Making Online Ads Accountable

Jeffrey F. Rayport writes in Business Week about the impending doom and gloom of online display ads in the seminal piece “Making Online Ads Accountable.”

Unsurprisingly, his conclusion is the simplest one imaginable: reducing everything to DR

It’s what we might call accountable media: advertising you pay for only when it works. What a concept, especially in an economy where pressure on marketing to generate measurable return on investment is greater than ever. That’s how online advertising will come out of this recession in a different way than it came in—more robust and much improved.

There are many reasons why this is a gross oversimplification of the problem. If the industry as a whole moves towards this model, it will continue encouraging the “last click syndrome”, or the idea of attributing all of success of a media mix to the last point of interaction. That is still one of the biggest problems of accountability in search marketing. Success needs to be shared, so to speak, and accountability works both ways.

There are other sensible alternatives of making display advertising CPM model more fair and more representative of the actual yield. Here are some examples:

• Discard impressions served below the fold and never seen, or impressions that spend less than X seconds in the user’s viewport. This may also lead to a model where advertisers use the metric of time spent with ad on screen (even if the user has not interacted with the ad) more routinely.
• Elimininate “international” impressions. The lack of geo targeting is rampant especially within premium media brands. This dilutes actual results and wastes advertisers’ media dollars which are usually allocated for specific markets. Ironically, all the ads I see on BusinessWeek.com are most definitely from US advertisers, targeting the U.S. audience. Yet I’m in Canada.
• Enforce frequency caps, with publishers accepting the possibility of capping total impressions per user across all campaigns. Reduce the pollution before it becomes a waste management problem.

Let’s not forget that even though advertisers may be buying the inventory on a CPM basis, they have the liberty of calculating their ROI in whatever form they like. Calculations can be made for an effective cost per click, cost per interaction, cost per engagement — and any other derivative imaginable. Reducing the potential of display advertising to a knee-jerk DR medium would be equivalent to pricing TV ad inventory based on immediate sales generated offline after the 30 second spot runs.

Ultimately, it’s up to publishers to enforce the quality of their inventory, manage its abundance, and to consistently reinvent themselves to justify the premiums they charge.