The Money Lies in ROI

Earlier this week, I fiddled around with Medium and posted some thoughts around why banner ads remain a large part of digital budgets.

The title of the post was “The Money Lies in ROI.” The general premise is that we are forced to buy digital banners and pre-rolls because their sheer volume allows us to calculate ROI via surveys in ways that more targeted native ads can’t yet.

Closed the post with a proposal on how we can get native ads to not only match the ROI calculation, but also go a step beyond.

Would love your thoughts. Give it a read here:

The Weird Tension Between Publishers & Banners

Banner ads have been coming under scrutiny for a while from the world of startups and ad tech companies. Big names like Federated Media have shut down their direct sold banner ad business too, further driving a nail into the coffin of banners — but why this trend now? 

Simply put: publishers don’t have to sacrifice their audience to get paid anymore.

It took me a long time to figure out why I hate banner ads so much and my problem was that I was too focused on why it sucked for an advertiser and not so much why it sucks for publishers. Once I started digging into this, the picture got pretty clear. So without further adieu: the reasons why publishers have a weird tension with banner ads…

1) Users come to a publisher’s site to engage with the content. Publishers want users to read as much good content as they can so that they actually build an *gasp* audience so that they keep coming back. Banners want you to get distracted and not read the content on the publisher’s site.

This sucks for a publisher, doesn’t it? Here they are, employing writers and artists to create awesome content — and they’re willing to divert the experience to the highest bidder. It also leaves a weird feng shui for a user who doesn’t really know what they’re going to get when visiting said publisher.

2) Banner ads introduce a ton of third party code onto your page on the client side, slowing down your page loads and readers’ patience.

Have you ever been listening to Pandora and then load up or and all of a sudden the music gets choppy? Yeah, that’s the shitty flash banners that are eating your CPU up. Not exactly the best experience for ESPN or NY Times that something bad happens (my music being choppy is annoying) when I visit their site.

It shocks me how little publishers focus on their page load times and how it impacts visitors to their site. Imagine what would happen if they cut down latency on their pageloads by 500 milliseconds — you may think nothing, but I would disagree.

Ask any developer who has ever worked on latency improvements to see what happens to usage and retention when you drive down load times.

It’s easier to drive down latency on your own code base, rather than relying on ad tech companies.

3) Instead of hitting a user with 1-2 banners 5-10 times, you can create 5-10 pieces of content and have the publisher’s audience view it 1-2 times.

The ability to create content that meshes with your user experience has never been easier. Publishers like Buzzfeed and The Atlantic and service companies like Federated Media and Percolate are creating/curating content on behalf of brands. 

Consumers like to be entertained when they’re visiting a publisher’s site. Native content like this keeps them there. It aligns everybody’s goal: happiness.

A user is happy because they came to the publisher to find content that they like.

Advertiser is happy because they have established a connection with a consumer without distracting them.

Publisher is happy because consumer and advertiser is happy.

Everybody wins in this model. I won’t pretent like promoted content is 100% as good as the other content on the publisher’s site (creative briefs aren’t going away, man), but it at least meshes with what every party is involved in doing.

Publishers will be best left to use the slots where ads exist today to help drive distribution to their promoted content or other content that they deem to be of the highest value.

Seriously, banners just suck for everybody. I know they work for DR — and the reason is the content where that banner is seen is less interesting than being distracted toward something else. It’s kind of a shiny object that publishers are willing to put on their page, but it doesn’t feel like the future of the Internet.

Let’s build something awesome, publishers. Let’s make everybody happy.

Facebook Exchange: A Long Term Distraction for FB Stock

There has been much discussion in the nerdosphere about Facebook’s move last week to debut their ad exchange: a form of retargeting visitors to an advertiser’s web page when they are back in the friendly confines of Layer on top of this a real-time bidding (RTB) engine, and you have advertisers rejoicing that Facebook is finally listening to market demands.

But here’s the rub: Facebook isn’t designed to be an advertising network. It’s designed to be a content consumption experience.

Advertisers have an inherent demand for commoditizing advertising across the Internet, because it naturally builds in scale for buys. This is great for building up ad revenue from the vast majority of ad dollars dedicated to maintaining the status quo.

The sad part is that consumers often have a non-scientifically correlated “stay the f*** away from me” demand from interruptive advertising. The average click through rate on a Facebook right rail ad is 0.05%.

Compare that to the view-through rate of posts on Facebook: damn near 100%. With in-stream Sponsored Stories, Facebook was aligning itself with its core user experience: connecting people with stories that make them feel good, inspired or educated.

The Challenge

This marks the most challenging part about building a monetization system: where do you draw a line between incorporating commoditized ad units vs a native platform which aligns with your user intent?

On one side: advertisers want what is familiar (commoditized ad units). It’s easy because you (the agency/advertiser) maintain your processes. From a product perspective, this is known as low hanging fruit. It’s easy money, so you take it and compare yourself to other ad buys.

On the other side: 99.9% of engagement with your site (assuming a 0.1% page ad CTR) is not generating revenue. While FB Exchange is priced on CPM, the clicks are really where the money lies. 99.9% is a really big number of untouched revenue.

It makes sense why Facebook is making this change. It’s been getting beat down by investors, claiming that the Mighty Zucks aren’t responsive to big name advertisers like GM.

This move will slow down the negative momentum, so I get it. The other part it slows down, though, is the drive to create great content and distribute it wisely across the Facebook ecosystem.

In the long run, this FB exchange will likely prove more a distraction than a key, disruptive revenue driver.