Nick Denton’s speculation on the upcoming blogpacolypse has received a lot of attention over the last couple of months, and not without merit - he calls out the failure of (most) online publishers to effectively monetize their traffic over the last 7 years of online ad growth. While his prediction of a 40% decline in online ad spending is a bit extreme, other experts (Mastercard, Morgan Stanley) are predicting significant (>20%) contractions as well, but I think there is more to the story than the current economic environment. The issue of how to present enough high-impact sponsor messages to an audience without degrading content has been the major industry bugaboo since the dawn of the internet. Of the major players, only Google has navigated this well to this point, as the steady decline in clickthrough rates that began in the late 90’s has now reached a point where even rich media campaigns struggle to break 1%. The situation within social networks is even worse – response rates of less than .01% (and often less than .005%) are now the norm and a wide variety of marketers have expressed private frustration to me along the same lines as P&G’s GM of Digital Marketing Ted McConnell’s comments about Facebook (AdAge reg required – synopsis here). To make matters worse, CPM’s are so low that the less savory marketers who used to only purchase remnant inventory now can flood the marketplace with annoying creative, which further drives down response rates, which further drives down CPM.
Not to pile on more, but there was one more stat released in the last week that was under-covered by the marketing intelligencia that is the bleakest of all: FireFox has reached 20% of global market share. Why is this so terrible for marketers? Two words: Adblock Plus. Free, and a recommended extension for new FireFox users, ABP eliminates all advertising (and when I mean all, I don’t just mean “Punch the Monkey”pop-ups, I mean banners, buttons, Google AdWord sidebars, etc.) on a web page to speed up loading and reduce privacy concerns. When I breeze by the ads on a DVR, I might (very) rarely stop my x5 fast forward for a look at an ad that interests me, but with ABP I never see it at all. The dollop of guilt I carry betraying my past as a former banner/microsite creator is the topic of another post and mostly not relevant, but the growing millions of users that do are, and portend an even more dire future for traditional online marketers.
Take it all in, and it adds up to great news.
The immediate upshot of near-universal miserable response rates is that marketers begin to appreciate user created, and distributed messaging even more, as it avoids every shortfall I outlined above. The “creative” (and calling that is a misnomer) is created by a voice the consumer trusts, adapted hundreds of ways to address hundreds of different communities. The messaging = content, which means it can’t be blocked, and can be syndicated into RSS feeds, mobile, and social networks with no extra cost, geometrically increasing the reach for worthy efforts. And it can dramatically improve organic SEO, which extends the shelf life of a message while providing even more effective targeting.
What countered all of these pros to date are two cons. The first, which is lack of message control, has been addressed much more eloquently by others and is rapidly fading as a concern among our clients and the marketplace as a whole. The second is ROI and measurement. Social marketing has never provided the level of data that direct online media has – the case studies are few and far between that show a direct effect between a blog write up and e-commerce sales or how a positive consumer message translates into a site visit. Nor is it foreseeable that it will be ever as trackable as search or email, as the social part of “Social Media” inherently carries with it an expectation of privacy. Looking at the death spiral of low response rates leading to cheaper inventory leading to cheaper creative leading to lower response rates that has plagued online display market, I’m glad we don’t have the data.
The abundance of data has literally crushed the online display industry, as marketers hold it to a higher standard than any other media (especially print and TV, and don’t get me started on outdoor). Awareness has taken a backseat to response, which has placed a premium on getting consumers to take immediate action versus building trust with them. Social marketing is lousy at direct response, but when well executed it is clearly the best way to build a relationship. As marketers invest more in connecting with their customers online, new metrics will receive more emphasis, and they certainly won’t be clickthrough rates and CPM. When whatever industry standards emerge around engagement and influence, it won’t just make life much easier for social marketing companies, it will also (hopefully) help publishers better price inventory and demand higher quality creative on the display side. The recognition that delivery and response aren’t the be-all and end-all of marketing is the first step in saving the industry, and here’s hoping that it comes from our industry in not too long.