devices -- are expected to further permeate both work and home life.
Until recently, digital advertising strategies have been dominated by two primary forms of online advertising: paid search and display. Paid search has been denominated in keywords. Display has fundamentally been denominated in cookies -- impressions, clicks, unique users, reach, frequency, returning users, etc.
Today there is no "über-cookie" that can track a user's behavior across all devices she might own -- and privacy advocates would be up in arms if one existed. Without an über-cookie, it seems like the online advertising market is set to become highly fragmented by device moving forward. Fragmenting the online advertising market by device might seem like a natural outcome, but it's not in anyone's best interest. Greater fragmentation means greater advertiser inefficiency, which means online advertiser spend doesn't reach its full potential.
Is there a way to avoid fragmenting the online advertising marketplace by device?
The Holy Grail: Intent
In order to avoid device-based fragmentation in online advertising, a new unit of trade is needed. Keywords alone can't prevent fragmentation because they don't span channels, and cookies can't prevent fragmentation because they don't span devices. Instead, we need a unit of trade that is neither keyword-based nor cookie-based, but rather intent-based. If consumer intent becomes the unit of trade, the device, app, or channel (search, display, or social) a consumer is using no longer matters. An advertiser might simply buy users with an intent to buy basketball shoes or an intent to travel to Europe. Device, app, and channel might only determine which type of ad to serve.
As users turn to different devices -- particularly mobile devices -- for access, that usage can be described as being "episodic" in nature. Searching Yelp reviews for the best local seafood restaurant, using Shazam to identify the song playing on the radio, asking Siri for directions on the iPhone -- all of these use cases have a certain objective or intent underlying the situation, which the device (or app as the case may be) helps to achieve.
Similarly, when we issue a query to a search engine, that query has a certain intent associated with it, and the search results page and ads on it try to help us achieve our intent. As such, episodic usage is often "query-like." For example, if I'm using Yelp on my smartphone to find a clam shack in New England, that behavior is the functional equivalent of going to my favorite search engine and entering the query "fried clams Cape Cod." Additionally, if my device is geo-enabled, my location -- Wellfleet, Mass., for example -- may help to provide further context around my behavior. My online behavior or the query is the explicit intent, whereas my implicit intent is represented by geography, what device I'm using, what time of day it is, etc.
With paid search today, consumer intent is primarily explicit -- it's stated in a query -- whereas with app usage and geo-enabled devices, intent is both explicit and implicit.
Today, explicit intent in queries is monetized in search by selling keywords. But keywords can't monetize implicit intent because they aren't query based. For example, a user who queries "city lights" on a smartphone while in Paris likely has a different intent than a user who queries "city lights" within a Yelp app while in San Francisco. The first person is probably looking for information on why Paris is called the "City of Lights;" the other person is looking for a local bookstore. Explicit intent provides the subject; implicit intent provides the context.
But regardless of whether I'm using a smartphone, tablet, laptop, desktop, or smart TV, browsing for clam shacks in New England nearly always has the exact same intent associated with it. And wouldn't it be nice if buying one intent for "city lights" would cover consumer searches no matter whether they're searching on a device or a PC or from different locations across the world?
If an intent-based unit of trade can be used to monetize cross-device traffic, everyone wins. Advertisers and agencies will be able to maximize the reach and return of their campaigns, and they will benefit from cross-channel economies of scale. Publishers will monetize traffic better. And consumers will see ads that are more relevant to their intent.
Google has nearly a $200 billion valuation, not because queries are valuable unto themselves, but because queries are rich with consumer intent. If the digital ad industry could monetize intents across a multitude of devices as well as Google has monetized intent in search, then eCPMs will continue to support the growth of digital advertising and media content for years to come, no matter the device.
Murthy Nukala is the founder and CEO of Adchemy.
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