The digital advertising value chain is changing fast; consumers are taking greater control of their viewing and innovative new forms of advertising are emerging.
Consequently, companies are re-evaluating their digital media assets and developing new ways of engaging with consumers.
Meanwhile,the recession is turning up the pressure on advertising to deliver improved performance and profits.
Reconfiguring the value chain
Changes and developments in technology and consumer behaviour are forcing the reconfiguration of the value chain as the real and comparative value offered by primary and support providers in the chain shifts significantly. Advertisers, technology providers, multiservice operators and even consumers themselves are set to gain value share and power within the chain.
Full-service ad agencies, direct marketing agencies, and traditional media planning and buying will lose value share and power; however, the position of content providers and media owners will remain comparatively unchanged.
The combination of disruption in the value chain, market fragmentation, and significant growth in ad inventory capacity and format types will create confusion in the pricing and valuation of ad inventory and technology.
All players in the value chain will therefore need to revalue the assets they sell and purchase in order to optimise their margins. Expect market makers such as ad exchanges to thrive in such dynamic conditions.
New metrics to identify the media really doing the work
New metrics are digging deeper into the user ’s path to sales conversion and uncovering issues with the current method of measuring and tracking the user.
The issue is this: the currently accepted system, sometimes called the ‘last ad wins ’ model, doesn’t show all the advertising and promotional collateral that actually has an influence on the user ’s eventual purchase, instead it just credits the last ad clicked by the user.
However,a new technique, known as ‘engagement mapping ’, identifies ads other than the last ad that have also influenced the purchase, enabling advertisers and media buyers to alter their media plans accordingly. Successful adoption of engagement mapping will likely lead to a modest but noticeable shift away from search ,as marketers realise the last ad was a search listing used to navigate to, rather the final purchase. Even at this nascent stage, Ovum believes media owners should be prepared, acting quickly to ascertain where their ad inventory stands in the engagement-mapping landscape and planning the reorganisation of their digital assets and strategies accordingly.
Granular targeting is here to stay but deep packet investigation (DPI) techniques are heading for a regulatory wall. The latest online targeting techniques that have captured the industry ’s imagination (and investment)are based on capturing behavioural data. This tells advertisers about the sites users visit and what they are doing there. Behavioural targeting is raising concerns over consumer privacy, although if handled carefully this should not automatically lead to transgression .However, behavioural targeting based on DPI techniques has hit the wall when it comes to privacy. DPI enables the inspection and monitoring of individual data packets, meaning it ’s possible (for instance)to read people ’s emails ,and this has not been helped by Internet companies not always keeping users properly informed about DPI practices.
Earlier in 2009,the All-Party Parliamentary Group on Communication (APPGC)in the
UK launched an investigation into online practices including behavioural targeting using DPI. The difficulty is \ the lack of clarity over who exactly should be responsible for protecting consumer privacy — the government, ISP or perhaps even the consumer? Self-regulation is the obvious (and in many respects preferable)route, but whether it proves effective remains to be seen.
Rich media drives greater consumer engagement
Revenue growth in digital advertising continues to be driven by search, which is actually benefitting from the recession as people use it to seek product reviews, price comparisons and other information that gives them the best deals. Established display formats follow search, while rich media like video and environments such as social networks show fast growth although revenue contributions are currently modest. However, growth in rich media-related advertising will accelerate going forward because of the need for greater engagement and to counter growing ‘banner blindness ’, particularly among low-end ad inventory.
Social networks foster new models of engagement but should not be seen as an advertising nirvana
Social networks are creating a new dialogue between consumer and advertiser that is highly interactive and holds the potential for a deep level of engagement. However, engagement works both ways; this is a dialogue and users can answer back, for better or worse. This is one of the key reasons that advertisers are still treating social networks with caution.
There is also the question of how well adverts perform in a context where people are communicating and are therefore arguably less susceptible to advertising. The counter-view to social networks as a new frontier for ad spend (and the view we support)is that the business case for advertising on social networks is more challenging than anticipated, and social networks should be seen as only one element of an aggregate online spend by advertisers.
Do not underestimate how difficult it is to get application-based advertising right.
Application-related advertising appeals to brands because it is interactive and has great viral marketing potential as people share the application. Media Buddy,a company that specialises in this area, claims people ’s engagement with its branded applications is 75 times greater than the time consumers spend interacting with traditional banner ads. But the reality is that this only happens with a fraction of application-related ads.Many are too overtly branded with no real value to the consumer; at the opposite end of the spectrum, others are over- elaborated and hard to use.
The best applications in any context are the very simple ones. Branded applications for social networks are becoming popular with advertisers who want to tap into viral distribution.
But this requires applications designed with strong interactivity and hooks for sharing and this is not always the case.Applications rarely go viral as a matter of course, and in most cases need to be marketed – a fact often overlooked.
Twitter has potential as a marketing and advertising channel
There are some clear potential benefits in using Twitter as an advertising platform. Twitter has a fast-growing, international base of around 7 million users. The most normal use of Twitter for marketing purposes is for brands to create their own ‘micro- blogs ’ to share information and create buzz around a product or service, encourage customer interaction, and respond more quickly to customers.
More imaginatively though, one company integrated edited Twitter feeds into a widget-based campaign. Meanwhile, Twitter itself is reported to be experimenting with the mobile advertising potential of ‘tweets ’ through integrated advertising within the SMS bearer. This does limit room for manoeuvre as tweets are up to 140 characters long, leaving 20 characters of the SMS for advertisers to play with. People using Twitter typically communicate by pushing out information and/or seeking advice and information from other twitterers.
Search advertising could play in what is returned.