Why Advertising In the Digital Era May Be Failing To Connect With Consumers

Google and Facebook are increasingly dominating digital advertising, as the data below demonstrate.

The problem with that is it may be constraining the connection between advertisers and consumers - just at a time when emotional interaction is becoming a primary driver of purchasing decisions. JL

Matthew Garrahan reports in the Financial Times:

Brands spend more than $540bn worldwide on advertising. (Yet) Facebook and Google have become the biggest recipients of digital ad spending. They accounted for 75 per cent of all new online ad spending in 2015. In the US, 85 cents of every new dollar spent on digital went to the two companies in the first quarter of 2016. There’s no shortage of screens (or) of impressions. But there’s a shortage of high value connection points between brands and consumers
Bill Bernbach, a founder of the DDB advertising agency and widely regarded as father of the modern marketing industry, once said that advertising “is fundamentally persuasion and persuasion happens to be not a science, but an art”.
Brands spend more than $540bn worldwide on advertising, according to eMarketer, the research company. Yet marketing is increasingly grappling with significant problems. Whether reaching millennial consumers who want to escape marketing messages, or “cord-cutting” television viewers, who ditch cable and satellite subscriptions in favour of ad-free Netflix, advertisers are having to work harder than ever to find their audience.
Technological change has made the task harder still. Ad blocking software has created real problems for digital publishers reliant on display advertising. Ad fraud is a similar worry, with the World Federation of Advertisers, whose members include McDonald’s and Unilever, recently warning of “endemic” digital ad fraud and claiming that up to 30 per cent of all online ads are never seen by real humans. The WFA is forecasting industry revenue losses of $50bn by 2025 unless marketers take immediate and effective action.
“Is it human beings seeing ads or just a machine? And if it’s a human being is it actually a consumer?” says Brinsley Dresden, head of advertising and marketing at law firm Lewis Silkin.
At the same time, there is a big shift in consumer behaviour. Smartphones and mobile devices are fast becoming primary sources of entertainment and advertising dollars are flowing there at an increasingly rapid rate.
Facebook and Google have become the biggest recipients of digital ad spending. Combined, they accounted for 75 per cent of all new online ad spending in 2015, according to the Internet Trends report published this year by Mary Meeker of Kleiner Perkins Caufield & Byers, the US venture capital fund. In the US, 85 cents of every new dollar spent on digital went to the two companies in the first quarter of 2016.
This shift has profound implications for media buying agencies that make money by placing ads for clients, as well as for the clients paying for ad space. The emergence of a digital duopoly caused some concern at the ad industry’s annual shindig in Cannes this summer, with private discussions taking place about creating a “third block” of TV advertising inventory to rival Facebook and Google. The talks centred on owners of television networks pooling inventory but it is unclear whether the talks have progressed much.

Innovation and evolving services mean TV is not such a turn-off

The emergence of new digital platforms and services means brands must also rethink the way they sell their products. For example, Instagram and Snapchat have different audiences and require shorter, punchier ads compared with traditional 30 second TV spots.
Christopher Vollmer, global entertainment and media advisory leader for PwC’s Strategy& consultancy, says advertising “has always been a combination of art and science. Technology is now becoming a third variable”. Advertisers “have to get all three of these things right”.
Not all aspects of advertising’s tech revolution have been a surprise. Video has become a big driver of advertising online and on social media. “It tends to get the most consumer engagement on social media and mobile devices,” Mr Vollmer says. This was one factor driving telecommunications company AT&T’s blockbuster $85.4bn bid for Time Warner, which faces a year of regulatory scrutiny and no guarantee that it will be approved.
Time Warner owns one of the media industry’s most impressive content portfolios, spanning CNN, the Warner Brothers film and television studio, and HBO, the premium cable channel. The ability to sell advertising against some of Time Warner’s content was a big factor in the proposed deal. New technology means the combined entity would be in a powerful position in selling advertising targeted to individuals and specific consumer groups.
Technology advances should, theoretically, make it easier to market products. Elie Kanaan, executive vice-president of marketing at Criteo, a digital advertising group, says the industry must do a better job of targeting its messages to the right consumer groups.
Criteo uses available data and internet cookies — data sent from a website to a browser — to identify shopping patterns in order to send relevant ads to the right online or mobile user.This targeted approach means the advertising beamed at consumers on their mobile devices can be more relevant. “Consumers want a seamless experience … they don’t want aggressive advertising that is intrusive,” he says. The company recently worked on a trial with several London retailers that installed beacons sending signals to the smartphones of shoppers. The beacons collected data about how long the people spent in the shops, as well as information about the items they spent time looking at.
Advertising is rapidly moving towards the personalised advertising world depicted in the Steven Spielberg movie Minority Report. But will this new era of targeting result in brands selling more products?
The most important aspect is engaging the consumer, says Mr Vollmer. “There’s no shortage of screens and there’s no shortage of impressions. But there’s a shortage of high value connection points between brands and consumers, which is the whole point of advertising. You have to create effective engagement with the consumer that gets them to buy.”
In this respect, advertising is the same as it ever was. Technology may have disrupted it but the industry’s artistic heart still has a big role to play.