In his post, John cuts through the confusion created by the contradictory market trends that are being picked up by the media, typically one at a time:
- the cyclical downturn in the general advertising market;
- the continuing explosion of new web advertising platforms like social networks and video;
- the development of great new targeting technologies; and,
- the increasing fragmentation of our attention across media, which reduces the effectiveness of online ads.
The markets are reacting. Google shares are down 37% since the start of the year, on fears of a slow-down in online advertising and waning effectiveness.
John points out:
Here’s the danger: we may become so focused on the recent growth in online advertising that we dismiss any short-term slowdown in spending growth as a purely cyclical phenomenon. In the process, we may miss the longer-term, and ultimately far more profound, impact of the diminishing returns that online advertising is already beginning to experience.
Think about the impact on traditional advertisers. Just as they are about to embrace the Internet; just as the large brands are starting to shift more bucks into banner ads and online video campaigns; just as the P&Gs and Unilevers and BMWs are coming round to the view that the Web is the future of advertising; just then.... the yield drops and Web ad effectiveness is thrown into doubt. Microsoft (oddly) captured the problem nicely in this funny video (thanks Nic, good find):
There will be a lot of click-through soul-searching and efforts to tweak ads to recapture our attention, but the truth will be inescapable: static, image-based advertising (eg banners, etc) will be on the wane just as these advertisers get it together online. Some will be scared off, a few will charge ahead into the next marketing frontier: interactive marketing games, clever video ads, and vague concepts like influencer marketing, social marketing, collaboration marketing, and so on. These innovations represent huge future advertising opportunities, but they are still nascent.
Future advertisign effectiveness will be about influencing influential people, and exploiting social networks to spread messages. It will be about the confluence of marketing, public relations, and corporate social responsibility, and about mastering some guerilla tactics to get the word out. And that's not likely to be your current ad agency's core competence. As a result, you can expect some serious churn of people and companies in the advertising industry before the new paradigm is established.