Technology Mashup

Developments in Online Advertising

By Steve Nimmons

Online advertising has been with us since the earliest days of the Internet and where ‘eyeballs meet content’ advertisers will always be close by. We have travelled an immense distance in the last 15 years. The first Web portals were (almost uniformly and tastelessly) bedecked with every imaginable flashing widget that might attract a valuable click-through. I will spare the early designers blushes but some sites would today come with health warnings for photosensitive epilepsy.

We saw banner ads on portal home pages as well as e-mail marketing (and alas spamming) as some of the earliest forays into online advertising. Commercial models were immature and offerings limited by technology (including software and infrastructure). As with early online journalism, innovation was somewhat stifled by attempting to replicate traditional approaches on emerging media. Much of the advertising followed what I describe as ‘interruptive flow’, little better than a distraction from the content it surrounded. Advertising was not particularly well tailored to user experience and to the emerging Web demographics.

As the popularity of home computing exploded throughout the 1990’s, driven by more accessible operating system technologies, falling electronics costs, uptake in education, the ubiquity of Web commerce and entertainment, we began to see year on year exponential growth in the online community.

This growth is by no means over, especially considering emerging economies and world markets. ‘Generation Y’ championed much of the growth and retailers began to fight hard for their online attention. Statistics for 2007 indicate that some 32.5 million people in the UK are now online, spending 16 hours per week on the Internet (published average for broadband consumers). It is a generalisation, but advertisers are highly attracted to the 16 through 34 age group particularly those with significant disposable income. There are diminishing returns (although there are product and brand variations) when marketing to more ‘mature’ groups, as susceptibility to advertising reduces. Responsibilities, investments, pensions, mortgages, children, university fees and many other draws on the purse strings coupled with a worldly cynicism makes the advertisers job more difficult.

There are therefore differences in the complexity of marketing to differing demographics and new levels of sophistication; personalisation and interactivity are required to optimise sales potential in the new media. It is obvious that advertisers and retailers have to innovate and embrace this change with vigour. They must also learn from previous mistakes and ensure they are enriching, not disrupting user experience.

I reached a point of minor despair about 4 years ago when seemingly endless levels of Adsense abuse was clogging search results. Being ‘top 10’ in a Google search is in itself a prized form of advertising. This inevitably leads to manipulation and spamming against the Google indexing algorithm (as indeed with other search providers).

I felt as if we had nearly reached breaking point with endless spam blogs packed full of affiliate programmes, click-through programmes and various ‘viral traffic’ generators littering the Web. Scrapers, blog generators and that old favourite, dumping a copy of the Open Directory project into your site provided ‘zero-effort’ means of attracting visitors to monetised, keyword rich shill sites. This was bad for advertisers, consumers and in my view damaged user experience for a significant period.

Google has worked hard and largely succeeded in taming this issue, although often much to the annoyance of genuine SEO’s who had to battle with dozens of algorithm changes. Where Google did work wonders was on stiff penalties for ‘black hat’ tricks like endless pop-ups, sneaky redirects and cloaking. These may have delivered short term revenue, but to the complete annoyance of anyone visiting the sites. Google are also trying to provide better quality click through on sponsored links and they suffered market turbulence in March when their ‘quality not quantity’ strategy resulted in a significant downturn in click-through growth.

Advertising quality issues, abuse, volume overload, relevance and level of interruption have been areas of major frustration and contention. It would be unfair to lay the blame with most advertisers, but there must be recognition that in such as lucrative market ‘nefarious entrepreneurs’ will rush in and try and grab a slice of the action. It feels as if we have just turned a corner on this issue, but the industry must learn hard lessons and work to maximise the overall online experience of users while defending brand and industry reputation. I would of course concede that there has been a large volume of successful and very useful models where user experience and genuine advertising utility has been paramount (B2B and B2C cross-selling, referrals and many others).

Online advertising spending in the UK in 2007 hit £2.8bn and is currently running at 9 times the level of growth of the entire sector. There has been a £2bn leap since 2003, a trend that can be linked to the strong uptake of broadband technologies (now with 90% of the market penetration) and the richer experience offered by Web2.0. Spending on Internet advertising in the UK now exceeds that of press classifieds and regional newspapers. Video sharing services have also played a large part in this success, as advertisers have been able to utilise richer media and viral marketing. Search currently accounts for 57.1% of all online advertising, display 21.5% and classifieds 20.8%. UK e-Commerce revenue predictions (Forrester UK e-Commerce Forecast 2006-2011) foresee a rise from £30.2bn to £52bn by 2011. It is clear therefore that this is a burgeoning market and year on year spending growth exceeds 38% (in the UK alone).

Web2.0 has further ‘tipped the scales’. I describe Web2.0 as having rebalanced the content producer to consumer ratio, enabling a very simple entry point to Web participation and content creation and distribution. Social Networks, blogs, wikis, video and picture sharing, chat services, forums and many others are competing for attention that used to be the preserve of radio and television entertainment and print media. Social Networks are serving up ‘captive audiences’ in huge volumes, which is quintessential ‘catnip’ to advertisers.

There have been some reasonable attempts at contextual advertising and this is being extended with interesting work in behavioural targeting. I worked in data mining research back in 1993 and remember having many discussions about the way in which the Web would emerge as the greatest profiling and personalisation experiment of ‘all time’. I foresee increased velocity in the development of behavioural targeting, but this necessitates behavioural profiling and hence collection, storage and processing of personal data. Social Networks and advertisers are keen to leverage this, but have had a great deal of difficulty in ‘selling’ the concept to users. My view is that while users would be perfectly receptive to the results they are not at all comfortable with the means.

Considering that online privacy, phishing, identity theft, data protection and data security are high on everyone’s personal agenda, and with low levels of trust and high profile data security failures (from Social Networks to Government Departments) a great deal of work is needed to quell fears. It really does boil down to trust and ISPs, Social Networks, traditional sites and advertisers must provide adequate security, transparent policies, opt-outs (many would prefer opt-ins), anonymity, data protection and data destruction. I would also advocate increased regulation of what information can be collected and sold (although we should not forget parallels with loyalty schemes in the ‘offline world’). There have been many examples of negative press in the past number of months concerning Facebook / Beacon, Phorm, deep packet inspection, user privacy, social networking security, preservation of anonymity and many others. If these issues are not addressed appropriately they will fuel a wave of resentment that will be much further reaching than spamming nuisances I described earlier.

Although ‘largely interruptive’ in nature, advertising sponsored SaaS (Software as a Service) solutions are interesting. Offerings (such as Microsoft AdCentre) equip SaaS suppliers to design and operate targeted ad funded services. Advertising fulfils a role therefore in innovations that provide utility to the consumer by reducing (or removing) total cost of ownership (of course this has been a characteristic of advertising in the online domain for many years).

Semantic Web will add another dimension as it begins to ‘ free us’ from the limitations of traditional key word searches. Semantic Web will also be a less contentious mechanism for serving contextual advertising. There are currently some really interesting innovations in corporate marketing (products, services, jobs), B2B / B2C and others in virtual environments such as SecondLife. A number of large IT companies (Microsoft and IBM in particular) are leading the way with interactive demos, virtual meetings and presentations, virtual sales representatives and self-service ‘kiosks’ linked to assets on corporate web sites. As we edge towards Web3.0 a lot of harmonisation and ‘platform’ aggregation lies ahead (Web2.0 and new search technologies folding in on virtual worlds). The virtual shopping malls created in SecondLife provide a view of future online retailing and the opportunity for advertising and cross selling as part of a ‘pure play’ uninterrupted and interactive customer experience. Semantic Search and personalisation through profiling will strengthen this.

Advertising is fundamentally content and must follow the rules. This means relevant, attractive, interactive (at least non-invasive), regulated, ethical and innovative. Competition is fierce and advertising volume can be overwhelming. Attention is getting harder to ‘grab’ but desire to drive increasing growth in a booming multi-billion pound industry is unabated. Conversion rates and cost effectiveness are key drivers and advertisers need to match their pace of change with consumer confidence in relation to new methods and technologies.

The backlash against Beacon and public meetings over Phorm indicate that the consumer must not be rushed. The Internet has an almost unique position in modern culture, for many a last bastion of escapism. We are profiled regularly in ‘real world’ retailing, resistance to which has largely faded, but Internet anonymity will not be easily surrendered. Trust, data security and privacy must be addressed with users and not ‘in spite of them’. The key sell is advertising ‘as content inline with user experience’. Enriching and non-interruptive models coupled with Semantic Web and Web3.0 herald an exciting future for the industry and Internet community.