![]() ![]() People don’t react to these ads because they are particularly convincing, but rather because they present a convenient route to the check out.Īffiliates are another contender. Programmatic online video or display ads also often act to shepherd prospects to the final sale. For relatively unknown brands, or existing brands that are launching a new product, search can drive awareness and, from there, new sales both now and in the future.īut it’s also not to say that search is the only example of rent-like digital advertising. This is not to say that all search-engine marketing is rent-like, as Faris Yakob pointed out when I contacted him. Insiders report that this kind of search ad is explicitly not supported in Google’s auction algorithm. Advertisers pay Google for clicks, and any hypothetical search ad that set out to tell a story, convince, or otherwise build demand, might not convert straight away. How Google manages search ad sales proves his point. Search is the obvious example, but it’s not the only rent-like digital “ad”īyron Sharp highlights search-engine marketing as the archetypal example of rent-like digital advertising, or to use his terminology, advertising that is really “ physical availability”. It’s because “online retailers must maintain a visible presence, recession or not”. Drawing on US data, it reports that traditional advertising formats are down, but that online advertising is flat, or even up a little. Correlation isn’t causation, but its surely not a coincidence that the line in the chart below, digital share of spend, is heading north-east in parallel with the bars, share of retail that’s online.Īnd then there’s the evidence point that The Economist used – the reaction to this year’s recession. It shows that the rise and rise of digital advertising matches the rise and rise of e-commerce. The macro data points to digital ads being rent-like too. Econometrics is not a perfect analytical technique, but ours are done to IPA-awards standards every time, and we believe the conclusion: these ads aren’t driving new sales, rather they are easing or defending sales driven by other things – price, the economy, and advertising on traditional channels. My job is to estimate econometric models of individual firms’ sales, and these models often show that some types of digital marketing don’t drive incremental sales. ![]() The data show that digital ads don’t drive new sales ![]() They replace the sign above the shop front, the lights that stay on inside, the shelf-space, and even the entry in the yellow pages. Their purpose is to help people who are already on their way to a business to arrive safely. Now that e-commerce is so prevalent, fewer businesses need to maintain a physical presence with a high street shop, but they do need to maintain a virtual presence and that’s why they purchase these ads. Instead, as a recent article in The Economist pointed out, they are “ the new rent”. This makes sense for some types of online ads, but others aren’t like traditional advertising. In 2020 online advertising is neither new nor under-analysed, and yet there remains a fundamental misunderstanding about the role it plays, says Grace Kite.īusinesses think that all digital advertising belongs in the same bucket as TV or posters, so they pay for it out of their marketing budget, monitor its return on investment and increase it at the expense of other channels. ![]()
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