Insight: Why digital ad spend is just another form of broadcast advertising

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By: RickFerguson |

Posted on September 29, 2016

The digital marketing world was rocked last week by revelations that Facebook has been dramatically overstating the amount of time its users spent watching video ads on its platform. The announcement has sent CMOs around the globe into existential despair over their investment in digital advertising. But is the Facebook revelation really that surprising? Perhaps it's time for marketers to admit that, for all its vaunted sophistication, programmatic digital advertising is really just a more complicated version of broadcast advertising. Isn't it really just the same old wine in a new bottle?

As the Wall Street Journal reports, the issue really plaguing the advertising industry is a lack of transparency. Money quote from the Journal story:

"Marketers who have been pouring huge sums into digital advertising are wrestling with several recent events that add to a troubling picture: some are finding they can't be sure how well that money was spent or what they've received in return for it.

The lack of transparency that plagues the advertising industry was on stark display this week. Revelations that Facebook Inc. overestimated by up to 80% the average time people spent watching video ads on its platform shocked the media and marketing world.

Meanwhile, Japanese ad giant Dentsu Inc. admitted on Friday it overcharged at least 111 companies for internet ads. The mea culpa was prompted by a complaint from Toyota Motor Corp. that its internet ads weren't having the promised impact. Dentsu apologized and blamed overworked employees for the overbilling.

At the same time, marketers increasingly are questioning whether their ad agencies accepted rebates from media companies without telling their clients. An industry probe earlier this year into rebates highlighted digital advertising deals as a key area of focus. Companies including General Electric Co., J.P. Morgan Chase & Co., and Nationwide Mutual Insurance Co. have launched audits of their agencies. Ad companies have denied wrongdoing."

I mean, wow. Why all the subterfuge? The industry shenanigans could be the simple result of digital agencies and advertising platforms dramatically overselling the power of programmatic advertising to change customer behavior. After all, for all of our ability to micro-segment and target consumers with mobile ads tailored to their internet search history, browsing habits, demographic data and even psychographic profiles, how exactly is this ability different from the old model of targeting television beer ads to the predominantly male audience of NFL football games and anti-aging cosmetic ads to the predominantly middle-aged women who watch the View?

Certainly digital retargeting has proven reasonably effective - if I search for shoes on Zappos and then abandon my shopping cart, it behooves Zappos to retarget me with digital ads enticing me to return and buy those shoes. The only problem: retargeting advertisements typically rely on discount offers, which encourage me only to wait out the brand for a better offer without any incentive to engage in a deeper relationship with the retailer. The other problem: digital retargeting has become so pervasive that consumers now largely tune it out.

Perhaps it's the inability of digital agencies and platforms to tie digital ad spend to any sort of demonstrable ROI that has led them to mislead and obfuscate their clients. Perhaps some of it is due to honest mistakes. I'm not here to judge. We can certainly expect much soul-searching during Advertising Week, and a new commitment to transparency and accountability by the industry. That's all to the good.

It's important, however, that we recognise the limitation of digital advertising that's been staring us in the face all along: digital advertising is simply broadcast advertising tarted up for the new Millennium. It has no more ability to drive deeper and more profitable relationships with customers than did television advertising in the last century. Broadcast advertising can build awareness and excitement. It can engage and entertain consumers. It can even drive short-term behavior shifts through retargeting and notifying consumers of sales and promotions.

But digital ads cannot do more than serve as the very beginning of a customer relationship. Nor do they allow marketers to definitively tie spend to incremental behavior change. Even if the industry embraces complete transparency, or if a third-party Nielsen-like entity arises to measure digital ad engagement, these limitations won't change, because they are systemic limitations based on the digital ad industry's fundamental broadcast structure. That's why this quote from the WSJ article doesn't ring true for me:

Despite their reservations, marketers will have little choice but to keep increasing spending on digital ads, especially on mobile devices, if they hope to reach consumers spending more time away from traditional media.

Actually, marketers do have a choice. Digital advertising will always be an essential component of brand awareness and engagement. But marketers would be well-served to use those advertising dollars to funnel consumers into marketing platforms that allow for multi-channel customer identification and one-to-one marketing - marketing that delivers incremental behavior change measurable on a dollar-for-dollar basis. Don't just spend your marketing dollars on broadcast messages, no matter how micro-targeted they may be. Shift some of that spend in the service of building strong, profitable, and sustainable relationships with your best customers, and transparency and accountability will no longer be your worry.

Read the Wall Street Journal article (paywalled) here.

-Rick Ferguson



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