Ev Williams Thinks Digital Advertising Is Broken. Here's Why He's Wrong.
Last week Medium founder Ev Williams created a stir in the media world after laying off a third of the publishing platform’s staff. He placed much of the blame for the massive layoff at digital advertising’s feet, claiming that it’s a “broken system.” He wrote in a post on Medium that digital advertising fails to reward the best content but rather content that can attract a few seconds of attention. Williams added that Medium does not have the solution to this problem yet, but it will try to create a new revenue model that doesn’t detract from the reading experience.
Trust me, Ev, publishers are not blind to the problems facing digital advertising. They know that banner ads average just a 0.12% click-through rate in the U.S. And that 26% of desktop users block ads. And that ad fraud wastes billions of dollars annually. Let’s not even get started on the fact that Facebook, the second largest digital advertising platform, inaccurately reported engagement (in five different instances), overestimating video engagement, time spent on articles, and the number of users that view businesses’ pages. So yes, publishers know digital advertising is a big ol’ mess, and they’ve known that for quite some time.
But despite these very real and serious challenges, digital advertising is still one of the most efficient ways to drive revenue online and can connect advertisers with consumers on a massive scale or at an individual level. Ad fraud and blocking aside, digital advertising still provides the best opportunities for advertisers to know exactly who viewed their ad and what actions they took after viewing that ad. That is simply not feasible in print or television. Plus, digital advertising offers unmatched reach, allowing advertisers to target users wherever they might go on the web. That is why it’s not surprising that online advertising spend has reached an all time high, according to a recent IAB report. Revenues hit $17.6 billion in Q3 of 2016, a 20% increase year-over-year.
And these ad dollars are not necessarily being spent in vain. Many publishers are elevating how they distribute ads and report engagement, proving to advertisers that their money is well spent. Time Inc., for example, rolled out an ambitious advertising program in 2016 after acquiring ad tech provider (and owner of MySpace) Viant. With Viant’s ad technology and massive database, the publisher can abandon unreliable cookie-targeting and deliver ads to known individuals, according to Erik Moreno, EVP and president of corporate development, new ventures and investments at Time Inc. That allows Time Inc. to deliver ads to the consumers most likely to purchase a certain product, and attribute ad impressions directly to advertiser revenue. Because it is marketing to known users, Time Inc. can track what actions where taken after a consumer viewed or clicked an ad, even when those actions happen outside of Time Inc.’s network of sites.
“At the end of the day, once you start targeting at the audience level, the fact that a mom may be on People.com, or Café Mom, or they might be on a stroller blog, it doesn’t matter,” said Moreno at an industry event in September. “It’s the same person, and we’re reaching them in all of those places.”
Even the oft-maligned programmatic ads are driving more revenue for publishers these days. Michael Dugan, CTO at Forbes Media, said programmatic offers publishers an opportunity to increase the revenue earned from inventory that hasn’t been sold direct and nurture advertisers toward more meaningful partnerships. But to ensure that their programmatic inventory does not depreciate in value, Dugan said that publishers must employ a variety of programmatic models from header bidding to private auctions and set floors so that bids do not dip too low. “Just because remnant inventory is unsold to a direct buyer, doesn’t mean it doesn’t have value,” said Dugan. “Your brands and the audience that visit them have value. The content that you’re producing has value, whether you happen to sell it directly or not.”
And ad tech companies continue to reinvent what constitutes digital advertising today. From in-image ads to quizzes, ad tech companies are creating new ways for publishers and advertisers to connect with readers and learn more about them. For example, Verizon-owned AOL just unveiled a new ad program that incentivizes consumers to view ads. After clicking an ad to download a coupon, consumers receive free Verizon data. In the coming years, these types of innovations will only increase as publishers and advertisers learn more about what makes consumers click, download, and buy.
Online advertising is not broken. It has problems, yes, but it is still evolving. The media industry is beginning to move out of digital advertising’s adolescence where pop-up ads and “Around the Web” spam reigned supreme. As online ads mature, they will become more sophisticated, relevant, interactive, and genuinely enjoyable. Publishers and advertisers aren’t going abandon this “broken” system. They are working to fix it right now.