Advertisers are significantly concerned about the
value of digital advertising and that concern is leading them to question whether and the extent to which digital
advertising will remain in the marketing and advertising mix of their companies.
3 factors are central to the discontent: suspicions about
the effectiveness of digital advertising, large amounts of fake traffic, and
concerns about the returns on advertising investments. Media companies,
platforms, and others providing digital advertising must address these issues
if digital advertising is to remain viable.
Much of the concern about poor effectiveness of digital
advertising is due to poor ad formats, lack of audience attention to ads, and
high rates of ad blocking—currently about 40% in U.S. on computers and tablets.
Such concerns have forced digital advertising prices downward
for the past decade because those factors have reduced demand and because there has been a dramatic increase in advertising inventory that is making individual ad slots less valuable.
Today the CPM for Facebook is about $10 and the costs per click average about
$2.30 on Google Ad Words and $1.70 on Facebook.
The serious problem of fake traffic continues to inflate
audience figures and make advertisers wary of the data given them by those providing advertising space. It is estimated that advertisers
lose $6-10 billion annually because of bots increasing visitor, viewing and click data. Although digital firms recognize the issue, no effective remedy has yet
been introduced.
Because of the first two factors advertisers are not seeing
the return on investments they desire. ROI
is a measure of additional
turnover generated by the advertising expenditure. When diminishing returns are
seen, advertisers reconsider where they are investing advertising expenditures,
how much they are investing, and whether stop additional investments. Digital
advertising ROI is concerning because some advertisers are finding it is
only about 1/3 that of their ROI for television ad expenditures. ROI issues led
Procter & Gamble Co.
to cut digital advertising spend in 2017 by $200 million after data showed it
was not effectively reaching its target audiences, causing its ROI to decline.
Those
providing digital spaces must work together to improve the acceptance and effectiveness
of digital advertising or they will never be able to improve prices they can
charge and the revenues they receive from advertising sales.
2 comments:
Marketing today is undergo a paradigm shift – from traditionally being a ‘pay to play’ model where large companies could get away without actually engaging their clients. The true democratization of content and consideration started by the internet has been fast forwarded by the explosive growth of social media.
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