Can Online Advertising Survive?

One of the enduring lessons of economics is that things look rosiest just before they explode.

This happened in the tech industry in the late 90's. Prices, valuations, and interest in the dotcom economy had been soaring for years and had reached astronomical levels. And then, in the course of a few short weeks, reality suddenly reared its ugly head and it all came crashing down.

The online advertising industry may be facing a similar fate. There are some very disturbing trends developing in online advertising that we have chosen to ignore. But they are there just the same:

• Delivery:  According to a Wall Street Journal report, a recent study by comScore found that 54% of display ads paid for by advertisers between May 2012 and February 2013 never appeared in front of a live human being. Furthermore, of the ads that did appear and were counted as "visible" the threshold for "visibility" was so low as to be meaningless -- 1/2 of the pixels had to load for one second.

• Traffic: There seems to be a huge amount of fraudulent traffic to websites. Adweek reports that according to Solve Media the amount of suspicious web traffic was 46% in the 1st quarter of 2013. That means that 46% of the viewership reported by websites may have been bots, not people. According to Adweek, as much as $9.5 billion of the $20 billion that will be spent on online advertising in 2013 may be for imaginary traffic.

• Click Fraud: Nobody knows what the true extent of click fraud is. According to Business Insider "...armies of computers unknowingly infected by hackers to drive fake traffic through ads, generating up to $400 million a year in fraudulent clicks." This is particularly disheartening when you consider that click rates, which include the inadvertent clicks we all make, are at an astonishingly low 2 to 9 clicks per 10,000 ads delivered -- before fraud.

• Prices Are Dropping: According to reports, cost-per-thousand and cost-per-click rates have been dropping steadily for two years. This means advertisers are systematically losing confidence in online advertising's ability to deliver results to them.

• Social Media: Social media is starting to receive the scrutiny it deserves. The magical mystery honeymoon is coming to an end and marketers are demanding to see results. According to Forrester Research, "Social tactics are not meaningful sales drivers."

• Ad Blocking: A program called "AdBlock Plus" claims to have 50 million users. Despite its name, AdBlock Plus is more like AdBlock Minus. It does not block all advertising. In fact, Salon magazine says it derives a substantial part of its income by making large corporations "pay to play." It lets a certain type of advertising through its filtering system. But if big guys won't pay up, none of their ads get through. There is nothing preventing a more scrupulous company or browser from developing a true ad blocker, with no asterisks. In fact, Mozilla (Firefox) was reportedly planning to do just that until someone got to them.

• Dilettantism: When dabblers get involved in an industry, it is generally not a good sign. You could sense the dotcom crash was coming when you were standing in line at the supermarket and the check-out clerks were talking about their tech stocks. We now have big shots working in the online channel who are proud to say they have no knowledge of, and no interest in, advertising.

• Criminality: There is clearly a substantial amount of criminal and deceitful activity going on. The phony traffic, the phony clicks, the phony delivery numbers have to be coming from somewhere.

Any one of these factors alone is disturbing. Put them together and you have a very discomfiting picture.

Of course, the ad industry and the investment and the business communities are very high on online advertising right now because everyone's making money. Just as they were high on the dotcom sector before it evaporated.

As in the dotcom crash, the strong would survive a melt down. But a whole lot of web businesses, media buying firms, and agencies would go down hard. 

Some might even go to jail. It is difficult for me to believe that law enforcement agencies aren't looking into the mushrooming fraud. It could trigger a major event.

I never make predictions. But online advertising is a train wreck waiting to happen. I wouldn't be surprised...


World Tour...
I am speaking this Thursday in Buffalo, N.Y. on "The Golden Age of BS." Here's the info.

Where Do The Myths Come From?

The advertising and marketing industries have some very ingrained and persistent myths.

Having been in the industry for 40 years, I've heard some of these myths but I've never  seen data to support them or found out where they come from.

One of the common and pervasive legends is that older people want to be like young people. The result of this is advertising that is obsessed with showing us the insipid activities of 22 year-olds in spite of the fact that people over 50 are responsible for almost half of consumer spending.

As far as I can tell, older people certainly want to be youthful. But they have no interest at all in being like young people. This is a distinction that is apparently lost on the advertising industry.

As someone over 50, I think I have a pretty good idea of how my friends and I look at ourselves and what we aspire to.

Yes, we want to remain youthful. But we have our own idea of what "youthful" means and it has nothing at all to do with the lamentable geeks and bozos we see portrayed in automobile ads, beer ads, food ads, and advertising in general. In fact, we think of these people as either pathetic or ridiculous.

The truth is, the advertising industry has been using the "older people want to be like young people" crutch for years because they are too lazy and too preoccupied with themselves and their friends to find out what older consumers are really about.

"Old people want to be like young people" is just the narcissistic excuse that lazy, young people who dominate advertising use to justify their ignorance and indifference about the people who Nielsen calls, "the most valuable consumers in the history of marketing."

Here's an insight to the self-absorbed people of the advertising and marketing industries about 50+ year olds...

They want to be youthful. But they don't want to be like you.

Don't Forget...
I'm speaking this evening in Portland. Here's the info.

Cranky Old Guy Finds Happiness

If you're a regular reader, you've probably noticed that there is very little of an autobiographical nature that appears in this blog.

There are two reasons for this. First, I prefer writing about advertising to writing about myself. And second, I believe you prefer reading about advertising than reading about me.

Once in a while, however, I write something autobiographical and today is one of those days. Several people have sent emails or asked recently about how I'm enjoying my almost-retirement, so I thought I'd write about it.

It has gone way better than I had any right to expect. I have not had a moment of regret about leaving the agency business.

One of the things I thought I might miss was being treated like a big shot. When you're an agency ceo and your agency spends a lot of money in media, everyone wants to be your friend and take you places and buy you lunch. When you retire, you quickly become "Bob who?" The good news is that I haven't missed it at all. Yes, there are a few games I'd like to have gone to, but that's why God gave us television.

The issue that has been challenging has been figuring out exactly how retired I really am. My new company, Type A Group, seems to be evolving into something different from what my partner and I conceived.

We started with only two things we knew for sure: it was not going to be an agency, and we were not going to hire anyone.

Other than that, we defined the business loosely -- as a consultancy to agencies and marketers in a few different areas. Our mantra was that we'd know what business we were in when we got our first client. After about 90 days, it became clear to us that the one area which seemed most interesting was helping companies and agencies market to the over-50 crowd. This is a major opportunity that I predict will explode in the next few years.

But interesting things keep popping up that have nothing to do with over-50's. Some  we have passed on, and some we've decided to pursue.

One of the things that has been so pleasant about these past few months is how varied the work has been.

Another of the surprising things is the amount of speaking we're doing. I'm not here to pimp the company, but I will say that I'm really enjoying the speaking and it seems to be going over well with the audiences we've been addressing. As you can imagine from the blog, our talks are different from the usual conference fare, and while not everyone agrees with us, people seem to enjoy the talks and the response has been terrific. It's almost like being in the entertainment business.

We're also engaged in a creative project, which is the last thing we thought we'd be doing. Out of the blue, my partner had an idea and we brought it to a company and they liked it and it looks like we're going to produce it.

Without question, the most liberating part of the almost-retirement gig is that I don't really give a damn about a lot of things I used to have to worry about. As an agency owner one of the great burdens was the worry about people whose livelihoods and families depended on me. One wrong word to a client and peoples' jobs could be in jeopardy. So I always had to be careful about what I said and how I said it. Now I say exactly what I think, and if someone doesn't like it, so be it. There is an amazing feeling of freedom when, after decades, you can finally tell the truth and not care about the consequences.

Of course, the thing that keeps me most busy is writing. In addition to this blog I have two books I am "working" on (by "working" I mean feeling guilty about by not doing a fucking thing.) One is fiction and one is another compilation of blog posts and short pieces. The one thing that is a complete shock is that my book remains the #1 selling ad book at Amazon and has been for 6 months. I hardly make any money from the thing but it's still very gratifying.

The answer to the question about how I'm enjoying my almost-retirement, to those of you who have been kind enough to ask, is that it is still early days, but so far it has been excellent.

And Speaking Of Speaking... 
I'll be talking to the Portland Ad Federation tomorrow evening on the subject of Social Media vs. Traditional Media. If you're in the Portland area, please come. You can find the info here.