The McKinsey Quarterly: A reality check for online advertising

The McKinsey Quarterly: A reality check for online advertising

“…recent McKinsey research finds that supply bottlenecks could limit the pace of online ad growth and drive prices higher. Moreover, a dearth of ad agencies that can manage both traditional and digital campaigns could further slow the shift in spending to online ads.”

The cost of online advertising has been a strong meme for the past six months as online publishers enjoy the lift of the interactivce renaissance that started in 2004. The problem is page views are not keeping pace with advertisers’ demands for impressions and targeted placements. Dow buys Marketwatch to get page views after limiting itself with the WSJ’s cost wall. AOL drops the last of the walled-garden walls. Every online publisher from Yahoo to niche trade sites needs impressions — the crack cocaine of the business — and more impressions. Now, discount those impressions due to click fraud, the fact that banner and skyscapers and IMU’s are old-school, and you turn to the fringes of the craft — behavioral targeting, RSS ads, viral, word-of-mouth and non-traditional tactics.

What’s an online marketer to do? Higher prices at a .02 click through rate makes “traditional” online advertising a non-starter. Keyword bids for commodity terms and the corrosion of click fraud makes that a non-starter as well.
If you’re in durables — autos, real estate, cars — you lean towards behavioral. If 25% pf the population is in the market every four years for a new automobile, then figuring out how to surround them with a car ad at that specific point in time is a huge bonus. This leads to detection of the intention and folks like Yahoo are masters at detecting it. Which leads to the insane prices being commanded for Yahoo’s auto placements.

For consumer non-durables — a pair of pants — well, is the agency going to go above a $50 cpm for a banner campaign to build the brand or a search campaign with a predictable cost per click model?

Me, I predict a collapse of the current blind impression model, a breakthrough in the behavioral side, a big shift to word of mouth and consumer-to-consumer activation, and more grassroots transparency. Couponing, just-in-time discounting, and other affiliate driven tactics will rise as well.

Sitting in the middle of this, I can say with some assurance that there is a massive generational gulf in marketing right now between traditional offline tactics and online. While online marketing is now nearly 20 years old, the competency and realization of its potential is only now beginning to creep into the CMO’s office. I’m fortunate to work for a CMO who gets it, but it’s still an evangelical sell to persuade many to take the leap of faith out of traditional marketing tactics into the new world, let alone the new-new world of WOM.

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