Why consumers are ignoring online ads

The attention signal is being lost in online advertising, and the answer lies in how well we understand the changing forces of consumer choices and behavior.

When most people think about the size of the internet, they think in terms of the number of unique people online. Research reports talk about how many people, what devices they use (hint: lots of smartphones), their connection speed, and if they are wired or wireless. The punchline -- pretty much every consumer in the U.S. is online, and those that aren't now are likely never going to be. As a developed economy, we're pretty damn close to complete saturation. All that misses perhaps the most disruptive point about what's truly happening -- it's the choices that those consumers have that are throwing the whole media ecosystem into convulsions. It's those choices that drive Facebook to spend $19 billion on a text-messaging app. It's those choices that make a large and profitable company like Yahoo worth a negative $10 billion.

Today there are more than 1 billion registered domains, or websites, on the internet. Inside those websites are countless articles, videos, photos, and status updates. About 20 percent of all registered websites are "active," meaning a human being has visited these sites at least once in the prior 30 days. That's 200 million active websites, or choices, and that doesn't even begin to touch on how many pieces of content are inside those active websites.

Over the past several years, marketers have become increasingly sophisticated in accessing and using data about consumers to purchase ads more efficiently and at an obscenely good ROI. Publishers reacted predictably as economics ebbed. These publishers began by a) bluntly refusing to embrace programmatic advertising by assuming, incorrectly, that this would solve the fragmentation problem and b) starting to add more ad slots and formats to their pages to keep RPMs consistent with declining ad prices. The first action put the publishers at an increasing disadvantage when it came to understanding and leveraging data to balance the economic equation. And the second action simply added to the glut of supply, making the first problem worse. Perhaps it's ignorance, or perhaps because each stakeholder is acting solely in its own best interest -- but in either case, consumer attention is fragmenting and therefore waning. And as we all know, attention is the crucible for effective marketing.

Consumers today are inundated with ads. Some are neat little standard squares or rectangles, some are "native" masquerading as content, and some exploit voyeuristic attention-bait lists and links. As an individual consumer, it's getting harder to find the actual content. More ads in more forms obviously mean more options for advertisers, but the attention fragmentation of today's internet means they must come with lower prices paid to achieve a reasonable ROI. That might sound good to a marketer acting in a short run self interest, but it risks spoiling the fertile soil of engagement and quality content.

Here's how we change this

We have to get better at how we use data to drive marketing decisions. Performance marketers embraced programmatic advertising first because they could cherry-pick audiences and buy in a biddable environment based on conversion algorithms. This misses the point of what data-driven marketing really is -- we need to leverage programmatic to deliver advertising messages that are more relevant to both the audience and the context. Programmatic does not equal performance advertising. Programmatic equals data-driven marketing, increased efficiencies, total transparency, and rifle-shot attribution opportunities. By really leveraging programmatic, we can finally understand, on an impression-by-impression basis, the reader, location, device, intent, past behaviors (online and off), the current situation, and many more critical attributes of attention opportunity. We can understand the context, viewability, and relative clutter of other adjacent advertising messages.

Online or digital marketing is an opportunity we've still not realized. We have an opportunity to both remove the inefficiencies and leverage what we know to message, learn, tune, and improve. Done right, this increases return on investment and puts money in the pockets of the content creators that deserve it most. The economics of advertising depend on consumers to stop ignoring and start engaging. Banner blindness is a symptom of what's wrong with the industry today. To thrive, publishers have to improve the RPM of their pages.

We need fewer ads and more that are endemic to the context of the site and page. These fewer and more targeted ads will pay better dividends to all involved. This transition ironically requires a complete embrace of programmatic advertising on level terms between publishers and marketers. To be clear, this is format-agnostic. Display, video, native, and mobile all have the same forces of decreasing signal and increasing noise diluting attention and therefore efficacy.

The tide will turn when publishers can see what the marketer sees and then use those same data signals to make programmatic decisions about the worth, engagement potential, and contextual alignment of a message. I know this puts the current notion of programmatic being a tool primarily for performance marketing on its head. The data-driven marketing horse is out of the barn and never going back. Marketers will always use data to make buying decisions -- but they need to get way better at it.

Walter Knapp is the CEO of sovrn Holdings.

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