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Image Source: The Drum
With an increasingly online-focused economy, many of the resources on the internet today remain free to access for consumers. Things like Googleâs email platform, YouTube for entertainment, Instagram, Facebook, Twitter, and Snapchat for social media, all provide value to consumers completely free of charge, or free with the option to upgrade (think YouTube Red, G Suite, etc.). Â In a world with nearly limitless access to information and entertainment, thereâs only one way for the entire system to support itself: advertising. However, this new age of freemium models and advertiser-friendly systems is not functioning in the most efficient manner possible. In fact, much of the money being spent on online advertising is going to waste as a result of abuse in the system. Letâs take a look.
Advertising Spend and Waste
Googleâs Ad Revenue from 2001 to 2017, Statista
The online advertising space has expanded substantially in recent years. Above we see data from Googleâs ad revenue increasing significantly each year to be a billion dollar enterprise for the company. Fellow tech giant Facebook is also growing its ad revenue business dramatically in recent years to make it a double-digit billion dollar money maker as well.
Facebookâs US and Non-US Advertising Revenue, Statista
The shift to online ad spending occurred quickly over recent years to the point of catching up with traditional offline advertising efforts. As more businesses shift to an online-focused approach, so to do their marketing and advertising efforts. In fact, 2017 was the first year that digital ad spending beat out television spending. Magna, the the research arm of the firm IPG Mediabrands, estimates total digital ad spending reached $209 billion in 2017 worldwide, while in the same year, TV ad spending reached $178 billion. As of 2017, digital ad spending captured around 41 percent of the global market, while TV ad spending accounted for 35 percent total. According to Magna, digital ad spend is expected to make up 50 percent of all ad spending by the year 2020. Clearly, it looks like digital ad spending is going nowhere anytime in the near future, and is likely to only continue to grow.
However, whatâs to come of all that money spent on digital advertising? While more money is funneled into digital ad spend, recent data from previous years shows that there is a significant amount of spend going to waste. In 2016, an estimated 48 percent of all online advertisements did not reach the right people across France, Germany, Italy, and the U.K., according to CNBC. Furthermore, Google has conducted research in the past on ad impressions and concluded that 56 percent of ad impressions are not seen, even though the average viewability rate is 50 percent. In total, Signalâs market research estimated that advertisers wasted $7.2 billion to fraud in 2016 while Proxima estimates that $37 billion of global marketing budgets are wasted.
In the world of digital advertising, there are multiple ways for advertisers to waste money on ad spend. Advertisers are facing a two-front battle against fraudulent practices from those looking to game the system and a simple lack of user engagement and attention from consumers. The first issue, fraudulent practices, can be traced back to other parties looking to gain the system. Some of the top offenders in this category include pixel stuffing, where one or more ads is âstuffedâ in a 1x1 pixel frame, ad stacking where multiple ads are placed on top of each other in a single advertising spot, and software applications that automate clicks for ad revenue to fake the appearance of human traffic (commonly called âbotsâ).
The second issue comes down to incorrectly targeting advertisements to consumers. Consumers are more likely to engage with advertising thatâs relevant to them and their interests, so advertisers need to get ads in front of the correct eyes.Without the proper data to effectively target the right consumers, ad campaigns can result in essentially taking shots into the dark. Along with that need is the need to combat the growing number of online users who browse with an ad blocker on their browser. With the growing number of online users utilizing an ad blocker, both on desktops/laptops and mobile browsing, advertisers must continue to find ways to minimize waste. But what can be done?
For advertisers to properly overcome many of the issues in the advertising industry, they need better access to first-party data and more effective channels to communicate with consumers. Between the abuse in the ad industry and the increased use of ad blockers by consumers, marketers need better options for how they utilize ad spend. Luckily, there are some innovators looking to solve those issues.
Zinc is one of the newest options in the marketing sphere thatâs building off of blockchain technology to create a system for both consumers and advertisers. The blockchain-based startup is creating a system thatâs consumer-focused where users can choose what data to share about themselves in exchange for tokens. In return, advertisers, ad networks, and developers can build products for and connect with verified consumers providing real data. With the system, advertisers are able to get past the ad blockers and inefficient ad spend by only connecting with real consumers who willing share first-party data for something in return.
Additionally, there are other platforms that enable consumers to choose what data theyâd like to share with advertisers for rewards. Datacoup is another data-focused company that enables consumers to profit from sharing their own data. On the Datacoup platform, verified US users can sign up, link social media accounts, and get paid a monthly premium for allowing the site to use your data with advertisers. Advertisers can use that highly specialized and verified data to target advertisements to the correct people. Many other platforms and startups are working on similar concepts as well.
While different platforms are likely to work for different consumers, one thing is clear in the future: first-party data is valuable. If advertisers and marketers seeking first-party data can offer something of value to the consumer in return for their willingness to share relevant data, weâll finally be able to tackle the problem of ad spend waste.