A lot of tech businesses make their money using advertising. That can be problematic because companies seem to prize highly targeted ads a lot more than untargeted banner ads. Before internet advertising, advertisers relied on magazines, newspapers, television, radio and billboards. None of those are highly targeted. They just target the general audience that is exposed to them.
Online, we’re immersed in a medium that allows much better targeting than ever and yet still delivers lower ad rates. How targeted is the Super Bowl? How targeted is Facebook? Which costs more per view? Well the cost per viewer of the Super Bowl in 2013 worked out to about $0.035. Facebook ads cost about $0.20…per thousand. In other words, Facebook ads cost $0.0002 per viewer. That makes the cost of a Super Bowl ad about 175 times higher and with little targeting. One third of the United States was watching after all.
So, what’s the deal? The transformation of advertising. For years it is questionable whether or not advertising delivered the results that it promised. Online advertising, on the other hand, has been expected to quantify the results that it delivers because it can. That quantification has resulted in lower ad rates that justify the ROI that they provide. Those rates aren’t the same everywhere though. Online venues that are able to deliver better results are able to charge higher rates. If the ROI of online advertising in general increases, then the rates should increase across the board.
While print has traditionally had higher rates, that isn’t the place to be anymore. The collapse of both print circulations and print advertising has caused newspaper advertising to drop to a total spending level that hasn’t been seen since the early 50’s. That has freed a lot of advertising dollars up to find another place to be spent. With all the time people are spending online these days, especially on mobile devices, those are the places most geared to deliver future results. Despite what many say, the places that capitalize the most though, won’t necessarily be apps. It could be websites that have high usage on both the desktop and the web that will be poised to profit the most. They will be able to deliver the most views and will be flexible enough to allow the advertisements to be served to people when their messages have the highest ROI. (i.e. around dinner time when you’re passing a restaurant you might enjoy)
It’s an exciting time for online advertising, but it isn’t going to be business as usual, but with increased rates. Online venues will have to find creative ways to serve advertising to make them both more engaging, more relevant and more timely. The companies that crack that will be the advertising giants of the next decade.