Why Tech Isn't Improving Your Advertising
The algorithm may have
taken over the ad buying, but there's still no telling exactly who is watching
your messaging.
BY HOWARD
TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH
INVESTORS@HOWARDTULLMAN1
Every entrepreneur will
tell you that they absolutely hate to spend any of their scarce cash on
advertising, for two main reasons. First, they're not sure that ads work--
there's a lot of "spray and pray" going on and not much in the way of
credible measurement or tangible results. Second, they believe that their
product or service is so great that people should simply be flocking to their
doors to buy whatever they're selling. They think that, if you use your money
to create exceptional products and services, you won't need to spend on
advertising.
If only life were that
fair or entrepreneurs were a little more realistic. For some businesses,
advertising is the cost of being boring. For others, it's an attempt to
put lipstick on a pig. But at the end of the day, there's really not much
choice. It's like dancing with a bear - you don't get to stop when you want to.
This antipathy is hardly
an attitude limited to new business builders. The advertising industry has
always known that, while everyone wants to make money, no one really wants to
buy advertising. On its best day, advertising is a necessary evil and - much
like cable television or insurance - always a grudge buy. Even worse, the
advent of new technologies, which in other industries have dramatically
improved transparency, productivity, and accountability, have only added more
confusion, uncertainty, and imprecision to the ad game.
Advertising follows
audiences, but with programmatic algorithms dictating the placement, frequency,
and duration of digital ads, no one knows much of what's happening in the
field. Claims about the effective addressability of digital ads are mostly
optimistic fantasies clothed in the belief that the underlying tech will
somehow get the job done. As John Wanamaker said long ago: "Half the money
I spend on advertising is wasted; the trouble is, I don't know which
half." Some things never change.
While some new companies
like Dumbstruck can help advertisers determine
whether the content of their ads is going to be effective, it's still anybody's
guess as to whether you're getting your ads in front of the right buying
audience at the right time and place. Context, given the abundant noise and
clutter, is just as important as content, if not more so. Smart reach is still the name of the game
and, as the migration from linear TV to digital video accelerates, determining
whether ads are reaching the right folks, resonating with them, and driving
purchase behavior is becoming increasingly difficult. Average daily TV
time is down from 3.5 hours a day in 2020 to less than 3 hours a day in 2023
while daily digital video viewing has grown by almost that exact amount from
2.5 hours a day to almost 3 hours a day in 2023.
As a result, linear TV
ad spending has been flat to down over the last four years (stuck in the
mid-$60 billions) and, even in an election year, there's not much enthusiasm
for 2024. But, at least in the old days of traditional TV, you could sometimes
see your ads running on the tube, while these days no one has any idea where
their digital placements are showing up, what they're adjacent to, and who's
seeing them. X (formerly Twitter and soon to be toast) is the most visible
poster child for the risks of having no control and no say over what some algo
decides to position next to your offerings. But the whole industry is now
driven in large part by fraudulent next-gen click bait systems designed to
attract programmatic ads. These MFA programs have led to an environment
where one in five links is to a fake site delivering made-up facts, phony
health products, or pathetic financial pitches.
That's no problem if
you're targeting kids up to age 18, because since TikTok and YouTube completely own the video market,
the choices are pretty much locked in, and frankly the advertisers
focusing on these kids don't really care about quality engagement or
first-party data. It's all about tonnage. TikTok's ad business is growing about
twice as fast as Meta's and almost 4x faster - year over year - than
Alphabet's. And because of TikTok's delivery methodology and typical video
duration, cost-per-view to advertisers is a fraction of what they have
been paying for decades in more traditional channels.
But for mature and
serious businesses seeking to actually connect to real human beings who are
interested in learning about and ultimately purchasing their products and
services, the problem is much more complex and challenging. TikTok isn't going
to get the job done, but new ancillary networks are being built which make much
more sense for serious advertisers. The most attractive of these are the retail
media networks being developed by merchants like Walgreens, Kroger-Albertsons,
and Walmart. They have extensive first-party data about their customers, strong
and recurrent connections to them, and relatively high-quality engagement. But
they lack the massive scale of players like Netflix. However, in combination,
they can provide a solution which also offers levels of addressability,
measurement and accountability that the digital vendors can't yet duplicate or
effectively compete with.
The bottom line is
pretty simple. As attractive and rapid as the newest delivery and tracking ad
technologies may seem, as the ad buyer you're being asked to put far too much
trust and money in "take my word for it" systems where the results are
machine-driven and fundamentally unmeasurable. A much better bet is to take a
step back and use channels and vendors whose methodology and mechanics are
clear, understandable and auditable in more concrete and convincing ways.