Advertising trends and where the future is headed
Consumer behaviors are changing the world quickly and the internet advertising model is rapidly losing its grip on consumers...
It is hearsay to suggest to both freshmen digitally native marketing and ad pros that digital advertising is “buying the top” of a market that is about the suffer unprecedented headwinds and a slow and steady trend down in influence and effectiveness. I have been perhaps one of the most bullish promoters of the sector for nearly 2 decades now, going so far as to spend 8 years of my career in-house at Google hand-holding the largest brands in the world to be comfortable spending 7, 8 in the largest of enterprise cases 9-figures annually on online advertising of all shapes and sizes. As in financial bull markets, when the music’s playing “you gotta dance.” The same is true with advertising. You fish where the fish are, or you starve.
But the world is changing, at ever-increasing velocity and it may be time to reassess our existing priors and consider slaughtering our sacred cows we’ve feasted on, understandably in gluttonous fashion for clients, employers and spreading ideas.
A sea-change is upon us that is becoming impossible to brush aside, and new reality/emerging trend we cannot ignore the start of today is this: consumer behaviors are changing the world quickly and the internet advertising model is rapidly losing its grip on consumers. This is an audacious claim many will immediately balk at, given it is a contrarian one for the advertising industry and its practitioners and something I’ve personally helped build and been a key advocate for while at Google and for martech/adtech startups.
The trend is your friend, until a new trend emerges
The meteoric rise of programmatic online advertising upended the advertising world in just 15 years. It’s completely unprecedented as so much in modernity is. That growth was driven by a) the explosion of internet usage and b) the MVP monetization model of online advertising. Few accounted for this in their prior models of the world, because it was just too ambitious a call. Everyone from newspapers to traditional media to large businesses missed it. As did many investors, journalists and analysts.
Internet usage will continue to grow, but the monetization model of the internet can change just as quickly. Bits evolve much faster than atoms -- easy come, easy go. While some might see what we’re about to share as an unpredictable ‘black swan’ (impossible to see coming or account for) I take a different perspective and view it as a white swan (easy to spot, you should see it coming). Another example is Covid-19 which was actually not a black swan event either, it was a white swan. Many have raised the alarm about a new pandemic for a decade+, they simply were ignored. There was absolutely no excuse for companies and governments not to be prepared for this. It was inevitable. This next shift in advertising will be similar.
Companies and consumers are showing that they are increasingly willing to pay for content. An illustrative example is The New York Times' subscription revenue surpassing advertising revenues. Other evolutions in their early innings are examples such as YouTube paid subscriptions, Twitter blue, and Patreon. As marketers, we are paid to adapt, or die. It’s why we’re here.
Imagine an internet that's not purely driven by ad support: it sounds healthy, user friendly, monetizable, and sustainable. There is a non-zero chance this is a likely reality within 10-20 years and we'd all be better for it.
Consider the other advertising mediums that make up the ~trillion dollar advertising landscape:
Is there any potential future any of us can imagine in which linear TV doesn't go to zero? It’s difficult to think that will not be the case. So, the question is how much of this spend will go to CTV + streaming. Again, with the prevalence and consumer preference evolution for subscriptions, there's a strong case that streaming content won't have the capacity to support these advertising inflows.
But don't take it from me, Bob Iger recently said traditional TV is going to head off a precipice. It’s not a novel observation but when Iger and the prev gen of media titans are now confirming what the early adopters have been screaming from the rooftops for well over a decade now, we should stop and take note.
Let’s also respond to another increasingly popular comment: "Wait, but Netflix is getting into advertising and other players will, too!" This is a (desperate) grasp at revenue growth for a platform that has stalled on user acquisition increases. Further, and most importantly, the valuable demographics that brands pay to reach will simply not be in the ad-supported tier. This will play out on every streaming service - those that can afford $10-20 per month will simply opt-out of commercials, leaving the remaining viewers relevant to only a subset of advertisers. Why would any premium product, the lion's share of ad budgets, want to advertise to this demo?
The changing tides of advertising…
Many advertising channels are sleepwalking into their demise. We should not be surprised if the future looks very different than is expected by many of the current seats of power, with a strong vested interest in maintaining the status quo. After all, when have we seen progress in media and marketing where that is the case? Let us work to prepare now and take advantage of this sea change. We should use the time we have prior to this trend accelerating more to learn how to not just survive, but thrive in a world where a natural balancing function of a “return to the mean” takes place. By return to the mean, ad dollars will go somewhere. There’s no shortage of excellent choices of high performing places for them. And look, digital ads aren’t going away. But they will more frequently be blocked, ignored and otherwise fought against with greater vigilance by platforms, users and governments in the name of UX, privacy and other headwinds. It’s both a challenge and an opportunity. As with all large trend shifts, chance favors the prepared.
Online ads > 62% of advertising, being eroded by subscriptions, ad-blocking, online privacy requirements
TV > 22% of advertising, diminishing due to lack of viewership, cord-cutting, content subscriptions
Radio > 3.84, being eliminated by streaming audio
Newspaper > 3.71%, needs no explanation
You’re familiar with all of these. But what’s one channel that’s growing? As I pointed out in the green above, it’s out of home (OOH) ads. Though OOH is still primarily a traditional medium, with billboards accounting for about 75% of total category ad spending, digital formats such as in-office video screens and electronic displays are making inroads. By 2026, the share of overall OOH ad spend devoted to digital will come to 41.3%, up from one-third this year.
And now only is the channel projected to grow post-pandemic dip, it’s highly effective. The below analysis, which represents an aggregation of publicly available studies on advertising recall from 2017 to 2022, shows that out of home advertisements produce significantly higher ad recall with consumers versus live and streaming television, podcasts and radio, print, and online executions. This holds true across printed and digital OOH formats.
Industry professionals also see the opportunity…
At the end of the day and decade, OOH remains perhaps the most exciting channel that stands to gain the most from other channels' deterioration. It is, as I like to call it, the ‘most lindy’ format (really where the first ads ever appeared, in town squares). It’s an exciting time to focus on making it work, easily for marketers of all shape and size.
And of course, I’ve made a bet here too. Late last year I decided to join AdQuick as VP of marketing to help modernize how marketers take advantage of out of home ads, by making them as easy to run as digital ads. My Tweets announcing this move are here in case you missed them.
Really liked the post. Makes you wonder how the culture on the internet shifts if companies don't have to monetize users with ads.
Years ago, I was out to dinner with friends. I excused myself to the bathroom. Over the urinal was a digital display, cycling through ads. Local car dealership, local roofer, etc.
I thought it was silly. Who'd pay to advertise over a urinal? And who would such advertising work on?
Of course, years later, the same company responsible for that display has since expanded into what seems like every bathroom across Northern Illinois. Ads everywhere. And it's a beautifully simple model. At the urinal, there's nothing else to give your attention to than what's directly ahead. The displays are a relatively minimal fixed cost with a (I'm guessing) reasonably long useful life. They can be updated remotely. The bars and restaurants take a cut. The company running them takes the lion's share to reinvest and expand, conquering, building a urinal advertising dynasty.