Twitter Summary: Information aggregators have the best chance at getting the right advertisement to the right person at the right time.
Prior to advertising on the web, advertisers were primarily paying for repeated impressions over broadcast technologies, such as radio, billboard and TV advertising. The amount they paid was based on the number of people that saw the shows, heard the radio, or passed by the billboard while the advertisement was displayed. The metrics that the marketers use to target their customers are viewer age, sex, and zip code in the attempts to influence the viewer when they made their next purchase.
The web changed the nature of advertising by being much more precise then any of the previous methods. My first “favorite” search engine was Altavista. It returned results quickly and it was relatively complete for its time. It made money by selling banner advertising to whomever would pay for the space above the search results. Advertisers were still paying primarily for impressions following the same strategy as for broadcast technologies, but this time they could get complete information about how many times their advertisements were actually seen by customers.
Google also began with marketing deals to display sponsored results at the top of a search results page based on their customer’s keyword searches. Their innovation was to eventually only charge if the customer clicked on the advertisement to go to the resulting page, instead of just viewing the advertisement. This new scheme, branded as Google AdWords, improved advertising results by scoring advertisements and only presenting the ones that were good enough to earn their customer’s clicks. Cost per click (CPC) advertising ensured the quality of the ads were high, and they created a multi-billion dollar business that replaced the impression based advertisements that appeared in the Google search results.
The challenge for marketers in this environment is getting the right advertisement to the right person at the right time. With customer’s jumping from website to website, and searching for disjoint topics, its difficult to know who the customer is, which advertisements they have seen already, and whether they are spending the money effectively to reach everyone they can.
My prediction is “information aggregation” utilities such as Google Wave, Gist, or the customer’s web browser with integrated email client will be the next best source for complete marketing information. These aggregators could solicit customers for biographical data both explicitly (customer surveys) and implicitly (observing the customer as they search and click on web links), and selectively share the biographical data with advertisers. This complete biographical view of the customer will allow advertisers to more effectievely target fewer and better ads to everyone.
The challenge will be convincing the customers that the advertising they get is to their benefit as well as the advertiser’s benefit. There are concerns that this may be considered too invasive to the privacy of the customer as they navigate the web. Fortunately, the trends on the web indicate that younger audiences are more willing to share information via Youtube, Twitter, and Facebook. This would imply they are more likely to share their information with marketers provided they are included in the value proposition and actually get a benefit from the advertisements they see. The success of Hulu bears this out since they are explicit about the tradeoff of getting on-demand video viewing while being required to sit through commercial breaks. As people get used to the idea of providing more information to marketers, they will have the ability to get more focused marketing information that could help them make informed decisions in the future.