INSIGHT: Rise of online means days of hit-and-miss advertising are fast ending

Advertising as an attempt to persuade people to buy things is as old as the hills and it certainly predates by millennia the print and electronic delivery technologies that became so powerful during the last century.

Advertising as an attempt to persuade people to buy things is as old as the hills and it certainly predates by millennia the print and electronic delivery technologies that became so powerful during the last century.

Think of the picture-signs outside shops and the town criers and handbills of earlier times.

Until recently, John Wanamaker’s famous frustration about advertising was universally shared and repeated ad nauseam.

A merchant from Philadelphia who, in the 1880s was credited with the complaint, Wanamaker observed: “Half the money I spend on advertising is wasted but the trouble is that I don’t know which half.”

As we now know, online advertising has changed all that. Today’s advertisers have a better degree of certainly that their advertising dollars have been well invested.

Moreover, online advertising technologies enable them to change track at very short notice. They can adjust their messages to exploit unforeseen opportunities or even quickly pull ads altogether if the results are disappointing.

But not all online technologies are created equal, and we now talk about the value of ‘intelligent’ ad serving – that is, the ability to publish ads based on data insights rather than gut feel.

The earliest ad servers appeared in the late 1990s - they were conventional servers aligned with database servers which stored online ads and delivered them to website visitors. That is still their essential function.

A publisher’s inventory of ads – banners, static images, animations and text – is refreshed for visitors on a continuous basis, and the ad server performs additional functions that include managing a website’s advertising space, counting the number times an advertisement is looked at and monitoring traffic to produce reports that tell advertisers how productively they are spending their online budget.

Online advertising…

And while online advertising is still in its early stages it is growing by leaps and bounds.

Today, it’s a mammoth industry that continues to expand and evolve. From the early days of banner ads followed by pay-per-click business models, we now talk about innovations in demand-side platforms and their application to location-based devices such as smartphones, tablets – and any day now – devices worn on the wrist and others yet to be conceived.

Mobile, of course, is where the explosion in online advertising is likely to be most profound in the near term.

Numbers vary but there is consistency in the expectation that worldwide spending on online ads will top US$200 billion in five years, and that a least a third of this will be mobile.

Near term growth in year-on-year mobile advertising in New Zealand is expected to grow 200 percent according to the recent report, Interactive Advertising Bureau and PwC Advertising Expenditure.

How will publishers adjust? Generally, the industry is finding that the old way of managing and selling inventory isn’t keeping pace with market demand.

Hence the call for a more intelligence-based approach to ad servers to overcome existing shortcomings and address the challenges publishers now face. Let’s examine these challenges and how they can be met.

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The first thing to acknowledge is that the major established ad serving technologies are ageing. The product functionality enhancements needed to update them have become impractical to develop and so older platforms must inevitably be phased out.

Cloud computing capabilities, which can offer so much in terms of flexibility, cost savings and operational freedom, have not yet been sufficiently embraced. The same is true of other advances in data collection, storage and processing.

The result is inadequate and even poor connection between the applications that are involved in selling and delivering ads, preventing publishers from seeing the big picture.

For example, an ad server might be able to report the numbers of impressions delivered, but if that data isn’t integrated with analysis tools, there is no reliable way of understanding if impressions were sold at the optimum price or if the inventory could have been better packaged to maximise value and performance. It’s a case of the publisher flying partly blind.

Server shortcomings…

Another shortcoming is that older ad servers haven’t been able to recognise visitors according to their demographic profiles, preventing publishers from serving ads appropriately.

If servers have built in behavioural and contextual targeting capabilities, however, they can tailor ad experiences for specific demographics. This means that a given inventory can be sold in different ways to different people.

Publishers who can’t do this will be even more disadvantaged as newer ad content types such as streaming video proliferate and turn inventory management into an ever worsening nightmare.

And then there’s competition. Whereas in the print media industry the cost of entry is often prohibitively high, working with websites is comparatively much less expensive.

Websites can also be got off the ground quickly, and with new ones being launched all the time, competition for advertising dollars increases without pause.

Traditional publishers with outdated ad servers won’t be able to keep up, not least because they are no longer the only contenders in their space. Popular social media sites and mobile apps are offering attractive options now as well.

While it’s true that many different tools and facilities can be deployed to meet these challenges – things such as targeting applications, market research, inventory analysis, workflow and CRM software – a piecemeal approach is not the right answer.

To optimise processes and maximise profitability, publishers need solutions that offer true advertising intelligence with an approach that makes data readily accessible, turns data into insight and provides fast and easy-to-use analytical capabilities for good decision making.

With such an approach, publishers make more profitable use of both their server infrastructures and ad inventories, website visitors see more relevant ads and advertisers enjoy much improved returns on their online advertising investments.

Intelligent advertising is truly a win-win-win business scenario.

By Geoff Beynon - General Manager, SAS Institute New Zealand - a business analytics software and services company