Why is digital advertising so lousy? Industry is too smug to innovate.

By Frederic Filloux
Sunday, May 30, 2010; G04

Is advertising the next casualty of the ongoing digital tsunami? For now, advertising looks like the patient who developed an asymptomatic form of cancer without realizing how sick he is. Such behavior usually results from excessive confidence in one's body's past performance, mixed with a state of permanent denial and a deep sense of superiority, all aided by a complacent environment.

The digital graveyard is filled with the carcasses of utterly confident people who all shared this sense of invincibility. The music industry and, to some extent, the news business built large mausoleums for themselves. Today, the advertising industry is working on its own funeral monument.

Before performing media oncology tests and discussing possible treatments, let me describe which soapbox I'm standing on. Each time I raise the issue of advertising trailing behind the digital train, I get two responses: Media execs nod sagely and later explain how they intend to progressively circumvent the ad food-chain. Advertising people breezily dismiss my remarks: "Anyway, you don't like us." Untrue.

First, I'm in the same boat as many of my friends in the news media: A significant part of my income, past and future, rides on advertising. Therefore, my pragmatic self-interest is to see digital advertising thrive.

Let's face it. On digital media, advertising hasn't delivered. In the news business, we have a rule of thumb: An electronic reader brings 15 to 20 times less in advertising revenue than a print reader does. I'll stop short of saying this dire state of affairs is attributable only to advertising. Between inadequate interfaces, poor marketing and the certainty that, just by itself, intellectual superiority entitles it to success, media carry their share of responsibility. But for the most part, the advertising community missed the digital target.

Digital advertising stinks. Both on the Web and on mobile. There are two main reasons.

No. 1: Poor design.

Where is the creative talent? Not in digital, that's only too clear. Look, most banners, skyscrapers, sliders, pop-ups, you name it, merely act as repellents to readers. They end up as fodder for ad-blocking systems. Unfortunately, these defense mechanisms are thriving. A Google query for "ad block" yields 1.25 million pages that send you to dozens of browser add-ons. On Firefox, AdBlockPlus is the most used extension, with more than 80 million downloads and more than 10 million active users. The same goes for Chrome, whose ad-blocking extension is downloaded at a rate of 100,000 times a week and now has more than 1 million users. For Internet Explorer, there are simply too many add-ons to count.

I spotted this comment in an excellent Guardian ad-blocking story:

I work for a digital advertising agency. Along with microsites, iPhone apps and long-form digital content, I make banners. Loads of them. And I use Adblock Plus. I also advise my friends and colleagues to use it too. This is because most advertising, online or otherwise, is utter crap. And banners contain some of the worst of the crap. Flickering, squirming, buzzing crap.

Another sign of the ad-design failure is Apple's decision. Not only does Apple enter the mobile-ad business as a sales house, but Jobs's company will also design ads, for a hefty $50,000 to $100,000 fee. Apple's message is that the profession needs to reboot advertising graphical standards. How strange to see a technology company giving lectures on design to the very people who prided themselves for their creative brilliance.

No. 2: Badly sold, badly bought.

Digital advertising high-tech products sold and bought in the most low-tech way. One after the other, most technology aspects of the advertising business have slipped out of the hands of those who were supposed to own them: ad serving, data management, behavioral targeting, analytics -- all are now controlled by engineering-driven companies.

In the process, the added value of media buying outlets has shrunk to a bare minimum, in which a bunch of twentysomethings are negotiating discounts with their counterparts in media. That's the exact opposite of yield management.

Everyone laments that Google, the ultimate geek machine, has absorbed a large part of the digital advertising business, but that's just the logical consequence of an inability to invest in technical talent.

Three trends should cause the advertising community to stop and think hard about its future.

-- The technology dimension of the business will intensify. Competence and imagination will tend to be in the hands of small companies. As they already do, the biggest and the smartest ad outlets will want to acquire such talent pools. But they will face tech companies ready for a bidding war; see what happened in the mobile ad sector with the AdMob's acquisition by Google and Quattro Wireless' takeover by Apple -- with the subsequent launch of iAd.

-- Media will have a strategic interest in boosting their CRM. They'll invest in developing this crucial asset for their digital properties.

-- Media will tend to move up the ad production chain by having their own creative teams, working more closely with big advertisers. On that matter, Apple could give an interesting pitch: "We are the media, we spent time and money designing a good interface; we don't want our work ruined by substandard advertising; let's work directly with brands and concoct great campaigns that will benefit us, the advertiser, and the reader." This could become a broader trend, spreading to other media, such as broadcast radio, neglected by today's ad creatives.

Does this lead to the extinction of big advertising shops? Certainly not. First, there is the inertia factor; these companies remain quite wealthy, thanks to decades of solid rainmaking. Second, agencies still enjoy profitable strongholds in which their value-added is undisputed, such as outdoor, display, television and print -- and the associated media and strategic planning. Third, they have no shortage of good managers able to organize a turnaround . . . in due course.

It is hard to reform a fat-cat culture -- from heavy margins, captive clients, cozy cronyism -- to a more agile one in which technology and innovation drive the business.

In this very respect, advertising and news media converge: Both have been late in hiring developers who understand the specifics of their business. Because of their intrinsic vulnerabilities, the media have been the first to take a hit. If advertising wants to avoid a Jivaro-like downsizing, it needs to listen to the clock: It's ticking away.

Frederic Filloux is the editor of the Monday Note, where this first appeared, and a contributor to Slate.fr.

-- The Big Money

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