Pass the popcorn. Hide the checkbook.

Don Marti
Sat, 11 Feb 2017 04:59:24 -0800

A new digital ad medium is making its way up the upward slope of the Peak Advertising curve.

Aldo Agostinelli of Sky Italia writes,

In the age of the IoT, web-connected devices are the new smart tools that will give advertisers unprecedented access to their users’ daily lives. But there is more to it: the IoT could also help advertisers deliver timely messages and persistently reach consumers.

This is how all targeted ad media, from direct mail to junk fax to mobile banners, get their start. Some Marketing person comes up with the idea of using some new technology to better target some users but not others.

Pass the popcorn. We've seen this show before.

Now it's time for a flood of videos from agencies about how well the new medium works, surveys where marketers say they're going to put budget into it, a bunch of VC funding for firms that do it, and before you know it, the new medium is something that marketers don't want to be caught not doing. The whole shitty carnival of "let's build a new targeted ad medium" is in town. Or in this case, on your toaster.

For a little while anyway.

Marketers know that you have to enjoy the new targeted ad medium while you can. Any new targeted ad medium always peaks, and then declines—right about the time users figure it out.

It's not that the technology is bad. Many new targeted ad media do provide technical advantages in more accurately matching ads to users. But somehow targeted ad media always go through a boom and bust cycle, unlike mass media advertising, where print and broadcast ads tend to hold their value.

Peak Advertising in targeted ad media keeps happening, because, as Agostinelli writes,

The IoT has many benefits for advertising: not only can a message related to a product reach a specific and clearly identified target audience, but the message can be designed based on data which makes it more personal and, therefore, more efficient.

Read that again. That's where every targeted ad medium breaks down. Efficient is why users bail. They start voting to ban junk faxes. They start running spam filters and ad blockers. And yes, they will, somehow, figure out how to kick the targeted ads off their toasters.

Meanwhile, users continue to accept magazine ads and at least tolerate the TV commercials. It's the targeted ad media, the ones that sound the coolest and most efficient, that get ignored, blocked, and regulated.

Let me share with you a sentence that's an obvious, even stupid, platitude for regular people, but a strange and terrible secret for digital advertisers. Ready?

There's no such thing as a free lunch.

Advertising, done in a sustainable way, is an exchange of value between the advertiser and the audience. The audience gives up some attention as the ad interrupts an ad-supported resource such as a news story or cultural work. In exchange, the advertiser offers economic signal, a hard-to-fake message about the advertiser's intentions in the market.

When a targeted ad medium helps advertisers try to get a free lunch by cutting back on the signal—by making it hard for users to estimate the amount spent to place the ad—the user no longer has an incentive to "pay" for the ad with his or her attention. The Peak Advertising curve is the result of users figuring out the targeting.

User tracking and targeting projects, built at tremendous expense, make an ad medium less valuable, not more. This is hard for computer nerds to understand. "What do you mean my program makes things worse? But it was so hard to write!"

No ad medium entirely goes away. When the IoT advertising hype is over, crappy toaster ads will remain, spreading security problems and brand-unsafe ad placements just like crappy web ads do today. The trick for brands is to sit back and enjoy the show, not get ripped off.