Tuesday, March 19, 2013

Why Online Advertising Isn't Local And Targeted Advertising Isn'tTargeted

When the internet first came into being nearly two decades ago, I along with many others, thought that it would be a brilliant medium for usurping Big Media and, espcially, for driving hyper local media and services. (Remember GeoCities ?).

I even went on to expand this thesis into a company delivering a platform for video narrowcasting services which established some pioneering services like ITV Local for the UK's largest commercial broadcaster.

But the market has conspired badly against this conviction and now a study by Boston Consulting Group has shown that only 3% of small local businesses use the internet for advertising. I'm not surprised.

The reason for this is technology and the interference with markets.

Let me explain. In theory, Amazon's sales 'long tail' should be a straight line. Instead it's a hockey stick. Using league tables, for example, inflates the sales of most popular titles and creates a positive vortex around them. So, a popular title remains popular. This is the reason why top music stars like Adele are now selling more than any artist in history. So, the effect become binary and the mid market becomes depleted. A similar effect works within ad placement alogrithms.

Another effect that skews the market is the way targetting works.

Traditionally, the more targeted an audience, the more media can charge, depending on the value of a specific audience. Therefore, 10,000 readers of a local newspaper or a specialist magazine were more valuable, per impression, than equivalent readers of national newspapers or generalist magazines.

However, online advertising models have been horribly skewed away from this model for a couple of reasons.

1) Volume - even with automation, low volume targeted media are a pain in the neck to deal with
2) Behavioural Targeting - frankly, the advertisers and adtech providers don't care what's on your page - they just follow the user. The results are often laughable, wasteful and useless all around. I'm constantly being targeted with ads for things I've already bought

So, just as you thought every solution on the internet had been thought of, there are mainstream business models eating themselves.

Indeed, Google tends to deliver much lower CPMs for narrow, targeted ads than for behavioural ads (they would argue, of course, that this is market driven - I would respond that it is very deliberate, as are most things Google do).

There is a huge gap in the marketplace for truly targeted advertising. At TVE we often talk to broadcasters and publishers about 'T-shaped' advertising, where the top of the T are larger national advertisers and the body represents narrow, targeted advertising. We believe that this is the best model for publishers, especially those involved with targeted advertising. But no one is fulfilling this.

As a raft of local broadcasters get set to launch in the UK and results for major local players like Trinity Mirror go from bad to worse, there is surely an opportunity to turn back the tide.