How digital's ad woes will forge a new, better industry

How digital's ad woes will forge a new, better industry

“Does advertising even work anymore?”

Negative media coverage around digital advertising has bombarded headlines over the past few months. Uninspiring creative, ad-fraud, privacy concerns and complaints about poor consumer experience have some going as far as to say the system, as we know it, is dead. With spreading concern about the long-term state of advertising, there are even a few starting to believe it. And yet, they’d be very much mistaken.

As media consumption plateaus in the UK – reaching a saturation point of nearly nine-and-a-half hours a day watching, streaming, reading and listening to content – it’s less about how much time consumers spend with media, and more about where that time is being spent. Digital now commands half of the consumers’ time spent with media, and 32% of time is spent on mobile, overtaking TV for the first time.

It’s not surprising, then, that global ad industry growth is being fuelled by digital. Advertisers are taking notice of changing consumer behaviours and investing heavily in categories like mobile and video, so much so that half of all global ad dollars will flow to digital media ad formats starting this year.

So, with unrestrained growth and consumers continuing to spend more time with digital media, where is the disconnect?

All that “new” spend is overwhelmingly being funnelled to a few major players. Marketers are allocating over 63% of their spend to the walled gardens, according to eMarketer research – despite the fact that just 34% of consumers’ time online is spent inside Facebook and Google properties. That means advertisers investing into the walled gardens are over-indexing their spend nearly two-fold.

What’s more, advertisers are directing that spend somewhat begrudgingly. Research suggests that, for 42% of marketers, the top concern is the growing dominance of the digital duopoly. The asymmetry building between consumer time spent in those environments and the vast amount of money reluctantly being invested there can be drilled down to a simple reason -- it’s easy and effective to advertise inside the walled gardens.

In an ideal world, marketers want the ability to engage people – not broad-brush audiences – in a one-to-one, permission-based way, like they can with Facebook and Google. But they want that in the place where their potential customers are actually spending the majority of their time: the open web. That’s where the opportunity lies.

Necessity is the mother of invention, and through the trials and tribulations of the past years, we’re seeing a wealth of exciting innovations take shape – starting with the rise of people-based marketing (PBM).

Primarily executed within walled garden environments right now, PBM is set to break through, slowly but surely, into the open web. That blows the game wide open for marketers, who’ll have a wealth of options and fewer restrictions on how they allocate spend. In one fell swoop, the future of the advertising industry already looks brighter.

But there’s more. Apple’s entrance into the OTT market proves the increasing promise represented by OTT providers, and, given the possibility that players like Netflix may one day introduce ad-supported options, that suggests rich pickings in the OTT space. Major players can’t rely solely on original content to keep a subscription only based model afloat.

Add to that the growing excitement around 5G, which is set to turn ad land on its head and bring huge benefits to everyone in the advertising ecosystem – from brands and publishers to consumers. We only have to look at the launch of 4G and its facilitation of apps like Uber – impossible in a 3G-only world – to see the potential for where this could take us. With all that to look forward to, we could say the next few years of digital advertising look almost rosy.

Better, faster and more relevant ad experiences will be the new normal. Most importantly, the foundation on which those experiences are built will be privacy compliant. The global push we’re seeing now for increased regulation means that all new products delivered to the market will have consumer preference in mind. For the ad industry specifically, that means all new solutions will be permissions based, delivering privacy by design.

While concerns exist in the digital ad ecosystem today, the industry isn’t ignoring these challenges in the hope that they will go away on their own. As old Nietzsche said, “That which does not kill us, makes us stronger”. Advertising is far from dead, and current challenges have ushered in immense opportunity and room for growth. Soon, marketers, publishers, and consumers alike can expect technology to deliver a better, fairer, more robust, and more creative advertising sector – and that’s certainly worth the wait.

Gavin Stirrat is the vice president for Europe of partner services at OpenX

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