Revisiting the value of ads

And the search for a more sustainable advertising ecosystem

Facebook and Instagram asked their iOS users this week to help keep those services free of charge. This was a reaction to Apple’s App Tracking Transparency (ATT) rollout, which introduces significant changes to how ads on mobile devices are served and attributed. It is likely one of the first times that an internet platform has drawn the connection between users tolerating ads and their services remaining free. 

You can enjoy a collection of other ATT prompt examples and submit your own here. (Thanks to Eric Seufert and MobileDevMemo for the tip.) 

This newsletter turned 1 year old this week. We’ve covered many topics in a year but keep coming back to this one regularly: What is the value of ads, if any, for the average internet consumer? When we first wrote about this there were far fewer of you subscribing then; as a thank you for reading, let’s revisit the value of an ad and the Advertising Paradox of 2020.  

Ask a friend who is not an advertising professional to explain the value of advertising today. They’ll probably say something about how there are too many ads, how they’re intrusive, irrelevant, contain viruses or scams, are creepy, etc. If you hear any mention of advertising supporting and enabling quality content so it remains free for the consumer consider yourself very lucky. It’s rare that consumers understand (or care about) this relationship in spite of being familiar with/subjected to TV, radio, print, and digital ads for decades. As much as the internet has increased the amount of money spent on advertising (and it has done so handsomely), on the consumer side it seems to have devalued the perception of value and utility almost completely. 

To the generations that have grown up with on-demand content and who started their media consumption on YouTube, the meticulously crafted ad with the clever creative is nothing more than an interruption — something to be dismissed as rapidly as possible en route to the content they actually want. I’m not sure the answer is any different for the slightly and not-so-slightly older crowd. Those same consumers who talk about Super Bowl ads for a week every year will install adblockers on all their devices. Media people will complain loudly to journalists citing restrictive paywalls, as if quality content can somehow magically produce and sustain itself, and we don’t need to bring up monetization ever. 

While advertising has been the monetary engine behind modern media, we never seem to have taken the time to make sure that consumers understand this. The only place where the value equation seems to be somewhat clearer (or at least where there are fewer outright consumer pitchforks raised against advertising - for now) is in the land of walled gardens: it seems easier to understand that seeing a few ads for face cream is an ok tradeoff to be able to see photos of your cousin’s new baby on Facebook. But even this has its limits: the more ads crammed into your news feed the more annoying the very concept of advertising seemingly becomes. Spot how your friend’s thumb rhythmically accelerates while scrolling over her Instagram feed’s sponsored posts - predictable, almost like a metronome.

Advertising is not a new industry or format. Ancient Egyptians made sales posters on papyrus. Political campaign ads were found in Pompeii and across Arabia. Greeks and Romans were fond of lost and found ads and a very distant predecessor of out-of-home advertising are rock paintings across present day Asia, Africa, and South America. We can trace the origins of commercial branding to Europe in the Middle Ages: with illiteracy rampant, signs and images associated with one’s trade were used: a shoe for a cobbler, an anvil or hammer for a blacksmith. Welcome, logos! You’re building upon a rich heraldic visual history. In the 19th century France’s tabloid/newspaper La Presse is credited with pioneering paid listings: the monetization engine that sparked paid media and catapulted us to the advertising world we still live in today. 

That’s part of the problem: the internet really wasn’t built for ads yet for the better part of the last ~25 years the default commercial conversations goes something like this:

[Person 1]: Here’s a new internet/media service!

[Person 2]: But how will we monetize this thing on the internet?

[Person 3:] Oh, easy – we’ll just run some ads against it. 

There’s never been more money spent on advertising than today – and, outside of limited ad industry circles, never has the very value of advertising been less clear. 

Why should you care?

For consumers, advertising is part of the overall customer experience. For advertisers, it’s still a separate silo.  

With separate silos come separate budgets, reporting lines and a variety of misaligned incentives. When you’re researching a new product if the post-ad, post-purchase experience isn’t up to snuff that product is going back and no amount of subsequent advertising spend will be able to change your mind about it. When you see ads for the airline you flew 100k+ miles on last year popping up all over your feeds inviting you to sign up for their frequent flier program the disconnect between how you perceive your status with them and from their end an innocuous ad placement couldn’t be more stark. When you log onto your bank’s website you don’t expect them to promote an easier way to write paper checks to you if the last physical check you’ve written was more than a decade ago; a data point you can easily verify by looking through the same account data your bank has access to. And what about that product you looked at last week that is now following you everywhere you go online? Better yet if you’re unhappy with the product: what an expensive reminder of how bad the experience was. 

My cable company knows where I live and what services they deliver to my address. At least once a month they’ll mail a promo for the exact service I already have (and usually offering a better deal than the one I have; loyalty is for chumps!). And herein lies the rub: considering advertising solely in the conquesting scenario is no longer enough, yet we don’t have the means to easily measure, adjust, and ensure a cohesive experience across all channels. For consumers each and every one of these mispersonalizations adds up to advertising annoyance and devalues the very utility and value of advertising. If ads are meant to introduce us to cool and new products can they still do that job if we’re proactively tuned out?

We call this The Advertising Paradox of 2020:

It has seemingly never been easier to (technically) reach a consumer because we’re all online all the time; but it has also never been harder to really reach a consumer when consumers are actively tuning out. 

Marc Pritchard, Procter & Gamble’s chief brand officer and he of multi-billion dollar annual advertising budgets, said it best during his 2019 CES session reflecting on the future of the industry:

“I would say the days of advertising as we know it today are numbered, and we need to start thinking about a world with no ads.”

This is partly why direct-to-consumer marketers have been successful. The DTC industry isn’t new either -- the original Sears catalog dates back to 1888, and how could we forget home shopping networks? (Instagram is this era’s QVC). Unlike legacy marketers DTC peers have been able to bridge the pre-sale and post-sale experience gap better. One takeaway here is that (perhaps contrary to the philosophy of maximizing mass market reach) DTC marketers know when to back off. If you’ve already bought a product from them the brand shifts to channels that enable a more direct, 1:1 form of communication: more email, fewer display ads. That’s not the route your bank, airline or cable company will readily take because for legacy brands customer experience and advertising sit on very opposite ends of the budgeting spreadsheet. But that’s a topic for another day. 

Where does that leave us? Marketers face three major challenges:

  • Advertising can’t be a standalone line-item 

  • Old ways of reaching consumers may no longer work

  • Every customer interaction needs to meet or exceed a certain level of expected customer experience

It’s still very much about delivering the right message to the right consumer at the right time but thinking like and adapting to that consumer is critical. To be able to do that well, you as a marketer will need a strong data foundation and tech stack that makes it possible to take swift and relevant action across multiple channels. And while ad tech will deliver on the promise of real-time activation, as a marketer you’ll need to define and continuously refine your customer data strategy (and not just your or your agency’s activation data strategy) in order to be successful. If you don’t your product, like your ads, will likely be increasingly skippable.

One question: 

CMOs are responsible for advertising. Who is responsible for the experience budget, assuming such a budget even exists? Experience is a fluffy notion that could use a better definition - some companies have set up the CXO role - Chief Experience Officer. Others have opted for the CCO - Chief Customer Officer, and many fold this responsibility under the purview of the CMO (which confirms the advertising = experience equation we propose). 

Dig deeper:

Thanks for reading,

Ana, Maja, and the Sparrow team

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Who we are: Sparrow Advisers

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Our unique perspective rooted deeply in AdTech, MarTech, SaaS, media, entertainment, commerce, software, technology, and services allows us to accelerate your business from strategy to day-to-day execution.

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