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1 Yonge Street / Advertising / Business Community / Entrepreneurship

Advertising in the Context of Change

Contextual ads at Billy Bishop Airport in Toronto

Advertising, as we know it, is about to change so radically it will be practically unrecognizable. If you have a favourite TV spot you might want to record it. Similarly, if there is an ad out there that annoys you to distraction you’ll be happy to know you’ll likely not have to see such awfulness again, at least not in the near future. Tomorrow’s ad delivery is already happening today but the scale is about to get so much bigger.

We live in a midst of a digital revolution. At no other time in human history have so many ideas and institutions been altered, challenged, changed, created, and destroyed. As discomforting as it is, revolutionary change is a natural by-product of technological advancement. A decade and a half after its inception the innovation that made Google one of the wealthiest companies on Earth is going to eliminate commercial advertising and replace it with contextual personal advertising.

If you want to see an example of contextual advertising delivery in action, take a trip to Billy Bishop Airport, just down the street from Telsec Business Centre’s downtown Toronto offices. A newly built tunnel connects this small island airport to the mainland. The escalators heading up out of the tunnel to the airport are influenced by data on the mobile devices of users who are logged into the WiFi available at Billy Bishop. This is an extraordinary technical feat yet it is only a rudimentary step along the path to tailoring ad delivery to the individual rather than targeting ad delivery based on demographics.

To better understand new technologies or ideas, it is often good to revisit the history of those technologies or ideas. In 2001, a company called Overture had a brilliant idea. Search engines had become the main tool used to find information on the Internet and a new search engine named Google was earning a reputation for returning far stronger result sets than other search tools. For advertisers, the problem with search was there was only ten blue links on the first page of search results and nobody could guarantee first page placement with 100% accuracy. Overture came up with a system that allowed advertisers to buy their ways onto the first page of search results for any given set of keywords; all you had to do was bid higher per click than the next advertiser. It was a brilliant system which was very quickly copied and improved upon by Google. The result was called AdWords and it changed Internet history, making Google the largest, most profitable, and most defining search engine on the Web. In fact, many argue that the introduction of AdWords made Google into an ad company which used search as a loss leader to push its real product, Pay-per-Click (PPC) advertising.

Sixteen years later, Google is still making more money from PPC advertising than all other sources of revenue for every other search application put together. It is a seemingly unlimited license to print money for a very good reason. In theory, Google and other PPC advertising purveyors only delivers paid ads to people who are going to be interested in the good, service, or product being advertised.

Consumers make their interests known primarily in two ways. The first is simple and direct; they enter keywords into the search query box. Because digital technologies never forget who did what, when, and where, the meanings of those search terms are used to generate ads that are similar to the search terms. The second way consumers inform the digital world of what they are interested in is through their general behaviour. Do you know why digital never forgets? Digital never forgets because most large Web companies track your every move when you’re online by placing cookies on your computer. For some like Google and Facebook, you don’t even have to be logged into their systems to be tracked via cookie. Google’s famously expires in 2035 so, for the coming thirteen years (at least), Google will know what you do online because that’s what Google is designed to do. So will Facebook and Microsoft and Amazon and Apple et al. This is how the digital advertising world knows to deliver one person ads about chocolate bars and other person ads about caramel candies with an uncanny accuracy for which person prefers which treat.

If you understand the basic concepts of PPC search advertising, you can easily understand the basic concept of contextual personal advertising. In a digital age we no longer need to subject all consumers to commercials covering all ranges of topics as we had to in the analog world only two decades ago. In fact, the coming year will see refinements in ad-delivery on cable TV in some jurisdictions as cable companies use consumer data to try to improve the advertising options they offer by delivering ad inventory based on the habits of individual consumers rather than airing one ad filmed to fit all viewers.

For smaller regional publications or cable firms, this change might be too expensive to adapt to. While consumer information, bulked into millions of unique personal profiles, is relatively cheap, the technologies used to match ad-inventories to those unique personal profiles are not. On the other hand, contextual delivery of all forms of advertising might be the biggest boon to manufacturers since the dawn of the advertising era. Think about a quote attributed to American retail pioneer John Wanamaker, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half”. Wanamaker understood that reaching out to the public was expensive but he fully understood that when he reached people interested in buying his merchandise, that expense was worth every penny he spent, even the ones “wasted”. If Wanamaker could have refined his ad-spend to only reach interested eyes, he would have made an even larger fortune. Today he’d have no problems spending on the guarantee that the vast majority of people viewing his advertising would have pre-qualified themselves based on their digital behaviours.

The days of shotgun advertising are ending. As more mediums switch to digital delivery and more consumers adopt portable digital devices such as tablets or mobile phones, it is going to be far easier to micro-target advertising and incentives directly to those interested while delivering other ads to people interested in other things all of whom are watching the same program or event.

In 1897, Baseball Hall of Fame member Willie Keeler had sage advice for batters, “Keep your eyes clear and hit it where they ain’t.”  That works well in baseball but it is wasted advice for advertisers who for too long have had to place their ads in places those ads were not necessarily wanted. That’s about to change so dramatically it will be hard to remember how annoying advertising once was.

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