The world of marketing became a lot more complicated with the advent of the internet. In the good ol’ days (for the purposes of this article let’s say pre-2005), marketing was a fairly straightforward process. Businesses marketing direct to consumers either worked through an agency or hired an internal marketing team to come up with creative, and place that creative either with the local newspaper, TV station, or radio channels. If a business provided services certain businesses, the strategy may then include advertising in trade magazines, attend more conferences and networking events, and/or cold calling. Some business best practices carried over into the post-2005 world–such as keeping a comprehensive list of clients and utilizing a customer relationship management (CRM) tool to regularly keep in touch with those clients using newsletters or other promotional messages–but by and large, the marketing was relatively straightforward as there were a lot fewer channels to advertise through.
A lot of that straightforwardness went out the window right around 2005. Why 2005? Surprisingly enough, 2005 was a banner year for most newspapers where revenues hit all-time highs. The internet was past the dot com boom, Myspace was just getting started, and Facebook had yet to be opened up to the general public. It was in June 2006 when Myspace surpassed Google as the most visited website in the United States and social media really started taking hold as more of a go-to source for the general public to view their news. To this day, newspapers and other forms of traditional media are still adapting and figuring out ways to compete in the online space. Some are more successful than others, but the pure fact of the matter is there are infinitely more advertising channels available in the post-2005 world.
What are Digital Ads? How do They Work?
Digital ads have a few different names and types along with the numerous strategies used to distribute those ads. They’re called programmatic display ads, targeted display ads, and sometimes can be referred to as the various strategies that are used to distribute those ads, i.e. geo-fencing, retargeting ads, etc. Many of these same strategies can be used to not only distribute display ads but also video commercials and audio commercials as well. These ads are all generally sold by impression (a view). Then there are pay-per-click models (think Google Ads and Bing Ads) that serve text ads at the top of a search result. There is no cost per impression, unlike the display and video ads. Meaning, a cost to the advertiser isn’t incurred until a user physically clicks on the ad–at which a certain amount of money is deducted from a predetermined daily budget. The actual cost per click can vary from just a few cents to hundreds of dollars based on the popularity of the keyword being targeted and the bid amount that advertisers set. This whole strategy is filled with quality score considerations, A/B testing on certain words, and manually bid adjusting for certain demographics or locations. Additionally, there is an entire world of social media advertising, which can be very effective with a proper social media marketing strategy in place. Please read here more information on social media advertising.
A lot of what is being bought and sold are regular display ads targeting certain users on a keyword they searched for, a website they’ve been to, or even a physical place they’ve been to through geo-fencing. It is not uncommon for a user ‘these days’ to visit a website looking at a pair of shoes, only to have an ad for those shoes follow them around the internet for the next month or so. Another example might be when someone visits a car lot on a Saturday, only to find ads for a competitor across town trying to draw them over there later that same night. These ads work primarily through ‘cookies’ (no, not the kind you eat!) that keep track of user data and are essentially the vehicles which bring these ads to a user when surfing the web or using apps.
In the case of geo-fencing, a digital fence is drawn around a physical location where it pings smartphones that enter that fence, subsequently serving ads to that user’s phone and all associated IP addresses (advertisers can even set up conversion fences to see how many users physically came to their store/event from a targeted fence location). Ads show on websites and apps that are hooked into an ad network (like msn.com, foxnews.com, The Weather Channel app, etc.) and those sites make money based on how many impressions they are able to serve on a daily and monthly basis. Same goes for videos. Most of the larger sites used above as examples distribute video content and serve ads before that content streams. There are also major sites like Youtube and Vimeo which also serve ads before playing content. That revenue is split between Youtube and the content provider based on how many views any given video receives.
How are Digital Ads Purchased and Priced?
Access to these advertising networks is usually brokered through agencies and demand-side platforms, otherwise known as DSPs. A DSP allows buyers of digital advertising to manage multiple ad exchanges through a single outlet. On the flip side of that, websites that do garner a fair amount of traffic (and by fair amount think at least 1 million impressions per month to see any reasonable profits through selling digital ads) can sell their inventory on various ad exchanges or supply side platforms (SSPs). How these ads are sold and at what cost can vary based on the quality of impressions that are being served, and the quantity purchased. Some programmatic buys are done through auctions, some have set CPM prices (CPM stands for cost per thousand, an old newspaper term carried over to the digital world), and others are only open to a qualified group of advertisers rather than any old blog trying to make money by serving ads.
What Exactly is an “Impression” in the Digital World?
It is important to understand exactly how an “impression” is defined. An impression is simply an ad loading on someone’s screen, but that doesn’t necessarily mean it is viewed by a human eyeball. A website with a 50% bounce rate that claims to serve 1 million monthly impressions may only see about half of those impressions fully load and displayed in front of a real human. Furthermore, a website that has 4 ads load above the fold could all be showing the same ad for the same company. That would technically count as 4 impressions served for that advertiser, even though it was really just one person who may or may not have stayed on the screen long enough to read the ad let along with click thru to the advertised website.
For example, a business purchasing 50,000 impressions at a $10 CPM may seem like a great deal for only $500 (especially when considering how expensive billboards, direct mail, and newspaper ads are with CPMs). Though the truth of the matter is, these aren’t all necessarily “hard” impressions–that is, a guarantee that the ad definitely reached a human eyeball. For this reason, video ads and audio ads have become popular especially as OTT video ad (over-the-top, as in ads shown over a Roku or a Firestick) inventories become larger, more varied, and more accessible. 5-6 second ads are priced a lot more competitively compared to display ads too, and since these ads have a much “harder” impression, it is easier to gauge when a video has physically played through completion, and more people are trying out these newer types of programmatic ad buys.
Digital Advertising vs. Traditional Advertising
It is almost impossible to give a definitive answer to digital advertising vs. traditional advertising debate. There are thousands of different variables involved depending on the type of business doing the marketing and where it is located. However, there are some major considerations to consider depending on the medium. Here are a few thoughts:
Newspaper Ads vs. Digital Ads
Ah, the newspaper. Once a mainstay in any business’ marketing budget, and now largely thought of as obsolete. This, however, is a mistake if doing marketing for general retail, especially if that is a local business within a defined geographical area that the newspaper covers (i.e. something everyone uses such as pizza or furniture). There is this general idea that only older people read the paper and only younger people read their news online, leading to the idea that makers of hearing aids should always stick to the paper and ads for cellphones/tablets should exclusively stick to online advertising. For a brief time after the 2005 paradox, this may have been true. But the sheer truth of the matter is at this point, there are just as many baby boomers online as there are millennials, and on the flip side, many millennials enjoy going “retro” and doing things a little out of the ordinary that is expected of them, such as reading a newspaper.
The newspaper was always a strong advertising medium because consumers could basically pick and choose which ads to look at while browsing through content (much like internet display ads), and it was the first form of targeted ads by placing certain ads in certain sections based on the demographics that heavily read those sections (also like internet display ads). For example, putting men’s shaving cream in the sports section and the Macy’s sale ad in the Entertainment section just made sense. The problem with the newspaper is there just isn’t enough advertising inventory anymore as papers do their best to cut expenses and therefore sections. This not only reduces their ability to ‘target’ their audiences but also drives prices way up for those businesses who find newspaper advertising highly effective.
Back ‘in the day’ (again pre-2005), it was estimated that about 4 in 5 people read the newspaper, that number is down to about 1 in 5 these days. Meaning, that while readership is way down, it is still a nice chunk of the population and still seen as a reliable source of news–an ad for a job certainly has much more credibility in a classified section of a newspaper than on Craigslist–so newspapers aren’t going away just yet, but no business in the 2020 era of doing business should exclusively rely on the paper to improve their bottom line. There is just too much opportunity out there in the digital world to be ignorant of that fact.
Radio Ads vs. Digital Ads
Radio is one of the best and worst forms of advertising. It is one of the best because by and large, this medium has not really been interrupted all that much–especially as more Americans than ever have longer commutes into the city. However, are smartphones/podcasts/satellite radio providers eating into this market? Absolutely, but the radio has one amazing attribute going for it–it is still free and every car in America still has a radio in it. There is a lot of competition on the radio, making advertising somewhat less effective. However, advertisers that stick it out with radio and stay consistent with their message definitely have a good opportunity to build their brand.
The problem with the radio (and frankly TV too, but more on that below), is it is almost impossible to catch people in the buying cycle for certain products. Advertisers do their best to guess–lawn care companies placing more ads in the spring for example–but for something like furniture or a vehicle, a person might only be in the market to buy those larger ticketed items once every five years. Meaning, advertising is wasted on folks who do not want their time wasted listening to some catchy slogan the local car dealership is pounding on the airwaves. This can actually might turn off people when they do get to that point of being in-market for a vehicle or couch.
Digital ads, by contrast, are the king of trying to catch people in the right buying cycle. Even if a person is just scratching the surface and doing some preliminary research on the best 4×4 system for a truck they eventually want to buy, the digital ad platforms are already putting that person into the universe to send truck ads towards. When it comes down to car dealerships, digital advertising technology is getting more and more advanced every day. It started with geo-fencing competitor’s car lots and has transformed into tapping into Polk data to send people ads when their leases start to expire, and dynamic ads that pull directly from a car dealerships inventory based on what was searched. Looking for a red Ford F-150? Well, Ford of Steubenville has one on their lot and now has the ability to send an ad to the person searching for that F-150 front and center. And while the radio is great for branding and getting catchy commercials stuck in someone’s head, it has nowhere near the ability to target on that specific kind of level.
Television Ads vs. Digital Ads
Let’s face it, TV executives, cable cutting is a thing, and there is not much to do about it until they adapt to compete against Netflix’s and Amazon’s of the world. It is catching up to the industry as people realize they are just paying more smaller bills to content providers rather than just one larger bill to a cable company. Whoever has the best content basically gets the most eyeballs. Plus, why pay a cable company a fairly high monthly fee AND have to watch ads around content too? Netflix is about $10 a month and no ads. This is a no-brainer for many people out there (not to mention much more convenient). From an advertising perspective though, Netflix doesn’t show ads on any kind of network, so good luck trying to capture those eyeballs.
Although traditional cable has been declining, there is some growth through the OTT advertising as more and more people are just simply downloading the HGTV app on their Roku, streaming their content over the internet, and putting up with the ads in exchange for (generally) free content. Instead of channel surfing, people are just app surfing, which advertisers actually like since it is more of a pain to switch between apps rather than cruising through the TV listings for something good on. Once HGTV is loaded up and a user becomes fully attentive to seeing what this house flip is going to look like at the end of the show, they will sit there and be forced to watch all the ads.
As for the local news stations, they experience the same challenge as the radio stations in terms of having a hard time catching people in the correct buying cycle for certain products. Furthermore, the price a lot of the general retail stores out of their advertising medium because it is still a bit expensive for Joe’s Pizza Shop to run consistent ads during the local news broadcast, especially when that broadcast may go in 50-mile radius and he really only serves a tenth of that market. A much more effective strategy is, still spending the time, effort, and money on creating great video content, but take advantage of some of the other outlets out there to push those commercials out by (targeted video ads, social media, OTT, etc.).
Final Thoughts on the Best Advertising Mediums 2019
A sales line many marketers used to use is, “it takes 4-6 impressions before someone notices an ad and that starts to influence their buying decision.” Since 2005, that number is probably more like 10-20 impressions, and maybe even more based on the number of targeted display ads being served over the internet on a daily basis. Google and Facebook certainly have made a great deal of profit harnessing this data and reselling it to everyone from the small pizza shop to the large auto-dealer with 25 area locations. There are price points for just about any business’s marketing budget, and the best part about it, digital ads have less waste. That is, fewer impressions are wasted on people who are not in the market for a good or service being advertised. In the paper, for example, it is estimated that any given ad is only relevant for about 10% of the readership. Combine that with a general decline in readership, and it makes a lot of sense to diversify into the digital advertising world.
Here is the one saving grace though for traditional media; no one can confidently say that it “doesn’t” work. There are still plenty of people out there consuming media on all three platforms outlined above and therefore plenty of people to patronize those businesses. Just like everything else, it seems like they have become much more of a niche advertising vehicle rather than a mainstay. The best advice for any business to follow is to do a mix of advertising, and follow a few simple business best practices when it comes to their online presence–have an attractive website, make sure listings are updates, get as many online reviews as possible, and have all the social media accounts with somewhat regular content posted. Most importantly though, get the right marketing help to ensure these are all being done in a correct and coordinated manner. Trying to do it in-house can be a very costly experiment, reaching out and using a digital agency is not only going to be more efficient than taking your attention away from your business to learn marketing, but has the added benefit of having multiple people working to make a business succeed. Some things are just worth investing in professional help, and marketing/advertising is definitely something that should not be skimped on. Successful businesses invest in marketing because it works.
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