In the summer of 2009, an article titled “The Next Bubble: Eyeballs” appeared on the Harvard Business Review blog.  Much of the article discussed new advertising innovations from the likes of Amazon and Tivo, but the overall message from the author was clear: advertising has reached a saturation point in our society and many ad supported businesses will soon go bust.

When first posted, the article really appealed to me.  The housing bubble was still fresh and – working in digital advertising and analytics – it seemed logical to me that there could be a limit to the value of ads.  I reasoned that each advertising opportunity, whether a 60-second primetime television spot or a mobile banner on Farmville, must have some sort of “true value” represented by the ability of the media to drive consumer action and commercial return for the advertiser.

Inspired by the article, I spent dozens of weekends in the office scrawling notes and equations on giant 3M poster-pads trying to piece together a comprehensive equation to calculate the value of an advertising opportunity.  Reach, Frequency, Media Impact, Creative Effectiveness, Current Product Penetration, Content Adjacency, Consumer Empowerment, Advertiser Goodwill, Publisher Reputation, Response Distance, User Demographics, Message Complexity, Share of Voice, Audience Volatility – I wrote all of these variables on a note cards and pinned them up on the wall.  Each weekend I restlessly arranged and re-arranged the cards trying to find correlations and connections, searching for some sort of advertising grand-unified-theory.

Looking back on my work three and a half years later, it seems silly that I left out perhaps the most important variable of them all: Relevancy.

Back in 2009, I saw advertising fundamentally as an exercise in competitive shouting.  Coke or Pepsi, Geico or Allstate, McDonalds or Burger King, which brand could use media to shout louder and influence consumer behavior?  I now know that advertising is not a one-dimensional game of “more” or “less” – where the goal is to saturate the market with your message.  Vying for consumer attention isn’t just about shouting; volume doesn’t matter if you’ve got the wrong message.

My realization here is an indication that the advertising game is changing.  It used to be mostly about influencing wants.  Advertisers would dangle images of a desirable lifestyle in front of consumers and hope they would pay-up to enjoy a piece of the luxury.  If the advertiser wanted better sales, the answer was simple: shout louder with more advertising.  A large portion of the ad world still follows this playbook, but I don’t think it works nearly as well as it did in 1980.  Today, the most effective ads meet consumers half way.  It’s much easier to sell someone a product they already want.  The secret is to figure out what products and services are relevant.

Technology has had a huge impact here.  Years ago, the best targeting available was by television day-part or by magazine section.  Today consumers are reached by ads that are much more aligned with their current needs and wants.

Is there a point at which our market will become saturated with advertising?  I think so.  We may even be close to that point.  However, as targeting technology gets better, our focus will naturally shift from the amount of advertising to the relevancy of the ads.  If we ever reach a point where all of the ads we see are finely targeted and relevant, it’s possible that advertising supported businesses will suffer.  The good news is, considering 95%+ of the ads I see today are absolutely irrelevant, I feel fairly confident that we’re nowhere close to that point.

 

Note: Very special thanks to Michael Griffiths for editing Disqus so it won’t break my frames.  Thanks to him, everyone will be able to enjoy more social commenting and perhaps even email notification of follow up comments.  Thank you, Michael!

Also, on the subject of call-outs, I’d be remiss if I didn’t also mention my girlfriend Miranda who edits my blog every week.  Thanks to her – my writing looks a lot better than it actually is :)

 

The Next Bubble: Eyeballs – Three and a Half Years Later
  • Well, I think advertising is fundamentally a solution to a market solution to a problem – lack of perfect information – that will ultimately be eliminated. 

    How do you differentiate between advertising and an AI that informs you of your choices whenever you want something?

  • Hmmm – I like the concept of an AI that simply presents choices.  Maybe that’ll be the next iteration of Ad Tech?

  • Isn’t that what Google is aiming at?

    If you think of Google as presenting the most relevant set of choices given some user input, and AdWords as a way of presenting highly relevant commercial choices, then Google’s next step is towards multiple user input.

    e.g. voice, other recording instruments. 

    A self-driving car is interesting partly because of the choices it could present to the user while driving. Is a store having a sale on a product that you thought about buying 3 months ago and searched about? Are a group of your friends gathering in the area? Perhaps doing some shopping, where you could meet up at a restaurant with a 10% off coupon for parties of 4 or more?

    etc.

  • I suppose so – although I’d have a hard time living in a world where everyone wore those glasses.  Maybe I’d have instant access to information, but I feel like I’d spend half my time feeling nauseous.  I can barely even stand 3D movie glasses. 

  • The glasses are never going to happen :-) 

    Probably in work environments, where information-tagging would be useful. But just generally? Too much noise, not enough value.

    Still, it’s an interesting question: what place does advertising have in that world?