What a year, huh?
2020 will be a year most-likely defined by a few major events (the pandemic, the US election, and racial equality protests), as well as an absolute slew of “oh yeah, that happened in 2020 as well” moments (Kobe Bryant’s death, the bookending of the year with the assassinations of prominent Iranians, Parasite winning the Oscar for Best Film). Unsurprisingly, the globe-spanning impact of the COVID-19 pandemic was felt in the digital advertising world as well. As we finally end this decades-long year, TONIK+’s VP of Data Science, Bryan Williams, explains how the world of finance can give us an understanding of what to expect as we look ahead to 2021 and beyond.
Digital Advertisers excelled in 2020…but don’t expect that trend to continue
The acceleration into digital work was exponentially increased due to the pandemic forcing many slow-to-adapt businesses to essentially push their workforce into a remote capacity almost overnight. This rapid digitalization of the white-collar workforce led to a boon for the tech-based companies that could provide and/or adapt to this new normal. This has led to a massive shift not only in work, but in the economy as well. The top 5 stocks (Microsoft, Apple, Amazon, Alphabet, and Facebook) account for 20% of the S&P 500’s market cap, exceeding the dot-com bubble’s peak concentration of 18%. Concentrations of this magnitude are untenable over a long term, and with the combination of this past history and the future slew of legal challenges upcoming for some of these companies provide a strong probability of reversion back toward a historical baseline.
If the mounting legal challenges are quickly-approaching rapids down the path, then the mounting uncertainty about the digital advertising space is the more-dangerous undercurrent lurking beneath the surface.
A Mile Wide and an Inch Deep
The recently-released book Subprime Attention Crisis: Advertising and the Time Bomb at the Heart of the Internet cuts straight to the heart of an issue that’s been bubbling beneath the surface of digital advertising for a while: digital ads don’t have the same impact that they once had. In the salad days of the Internet, banner advertisements were scoring a remarkable 44% click-through rate despite being a static image, relatively simple animation, or (heaven forbid) an ad with an annoying repeated audio clip. The creativity of ad content has evolved drastically since then, leading to digital content becoming the primary focus and trickling down to TV, print, etc. The breadth of the market has widened considerably as well: banner ads are now joined by search, display, social, in-stream, interactive, and many others across a wide variety of platforms, channels, and formats. How do today’s full HD video spots and well-shot static images with well-known celebrities and tastefully-done branding compare to a crude banner ad slapped on an angsty Xanga or MySpace page? Not…good. A comparable ad in today’s world would pull a CTR of less than 0.5%, a level ninety times lower than a couple of decades ago. What happened? The rise of ad blockers, an overall lack of interest from audiences, and poor placement of ads due to the glut of inventory (and less-than-sufficient definitions of “attention” via measurable metrics) has caused a massive shrinkage in digital ad effectiveness. In fact, nearly half of all ads online are never seen by a user, and those defined as “seen” might not have ever grabbed the attention of the viewer. The introduction of better formatting, structure, and more-immersive content types can push the average CTR higher, but none of these format improvements get within a factor of ten on average due to the lack of interest from users at-large.
What has caused this decline in ad effectiveness on digital? In essence, its effectiveness is what led to the decline of its performance. It is similar to the decline of a successful investment fund’s alpha (risk-adjusted return) in finance: as a fund that outperforms the market due to a new angle on the market becomes more-and-more popular, the size of the market devoted to this investment (either through the original fund, copycat funds, or funds that are structured to take advantage of the original fund’s positions) becomes larger and larger. This effectively bakes the fund into the market, making the original alpha shrink until it’s at (or below) the market level. This phenomenon is similar to what we’re seeing in digital advertising: as it grows and grows in size, it has essentially gone from being an outperformer of the market to becoming the market. New features and additions can lead to an initial bump up in performance, but eventually these new offerings get absorbed into the market and become dispersed enough to not offer any advantage. Long gone are the days of having an advantage over the market, and the newest bells and whistles offered by the programmatic ad exchanges are only a temporary bump toward a past level of success that won’t be re-attainable without a massive rehaul of the digital advertising landscape.
Make Your Ad Strategy Antifragile
It’s not all doom and gloom: digital advertising still offers the best quantitative measure of ad performance out of any format. However, one should realize that while digital ad metrics are heads and shoulders above the estimates used by advertisers for decades, they are still quantitative reflections of qualitative concepts. A video view is defined by an instance where a video plays for two continuous seconds with at least 50% of the video visible on-screen. Does this actually mean that the user did indeed view said video? There’s no way to know for sure on an instance-by-instance basis, but if two videos ran at the same, had the same length and same spend, and one video had three times more views than the other, that presents a very strong signal that one video was better than the other. The only true metric of an ad’s effectiveness is its impact on the bottom line of your business, but performance boxed within a closed system such as digital advertising can tell us in a specifically contextualized manner. Much like the Churchill quotation about Democracy, digital advertising is the worst form of advertising except for all those other forms that have been tried.
Antifragility is a concept of a system that strengthens under duress and negative impacts. In digital advertising, a strategy that constantly hunts for and dives into the newest ad product is one that is setting itself into a fragile environment: by placing your strategy entirely in the hands of the newest release, you make your success almost entirely dependent on an externality that you have no control over. Instead, treat the digital advertising platforms as a tool rather than a crutch. Ultimately, the true driver of performance is the content’s resonance, or ability to grab and keep a viewer’s attention either by imagery, subject matter, and/or entertainment. Broad targeting campaigns are nearly as effective as specific targeting campaigns and are much cheaper to run. Instead of hyper-targeting users inaccurately or overpaying for conversions, focus on making better content that’ll perform well no matter where it’s placed or who sees it. I don’t drink Budweiser or wear Reeboks, but I can still remember the original Budweiser Frogs and Terry Tate: Office Linebacker commercials.
Good content is the ultimate antifragile performer, and no shiny new deployment is going to replace the lift of a highly-resonant spot. Redirecting budget to a better production team, creative, or even equipment can’t be as easily measured at first, but they are reflected in end-point performance. High-quality content can boost end-goal KPI metrics by a significant amount over bog-standard content. When high-quality is coupled with a service such as TONIK+ Video Intelligence, that original piece of content can be cut down to a multitude of lengths and formats to fit on a wide variety of deployments that are hyper-effective in KPI performance.
At the end of this long, long, long year, I think it’s fair to say that flexibility has been one of the defining measures for success. Companies, individuals, and society in general have come to see the ability to be adaptive to changes (both small and large) has a constructive benefit that outweighs pretty much any cost that goes into it. While many businesses in the digital ad landscape will espouse the same generic advice and “forward-looking” strategies that are in-truth backward-looking anchors, we’re of a mind that the best plan going forward is…keep your options open. A basic strategy that focuses on producing quality content first and foremost and deployment of said content afterward has an intrinsic advantage when the tides change versus a strategy that is beholden to overly-specific deployments (that don’t actually outperform). At the end of the day, digital advertising is a very powerful, but still an imperfect tool. Crafting your strategy around it takes much of the control out of your hands, making it highly susceptible to external forces, bubbles, and semi-subjective definitions of success. By keeping the focus on content first, you remain at the helm of your strategy, better able to weather the inevitable unforeseen storms on the horizon.
