Today, digital advertising is expected to grow to an annual spend over $335 billion by 2020. The industry is booming, taking over search ad spend at #1 in 2016. However, with constant increases in ad volume and spend, what’s happening to returns?
The average clickthrough rate of display ads across all formats and placements is a miniscule fraction of a percent: 0.06%. Even of this small amount, over half of mobile ad clicks are reportedly accidental—and that’s if you can reach the user in the first place.
Conversely, ad blocking tools are growing explosively, with usage up 41% on the year globally. The number is even higher among younger generations: nearly two in three millennials report using ad block software.
Some predict an advertising Armageddon stemming from cheap or fake impressions, especially considering that Methbot, a Russian ad arbitrage fraud bot was amassing $5 million dollars in daily earnings. Others harp that the future is in engaging, rich content aimed at millennials seeking authentic brand experiences. However, neither is correct—entirely.
When real-time bidding (RTB) for ad inventory went mainstream in 2011, programmatic ads began their half-decade, exponential climb to domination. In 2016 alone, over 96% of advertisers reported using programmatic advertising, with over half of the digital ad market traded via programmatic exchanges.
Advertisers have now grown use to the ability to making automatic, data-based decisions with programmatic and buy at-scale from a virtually infinite ad inventory.
That’s a long way from when Advertising.com—then known as TeknoSurf—announced (what is credited with being) the first cost-per-click (CPC) model for digital advertising, in 1998, virtually inventing performance-based marketing. Prior to this, most Internet advertisers had simply adopted the age-old CPM (cost per thousand impressions) model used by print.
This created a dichotomy that has persisted for decades in digital marketing strategy: brand advertisers generate widespread awareness paying for low CPMs, while performance/direct marketers engineer sales funnels to fuel with CPC traffic.
Over the years, many corporations divided the roles into separate silos. It seems intuitive. Let PR and creatives handle brand messaging while sales focus on optimizing funnels and bidding. But this isn’t 1998. Since then, human attention spans have dropped by over half, despite a five-fold increase in average daily information intake.
Many of today’s youngest consumers grew up with the luxury of having digital content their whole lives. Avid Internet users are effective and unforgiving skimmers who demand high-quality content constantly.