Rescuing Digital Advertising from Extinction: The Innovation Challenge

This content relates to : DIGITAL TRANSFORMATION

HIGHLIGHTS

“Interest” targeting (e.g., the use of cookies) is not as effective as digital advertisers believe

Knowledge of what consumers do online is no substitute for understanding why consumers do what they do

The end of “free data” necessitates innovations that would maximize digital shoppers’ satisfaction while respecting consumer sovereignty.  

Eli Seggev

Seggev Consulting

Six-and-a-half million years ago a cataclysmic event caused the dinosaurs’ extinction. An equally cataclysmic event occurred in 2017 in the world of digital advertising when Apple began implementing their Safari Intelligent Tracking Prevention technology (ITP). Firefox followed in 2018 with its Enhanced Tracking Protection (ETP), and Microsoft released Edge Tracking Prevention in 2019. Since then, 96 percent of iPhone users took advantage of the newly found freedom and opted out of automatic cookie surveillance. While digital media and advertisers believe that cookies are essential for personalized ad targeting on the internet, the use of cookies without consumers’ active permission is considered by many to be infringing on people’s right to privacy.  

The difference between the two events is that while dinosaurs could not adapt to the changes brought about by the meteorite impact, digital advertising and marketing can! The only question is: Do marketers and the digital ad agencies to which they entrust their marketing communication have the will to invent a cookie-free system? This writeup is a plea for adaptation and offers an outline of a roadmap for doing so. 

But first, a few relevant research findings: (1) A recent ANA (Association of National Advertisers), study found that only 30% of the digital ads have been reaching the intended consumers; (2) Facebook’s own Marketing Science Team’s analysis shows that demographic targeting reaches twice as many intended consumers as “interest targeting” (Facebook’s term for the surveillance data provided by the company); and (3) An IPSOS study of “public trust” revealed that advertising professionals enjoy the lowest “net trust,” as measured by the difference between the percentages of “trust to tell the truth” minus the percentages of “don’t trust to tell the truth.”  

It is noteworthy that these dismal findings reflect a period during which data was available in unlimited quantities and the digital advertising industry benefited from the most sophisticated analytic methodologies the profession has ever known, such as: artificial intelligence (AI) and machine learning (ML). This was also a period during which a new generation of well-trained data scientists assumed leadership positions in the advertising and the data and analytics industries.  

The inevitable conclusions are that: (1) Data quantity is no substitute for data relevance and data quality; (2) Knowledge of what consumers do online, or anywhere else for that matter, is no substitute for understanding why consumers do what they do; and (3) In general, theory and conceptual foundations must drive data collection and analytics rather than the other way around.  

So, what should advertisers and their agencies do to prosper in an era of digital shopping, particularly now that we all expect a post-pandemic e-commerce boom?  

It is time to resurrect the fundamental tenets of advertising that point to advertising’s role to persuade consumers to buy the advertised product for which reaching the right consumers with the message is an obvious requirement. Cookies – as shown by Facebook’s research – are totally ineffective for message development.  

The latter requires that we: 

  1. Understand how social media and, generally, life in the virtual world, affect human perceptions, motivations, attitudes and even core values and take those into account to: 
    1. Define what data to seek: behavior outcomes vs. motivational antecedents  
    2. Determine the most cost-effective methods of acquiring that data 
    3. Look at the intersection of consumer behavior, marketing theories, and decision theory where scholars have made significant advances during the past 20 years. (Hint: consider the growth and maturation of Behavioral Economics) 
  1. Reconsider the value of primary data which, being proprietary, offers a significant competitive advantage compared to online surveillance data to which all the competitors in a product category have equal access, therefore nullifying any competitive advantage not to mention the fact that universal access to the same data set inevitably leads to homogenized advertising that makes all advertising less effective, no matter how much a company spends. 
  1. Make sure that advertising spend can be related to the attainment of campaigns’ marketing objectives and can be measured accurately via an indicator such as Return on Advertising Investment (ROAI). 
     

During the last two decades, marketing practitioners have made significant progress in developing technologies that can help us accomplish those objectives and we can, and should, fall back on basic marketing science precepts that have successfully guided advertising through time. 

The end of free data, while perhaps shocking in the short term, gives marketing professionals and marketing scientists an opportunity to rethink the information brands require for their strategic planning and tactical programming that would maximize digital shoppers’ satisfaction while respecting consumer sovereignty. That is particularly important at this juncture as digital shopping will be consuming even more marketing and advertising budgets as it continues to grow steadily. What we need now more than anything are new technologies that use proprietary data in a creative and low-cost manner.  

The sudden demise of the cookie would hopefully provide the right incentive! 

Author: 

Eli Seggev, ’69 Ph.D.

Seggev Consulting, Inc.