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Digital advertising is now bigger than television – or is it?

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In 2012, digital advertising was a $102 billion industry worldwide, according to emarketer.com, with North America's share being $39.8 billion (39 percent). In 2013, according to the Interactive Advertising Bureau and PriceWaterhouseCoopers, that figure had grown to $42.8 billion, which they also said was more than total television advertising spending. But according to an April 17 Online Publishing Insider report, those figures may be, like triumphant Obamacare sign-up totals, just a wee bit exaggerated.

"As an industry, if we took an honest look in the mirror, we would see a clearer picture of who we really are, complete with the structural flaws we mask with these inflated figures," media sales consultant Ari Rosenberg writes.

A matter of definition

Whether online ad spending figures are inflated or not depends on how you define advertising. Without coming out and saying so, Rosenberg seems to be defining advertising as display space or air time in paid media. And while traditional advertising breaks spending into distinct categories, digital ad spending totals result from lumping them all together.

"First off," says Rosenberg, "one company contributes to half of the total industry billings we report...We have to put Google’s revenue somewhere, but calling ourselves a $42.8 billion collective 'industry' comes with one gigantic wink when half of these reported dollars come from one bank account."

Now, the fact that Google Adwords sponsored links represent half of total digital advertising does not in itself disqualify that spending from being added to the total. But the disparity in how totals are calculated very well might. Print advertising spending totals exclude classified ads, to which sponsored-link listings bear a more than passing resemblance. Subtract that 50 percent, and suddenly the $42.8 billion digital ad spending becomes a measly $21.4 billion.

Apples and oranges

The way traditional and digital media count direct-response advertising is another case of apples and oranges. "Pure direct response" accounts for 65 percent of digital advertising ($27.82 billion), Rosenberg says, and he doesn't think it's "pure online advertising" that "creates branding and awareness."

But traditional media carry direct-response advertising too, and how that gets added varies by medium. In print media – newspapers and magazines – direct-response advertisers pay the same rates as other display advertisers just trying to create branding and awareness, and their space costs get added to the print totals.

But television's a different story. There, direct-response advertisers buy remnant time – air time at all times of day and night that the stations, networks or cable channels couldn't sell at normal rates. On the premise that some money is better than none, they sell remnant time to direct-response advertisers at fire-sale rates – as low as $5 or $10 for a 30-second spot. On the premise that low media rates work to lower costs per lead, direct-response advertisers buy it.

So while direct-response commercials figure in the television ad totals, they do so at a huge reductions. But for digital media, Rosenberg notes, that $27.82 billion worth of direct-response advertising is pay per click, "yet we happily report an industry spend total including almost $28 billion that doesn’t get collected unless someone clicks on an ad."

'Phantom dollars for phantom ads'

Of the remaining $14.98 billion left from the $42.8 billion figure, according to Rosenberg's calculations,

Conservatively, 50% of these ads we sell to advertisers never get seen by people. So phantom dollars for phantom ads are part of this reported total as well. If you discount those dollars, it leaves us at a legitimate $7.5 billion “pure advertising” business online.

Here again, a question of definition arises. By "phantom ads," does Rosenberg mean paid ads sent by robots to robots? Or does he mean ads that people are exposed to but ignore? If the latter, traditional advertising has its own version of "phantom ads." Readership research conducted over the course of eight decades shows that in a typical newspaper or magazine, some 54 percent of readers ignore the most-noticed ad, and only 10 percent of those who notice it (4.6 percent of the total readership) read the body copy. Yet, the space costs advertisers pay for those "phantom" ads go right into the print advertising totals.

What's more important than whether revenues for unread ads are included in totals is why all these digital ads go unread, and here Rosenberg nails it.

[I]nstead of running a thrift shop for ads, we need to start acting like a Neiman Marcus.

Right now, we have too many ads being served on one single page view. Right now, we serve ad executions (pre-rolls, pop-ups, exapandables, auto-plays, etc[.]) that literally, not figuratively, infuriate consumers. Right now we welcome ad creative so awful it’s hard to look at. Right now, we are killing the value of an ad’s exposure, not improving it.

And that’s my point. We publicly gloat about the overall spending figures we “can report,” trying to convince everyone how great we are doing, when in fact we are imploding. If we continue to report these total dollars spent without being more honest with ourselves about how and why these dollars come our way, then none of these structural flaws affecting the value of the ad exposure we sell, will be addressed.

Of course, there's more than enough "ad creative so awful it’s hard to look at" in newspapers and magazines, on television and outdoor boards (and on radio, where it's hard to listen to), but the intrusive overkill is definitely unique to digital.

It's up to the online media

Rosenberg lists seven things that can make digital advertising more effective with consumers and more valuable to advertisers:

  1. Limit page views to one single advertiser.
  2. Stop the insanity of pop-up surveys and offers that distract users from consuming content.
  3. Stop the ridiculousness of auto-play video ads, and move pre-rolls to mid-rolls.
  4. Stop any and all overlays.
  5. Sell ads that get seen.
  6. Say no to advertisers who run crappy-looking creative.
  7. Put users back on a pedestal instead of using them as a stepping stool to cheap revenue.

Too bad it's only the last two that advertisers and agencies, as opposed to online publishers, can do anything about.

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