Advertising, Optimisation and Adaptation: Why advertising is declining

As today’s guest post on TechCrunch discusses, Internet advertising revenues have dropped sharply and the author goes on to say that

it [was not] caused solely by the general recession and the decline in retail sales.  Internet advertising will rapidly lose its value and its impact, for reasons that can easily be understood.

The article provides a deep analysis of the whole situation and prompted me to do a little research on myself. I signed in to my Google account and took a look at my web search history. What I found was the following:

  • My total since I activated the service is 12,000 Google searches
  • And in the last 30 days the total was 293 searches

However, this is where it gets interesting:

  • Over all time, I clicked approximately on 132 sponsored links (i.e. adverts)
  • While over the same 30 day period I clicked on just 1 advert.

That boils down to something like a 1.1% clickthrough rate. Not conversion. Clickthrough.

Now I am probably not a typical Internet user. I’m a programmer, I studied computer science, I design and build websites and do web optimisation consulting. Basically I’m a “Power User” which means that I know exactly what and how stuff works on the web. Also, a large percentage of my searches are directed towards finding specific bits of information and I often know exactly what path to clickthrough to.

However, even mentally “controlling” for all that, I think there are some interesting points to be made.

1. Adaptation

The first is that human beings are great adaptors. In an unfamiliar situation we can quickly carve out a niche comfort zone that keeps us happy. The web is no different. My brain, eyse and fingers have quite simply adapted to the fact that half the stuff on any given webpage is likely to be uninteresting advertising and thus I filter it out. I know what the Google non-sponsored links look like (i.e. the real search results) and that it what my eye and mouse seeks out.

2. Skill

Secondly, this adaptation moves from being simply a reaction to the environment to being an acquired skill that is refined and improved by time. What this means is that it becomes easier for me to apply what I’ve subconsciously learnt within the Google context to other similar environments.

Therefore, when I (rarely) find myself using a different search engine I can quickly apply my skill to filter out the chaff from the corn. And I can also do it on any other site, including the TechCrunch site, where, being a regular reader I know precisely which bits of the page to block out.

3. Optimisation

And just like a virus will change and optimise its behaviour in response to antibiotics, so do I optimise and improve my skill even while advertisers are trying to optmise their advertising strategies. In theory this would keep me and the advertiser on par as I learn how to avoid the new tricks, but in reality, the non-advert-clicking-surfer is clearly winning this battle. I think this is because I am not only learning how to avoid the adverts I know, but I am also learning how to anticipate the new strategies and will therefore adapt to them more speedily!

This is probably why, when Facebook launched Beacon and I read about the controversy, I remeber asking myself “My God, are there adverts on Facebook??” I had never even noticed them before I read about them, and I’m a heavy FB user. The same goes for Twitter where, after only a few months of being and active user, I almost instantaneously learned which kinds of Tweets to avoid (many of them are Guy Kawasaki’s :-)) because they’re typically link bait.

Finally, keep in mind that while I’m young, I’m not really “Internet generation”. I first used the net when I was 15 or so. Compare that with a modern 15-year old who’s probably been using the net since she was 5. These guys are probably orders of magnitude better at filtering out the crap than I am.

So what’s the solution?

I don’t know yet. But what I do know is that this is a “problem” because the people the ads are aimed at clearly don’t want them. If they were interested, they wouldn’t be learning how to avoid them. So part of the solution probably lies in trying to deeply understand, at a more fine-grained level than just “eyeballs”, what is unsatisfied in your visitors’ life and trying to address that.

Update: An interesting and related post by Doc Searls here.

Update 2: Simon pointed out this related article mainly about blog advertising.

If you liked this post follow me on Twitter, I’m @richardmuscat, or subscribe to this blog’s RSS feed.

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7 thoughts on “Advertising, Optimisation and Adaptation: Why advertising is declining

  1. xmun says:

    Richard, this is a problem with all advertising, not just the online variety. It has to do with credibility and, of course, if you actually want to buy anything at that particular time.

    People quickly learn that advertisers are rarely unbiased, obviously. Their advertising is skewed to their own product, emphasising whatever problem or need their product claims to solve. Problem is, it may not be much of a problem at all. And, of course, the claims for effectiveness are being made by the people trying to sell the solution.
    People aren’t stupid. They learn these patterns pretty fast. And advertisers need to learn this: they need, badly, to learn how to communicate better.

    First, the product needs to actually do what it claims to do. Second, real, independent confirmation of this is necessary. Third, don’t just throw the info out at anyone who comes by – make sure your targets are really interested in what you’ve got on offer.

    A tall order, in truth. But no different in the online world to anywhere else. Its all about being honest and upfront – advertising and communication ethics do not change just because you go online. If anything, they should be tighter – you can be found out more easily!

  2. ourseat says:

    First time on this blog, but “simplicity” caught my attention. I have a solution to the great advertising failure debate that is so simple, it feels complcated. (I use the term obviously wrong and actually entirely correct…same principle) Here goes…

    It’s true that the status quo has shifted and consumers are now in control. It’s also true that media companies have moved from a cartel-like perch atop the ad economy to hyper-fragmentation which is causing an erosion in their power. That’s what’s broken. What isn’t broken is that advertisers spend $300 billion per year to buy consumers’ time, attention and loyalty. Yet that’s what everyone is trying to fix. Is the only solution to reduce how valuable consumers are? Charge us to hide…DVRs, satellite radio, paid Internet experiences. Is the best option to cripple the ad economy and make consumers pay the difference?

    The status quo that needs replacing is the flow of money in the ad economy. Media companies have been selling what belongs to others. Our time, attention, personal information. It’s a flawed economic model that has been maintained by the reality that consumers had been fragmented…a sea of powerless individuals. The Internet changes all that. The only value media companies provide to the ad economy is audience aggregation. We can aggregate ourselves now. I address this concept as it relates to Professor Clemons’ on my blog http://www.OurSeatAtTheTable.com. Consumers provide the goods and services that advertisers are buying. Give them a slice of the pie and the question of consumers wanting/needing/trusting advertisers goes away.

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