I have been involved in online advertising for 20 years. I have sold solutions to better target ads, find the right target groups and personalize advertising. These solutions can improve some results, but, at the same time, there are quite fundamental problems with online advertising. Many believe the future lies with AI.
Last week, I was attending the Venture Beat’s Transform event in San Francisco. As you can imagine, it was very much about AI this year. There were many interesting discussions and new ideas. At the same time, there were many boring areas, especially with corporations wanting to make old things with new things where concepts would need more than just applying new technology. Advertising is one of those areas.
Targeting has been overrated
Targeting has been an overrated area in online advertising. Of course, getting the right message to the right people is relevant because, in the end, advertisers want to create sales. But that reality is much more complex.
Even if you show the right ad to the right person, it doesn’t mean the person notices it or is interested in it. There is also significant fraud in online advertising, where different parties make money based on clicks. Online ad prices are low, so only huge websites can make significant money from it. Others are often desperate to do anything to get visitors’ attention for their ads, and these ads are often very annoying.
A recent Financial Times podcast and article raised many questions about Facebook’s advertising and earning model. It also raised concerns about the use of personal data and privacy. It questioned whether Facebook had seen its best days, facing revenue declines, and even if its business model still works.
But let’s go back to VB’s event last week. We again heard many corporate and online marketing guys saying how generative AI could contribute to better marketing and advertising. Now we can target ads even better and also personalize messages in them.
AI can make advertising better
I admit AI can make advertising better by making ad content more relevant and more effective. But then it requires really new ideas. It is not just better targeting and adjusting a little bit of ad text for each recipient. Advertising really needs creativity, it must engage people on an emotional and rational level, and it must also be interesting. Selling and brand experience is much more than just advertising.
One female presenter said that AI can better determine whether her company should send an ad to a customer through email, social media or another online ad channel. They could also adjust the text based on customer information and the person’s current product. This way, they could better manage churn and make the best offers next.
I am already experiencing personal churn management and the best next offers in a personal way. When a person from my mobile provider calls me monthly and says, “Now you can save a lot of money by entering a new two-year contract with us.” In future, AI will write to me or make a robot call but I’m not sure it will make me a more committed customer.
Measuring marketing and brand experience better
I have also seen new concepts to measure the marketing and brand experience better, e.g. the Share of Experience score. This is not yet a mainstream way of measuring customer experience or marketing, but it probably indicates which direction the market is moving. It is not only about targeting and trivial personalization but how to understand customers better and offer them unique experiences. A few more personalized sales offers with AI are not enough.
The challenge to offer something better and more interesting to this market is probably the time span. If you only want sales in this quarter, it is easier to utilize direct email, online targeting and cold call models. These can then be fine-tuned to get more quick sales. This is easy to understand when you have your sales and revenue targets. But it is good to remember that volume-based targeting can also be detrimental to customer experience and brand value.
The current online advertising model is broken
Companies must keep their customers happy and get existing and past customers to buy again. This goes hand-in-hand with getting customers to value the brand and feel that the company respects and values them by offering them something unique. This also means that customers prefer companies that don’t utilize personal data against them or personalize sales messages just to trap them. They also dislike offers that are of no long-term value to them and to be targeted by AI-generated spam. AI can enable us to improve customer messaging, experience, and advertising. But it needs new ideas and concepts rather than just trying to make more with the existing models. The is no doubt the current online advertising model is broken.
Related article: Advertising revenue models are back – and riskier than ever
I agree that the online advertising model is broken. So much money is spent on it, yet in the real world we don’t see people noticing and reporting online advertising as much as we might expect. For it to work it needs to be served to a human (not a bot) and that person needs to notice it and find the advertising relevant and persuasive. Done well, online advertising can build brand perception as well as sales – but a lot needs to be done to provide accurate and meaningful measurement. John Wannamaker who famously said “Half my advertising is wasted. The problem is I don’t know which half.” would definitely have something to say about this!