Can Digital Advertising Evolve?

The promise of digital advertising was that unlike traditional media, which is one-directional, it would be possible to use the bidirectionality of the internet to tailor advertisers’ messages to people looking at a screen, thus making them more effective. The classic axiom of “I know I’m wasting half of my advertising investment, but I don’t know which half”, was replaced by skilled snipers capable of delivering the message to a very specific profile.

Internet advertising, which now accounts for almost half of total advertising investment, and which is increasingly marginalizing traditional media, is fragmented among a myriad of highly specialized companies who are each in charge of one thing in exchange for their corresponding slice of the pie. Programmatic advertising, which makes up 89% of the total, is decided by algorithms that auction user profiles in real time: you enter a page, and the system auctions your profile to the highest bidder based on what it is able to know about you based on your past behavior.

So far, so good — except for that constant feeling we have of being relentlessly pursued. Furthermore, each of the actors involved takes a percentage of the advertiser’s investment, and of what is left, a good part is devoured by malicious actors who manage bots and click farms to make them believe their ad has been delivered to flesh and blood people, when in reality, it hasn’t. There are estimates that calculate the percentage of fraudulent clicks today as close to 88%.

In practice, it turns out that the supposedly marvelous technological apparatus created to get ads to those who might be interested in them is less successful than flipping a coin or placing them completely at random: something as simple as segmenting by gender turns out to be successful less than half of the time. According to other estimates, only 25% of ads reach the right targets. Geo-targeted advertising, which sounded logical enough, is riddled with inaccuracies to the point of being a waste, 65% of the time. Facebook’s algorithms, according to a complaint to the company, hit between 9% and 41% of the cases: not bad for an outfit that sells itself as the best sniper unit in the world… that’s how wars are lost.

If we add to all that the growing number of cases in which the weapon of choice, cookies, are increasingly intercepted by browsers, it’s clear that digital advertising is a garbage heap where marketing managers around the world, from large companies to individuals trying to sell a book or a course, are throwing their money away, convinced that they are sitting on a gold mine. This is basically Stockholm syndrome: supposedly intelligent people dependent on their abusers. The people who run this gigantic scam come up with perfectly credible explanations, and the fact that advertisers are lining the pockets of companies involved in all kinds of scandals and in cahoots with an utterly unscrupulous organization doesn’t seem to bother them.

Digital advertising is now an alembic in which a few share the money of the many, without those many actually selling much more than before. The newspaper industry pumps huge amounts of money into Facebook every day, but… what happened the day Facebook and all its properties went down? Those newspapers’ sites were avalanched with visitors.

Meanwhile, online media continue to find alternatives to advertising as a business model. Subscription, freemium, or other models like Medium, which distributes the revenue generated by subscriptions among the authors of its content based on their popularity, are a good place to start. Reading without interruptions, without unbearable ad formats, and where authors do not have to accept conditions of all kinds in order to be able to write. In contrast, trying to read a simple opinion column in advertising-funded media can be an ordeal.

Digital advertising needs a total overhaul. More and more large advertisers are reducing their advertising investment in digital media, simply because it doesn’t add up. Companies like Facebook or Google, which did a very good job reducing the barriers to entry so that anyone could access advertising, now sell packages that have little impact, but that still seem to keep advertisers happy.

Today, digital advertising is simply an illustration of how a model based on reasonable principles has degenerated. We will see how long the model lasts. Or better still, let’s start thinking about what will replace it.

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This post was previously published on MEDIUM.COM.

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