Why Advertising Is Making The Internet and Mobility Less Fun and Eventually, Perhaps, Less Profitable
I’m not ashamed of telling people I like to play Rovio’s Angry Birds. I liked the game better before Rovio decided it was OK to advertise to me even in games that I paid for. Sure, they are advertising in-app purchases, plush toys and their own games, but they are still advertising and it still interrupts game play. I click “close the ads” as quickly as possible so I can get back to popping piggies. But I really hate that they are now advertising power-ups every few slings—“please buy some software that makes it possible for you to use less skill in our games”—an anathema for purists.
And speaking of interruptions, how about the advertising on web-based replays of broadcast television shows? Full advertisements, now increasing to well over a minute. Often the ads are the same ones, repeated over-and-over. Ads are perhaps the one case for the Windows claim that people really want to watch video and do something else at the same time. I would love to be able to check my e-mail during these commercials, just like I do when watching live television.
I don’t get to check my e-mail while watching DVR television because I am spending the commercial time fast forwarding through the commercials. (Then you also have the issue of on-demand broadcast shows on cable with embedded advertising with fast forwarding disabled — some pay over $200 a month in bundled services to be told by their television they can’t fast forward through ads that come from basic broadcast channels.)
As I researched click-through rates, the first article I found pushed a full page ad at me before letting me get on to the article. From that article (Facebook ads’ click-through rates soar in Q3)I learned that in Q3 of 2013 soaring is defined as going from .05% to .20%.
Why so much advertising? Because companies are trying to “monetize” their technology investments, and because of the perception that most content not only wants to be free, but needs to be free, and ads become the de facto approach to creating revenue streams. Unfortunately, even low amounts of engagement do drive revenue. Ads vary in their approach, from pop-ups, to banners, to in-line text to news feed ads, all of which cost different amounts and offer a range of returns for customers. The highest click-through rate I could find was 8%, which was the highest level for an ad placed at the top of a Google search. The average click-through rate for highly-placed Google ads was much lower, at 3.16% (Google AdWords Click Through Rates Per Position).
People do click-through, and those click-throughs can be tied directly to revenue for web retailers. The cost is pretty small compared to other engagement engines, so it seems advertisers have decided it is better to be ignored or to upset at least 92% of customers for the 8% or less of customers who create the return on the advertising investment.
What none of these mathematical ruminations considers is if retailers could do better with other models of engagement. Could investments in customer service, higher quality products or other areas create better revenue returns than advertising? Of those 92% or so of customers not clicking through, and the whatever percentage that just completely ignore the ads, do they lose because their primary touch point isn’t effective at all?
And then there is the extreme case where advertising drives a negative response, rather than a positive one — and I don’t mean from perceived messages, positive and negative, derived from campaigns like SnoreStop’s #betogether billboard featuring a U.S. Soldier hugging a Muslim woman — I mean from the sheer quantity, persistence and interrupt-driven nature of advertising.
That experience includes those fast-forward-disabled ads on cable television, and those ads, like the Rovio Angry Birds ads, that play even after you’ve already made a payment. (If you’re curious about how many ads you are exposed to, on average, keep your curiosity, but set your expectations low about finding an answer. Lonny Kocina points out that the source for a common 3,000 ads per day statistic is apparently mythical. See his post: The average American is exposed to … for more or less detail).
This all came to a peak for me during the Macy’s Thanksgiving Day Parade. Of course, being called the Macy’s Thanksgiving Day Parade is a giveaway that the event is likely to push Macy’s. It is also likely to push NBC, the broadcast home of the parade, where endless queues of stars spilled their voices and images into the cameras and microphones of Al Roker and others to promote their latest NBC projects. Rather than being a beloved American event, the television version has eroded into an endless plug for Comcast and its properties.
What does the future hold: a consumer rebellion where people actively act on their irritation and stop clicking through to make a point? Or do the minority of consumers who click-through continue to make it worthwhile for advertisers? Does positive growth in one segment offer enough value for advertisers to continue to risk alienating a greater population of potential consumers?
Do advertisers recognize their myopia and start looking at customer engagement as a holistic endeavor worthy of rethinking strategy and increasing investments in experience and human capital? Do cable company customers push back by canceling services that force advertising on them after already paying exorbitant rates, or do they just accept the new reality compounded upon a new reality and turn to the other new reality, their tablets, turning from one advertising platform to another? Does frustration escalate as Google, Facebook and others master mobile advertising?
If consumers get fed-up with advertising, they may well stop buying products that annoy them. Fortunately for advertisers, people will always want stuff, and it will take many a tumble down Maslow’s Hierarchy of needs for that to change. The likelihood is that we will see more advertising not less, but it will be targeted, and perhaps feel more comfortable as social media invades and the ads are pushed not from big mindless engines but from our friends, colleagues and acquaintances.
And finally, there is likely to be an eventual advertising arms race, as some software companies will attempt to break the keys behind the advertising and block it on browsers, phones, inside of apps and even cable boxes.
What do you think of advertising? Are you tired of it? Tired of it enough to do anything? Do you just accept it as reality and ignore it? Do you embrace it and hope that it brings you deals and happiness? I look forward to your thoughts.
Daniel W. Rasmus
Daniel W. Rasmus, Founder and Principal Analyst of Serious Insights, is an internationally recognized speaker on the future of work and education. He is the author of several books, including Listening to the Future and Management by Design.