Digital advertising is already in the throes of a third revolution4 min read . Updated: 30 Nov 2020, 09:28 PM IST
Sophisticated new bidding systems enable the real-time purchase of slots on the internet for advertisers to maximize impact
The first revolution in digital advertising occurred when Google began to place advertisements along with its standard web search results. Search Engine Optimization was all the rage a few years ago, which meant that companies were willing to spend money to ensure that a Google search for certain keywords would throw up their website within the first few hits. Simply put, these companies wanted to be on the first page of what Google served its users. The company was smart enough to add video to the mix, and now YouTube, with all its advertisements, operates as the second-largest search engine on the internet.
This revolution was so significant that it caught the attention of Europe’s vigilant regulators. The European Union filed a suit against Google—specifically its “Search Engine Results Pages" and its advertising businesses. In 2017, the European Commission levied a record €2.42 billion fine on Google for having “abused its market dominance as a search engine by giving an illegal advantage to another Google product, its comparison-shopping service." Google’s case in its defence has always been that it has reached this level of market dominance simply by building a better product than others, and not by acting unfairly.
The second revolution came along with Facebook, which with its own social media approach created the largest advertising platform that the world had yet seen. Its purchase of WhatsApp, Instagram and other such players meant that it knew a lot about each one of us on its platforms, from who our associates were to what our areas of political, commercial, filial and artistic interests might be. And users, in droves, gave Facebook more information on their own likes and dislikes by putting up pictures of food, “checking in" upon arriving at restaurants, theatres or other places of interest, and generally trying to best their online “friends". This gave the behemoth an untrammelled view of our personal lives, advertising grew significantly more finely targeted, and “echo chambers" came up that played information back to us that we were likely to approve of.
There is now a third revolution at hand. The world of broadcast television is going away, as our viewing screens become more and more internet-connected for regular programming as well as for premium video feeds from channels such as Netflix, Amazon Video, Apple TV, YouTube TV and others. This is already apparent, at least in countries like the US (and soon in India as well, one can safely predict, with the current boom in internet connectivity across the nation).
Broadcast TV advertising was always a bit of a hit-or-miss affair, and advertisers relied on data companies such as AC Nielsen and others that would track samples of viewers to understand viewing patterns. This was achieved by placing a small device on the TV sets of people in an audience sample, and collecting data from it to understand which TV shows people watched, and how often. Television Rating Points (TRPs) are an output of this process.
But TRPs will play less of a role in the future, as TV viewing moves online. And TV advertising will become less of a hit-or-miss affair. Programmatic advertising placement—targeted ads that are automatically placed online to appear on various net-connected devices, including TV sets—is the third wave. This entails automating the buying and selling of advertisement slot inventory in real time through an automated bidding system. It enables advertisers or ad agencies to purchase advertisement impressions on publisher sites or apps within milliseconds through a sophisticated technological ecosystem. So far, this has been used mainly on mobile phones.
In the US, there are a few companies which are leading the way on programmatic advertising via connected TVs. The largest of these is The Trade Desk. The $41 billion California-based company, founded by chief executive officer (CEO) Jeff Green, is a demand-side advertising platform that lets advertising agencies and other buyers place digital advertisements using algorithms and highly enriched data. This segment is growing far faster than the overall advertising market, but for now it is still just a fraction of the latter’s size.
The Trade Desk operates a cloud-based technology platform that lets advertisers optimize their ad spending, typically by getting the right advertisements to pop up for the right shoppers at the right time. Its stock has jumped almost 220% this year. Early in November, the company announced a huge positive surprise in its revenue and earnings for the preceding quarter.
On the earnings call at the time, CEO Green said: “While our growth is very encouraging, we are still operating at a time of great uncertainty for many industries... Advertising is an engine of economic growth and our customers know that their campaigns can fuel growth and drive market share gains for their brands. And because of that, during times of uncertainty, they become much more deliberate."
As companies seek to rebuild their businesses after the pandemic, the typical measurement techniques that have been used by marketers are going to come under microscopic scrutiny by chief financial officers. And that means that advertisers have to focus on advertising opportunities that are measurable to the extent that returns generated for their business can be tracked and proven.
Green says his company is working to overhaul its systems with an improved user interface, and expects to bring ad buying and planning tools together in one space. It will also feature easier integration and management of data, with updates to its machine-learning and artificial intelligence engines for advertising campaigns. Others in the field, no doubt, would be rushing to improve too.
Bye bye, television TRPs. Hello, internet programmatic advertising.
Siddharth Pai is founder of Siana Capital, a venture fund management company focused on deep science and tech in India