Display Ad Spending vs. Search

The story of the week has largely been about the growth of online ad spending.  While this seems like a well-trodden, tired conversation,  it got a pretty nice boost this week from Fred Wilson (which was inspired by a presentation posted in The Atlantic here).  In an earlier post I wrote I talked about the semantic web and Facebook’s bold venture into becoming the servers that will deliver relevant advertising based on what we like (here).  I want to continue down this road and talk about content sites and advertising.

Over the past several years,  “clicky” sites have beat out the “sticky” ones because of the economics of intent-driven, performance-based media (Chris Dixon explains this far better than I can).   Content has taken a back seat to sites like Google, which generate a lot of visitors who spend very little time on the site before clicking out to purchase (or to consume content).   This type of behavior generates a lot of revenue, is highly measurable and marketers like it because they can calculate a direct ROI (spend $100 on performance-based media like Google Pay-Per-Click, generate $150 in net income from the refers and you’re just made money) .

This development has been great for growth in the online economy; it has fueled innovation and brought transparency and validity to the space when it needed it.  But, while SEM is a highly efficient means of advertising, it’s a terrible way to create brand equity.  I believe that display will get a shot in the arm from companies like Facebook, who will be able to generate relevant, targeted ads to consumers. I think this will be a good thing for the web because it will likely drive demand for more rich, content-heavy experiences online.  Display advertising (I’m not necessarily talking about IAB ad unit banners) works best in places where a user stays on a page for a while and consumes content (I have no proof of this, but I like associating brands with experiences and I believe that most people feel the same way).

Of course, the real win for online display advertising will be when someone figures out a way to really measure engagement.  The way the system currently works, people see ads everywhere, but when they decide to buy they go to Google, search the keyword and click on a sponsored or organic link.  It’s unfair to credit Google with 100% of any given sale;  a user might have read a review on a blog, viewed a few display ads, or even (say it ain’t so) read an ad in a newspaper.  Right now all of the credit for the sale goes to Google  when in reality the credit should be shared across  the marketing funnel.  Engagement marketing is an important part of the equation and is often ignored by marketers at the risk of brand dilution.  As the web becomes a more personal experience for us all,  I think we’re going to see growth in the engagemnt side of things again.

About these ads

I work in a Seed Stage private equity fund, K2 Media Labs, focused on businesses in digital media, mobile and gaming.

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Posted in Marketing, Media & Technology

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