Advertising and Technology

attention-merchantsMost industry folks know the name Tim Wu. He’s the Columbia professor that coined the phrase ‘net neutrality’ and who has been an advisor to the FCC on telecom issues. He’s written a new book, The Attention Merchants, about the history of advertising that culminates with the advertising we see today on the Internet.

Wu specifically looks at what he calls the attention industry, being that part of advertising that works hard to get people’s attention – as opposed to the part of the industry that produces advertising copy and materials. Wu pegs the start of the attention industry with the New York Sun, a scandal sheet started in 1833 that built up circulation by selling papers at a low price that included sensational (and untrue) content. The Sun was the first generation of publications like today’s National Enquirer and like a lot of websites today that peddle fake news. But that model worked and Herbert Simon of the Sun created an industry and made a lot of money selling advertisements.

Wu has painted a picture about advertising in terms of its place in the larger society. He observes that advertising has always come in cycles. At times advertisers grow to become too pervasive and annoying, and society then reacts by ignoring the abuses or by forcing the end to the largest abuses of the industry.

Wu traces the history of the attention industry through the years. He looks at the development of billboards and at state-sponsored propaganda machines like the British during WW1 and the Germans in WW2. He ends up by looking at Google, Facebook, Instagram and others as today’s latest manifestation of industries built from the concept of gaining people’s attention.

The attention industry has changed along with technology, and so Wu’s story is as much about technology as advertising. From the early days of sensational newspapers the attention industry morphed over the years to adapt to the new technologies of radio, television and now the Internet.

Probably the heyday of advertising was during the 1950s in the US when as many as two-thirds of the nation tuned in to watch the same shows like I Love Lucy or the Ed Sullivan Show. Advertisers for those shows caught the attention of the whole nation at the same time. But that uniformity of a huge market fragmented over time with the advent of cable TV and multiple channels for people to watch.

Today we are in the process of carrying advertising to the ultimate degree where ads are being aimed at specific people. The attention industry is spending a lot of money today on big data and on building profiles for each of us that are then sold to specific advertisers.

But we are already seeing the pushback from this effort. At the end of 2016 it was reported that over 70 million Americans were using ad blockers. These ad blockers don’t stop all ads and the advertising industry is working hard to do an end run around ad blockers. But it’s clear that like at times in the past, the advertisers have gone too far for many people. In the early days of the tabloids there was a lot of advertising for fake health products and other dangerous items and the government stepped in and stopped the worst of the practices. When TV ads became too pervasive and repetitive people invested in TiVo and DVRs in order to be able to skip the ads.

And the same is happening with online advertising. I am probably a good example and I rarely notice online advertising any more. I use an ad blocker to block a lot of it. I refuse to use web sites that are too annoying with pop-ups or other ads. And over time I’ve trained my eyes to just not notice online ads on web pages and on social media streams. And so advertisers are wasting their money on me, as they are on many people who have grown immune to the new forms of online ads.

But advertisers wouldn’t be going through the efforts if it didn’t work. Obviously online advertising is bringing tangible results or companies wouldn’t be moving the majority of their ad revenues from other media to the web. Wu’s book is a fascinating read that puts today’s advertising into perspective – it’s mostly the attention industry doing the same things they’ve always done, wrapped into a new medium. The technology may be new, but this is still the same attention industry that was trying to gain eyeballs in the 1800s. If nothing else, the book reminds us that the goal of the industry is to get your attention – and that you have a choice to participate or not.

The Battle Over Ad Blocking

advertise hereIt’s easy to forget that most forms of media are still paid for by advertising. While there are a few exceptions these days for services like Netflix and Amazon Prime that are paid for by subscription fees, most media still relies heavily on advertising to stay financially afloat. Even the most expensive cable networks, like ESPN, that earn huge revenues from subscription fees still also get significant revenues from advertising.

But advertising is changing rapidly as the way people use media is changing. Newspapers have lost the bulk of their advertising and magazines are similarly struggling. Radio seems to be holding its own, but other forms of media are starting to struggle as well. Numerous analysts have their eye on cable and TV advertising as it’s becoming obvious that people are cutting back on watching the big screen. And even many of those who watch TV are avoiding all of the commercials by watching TV on a time-delayed basis.

The hope of the advertising world was that they could shift dollars from traditional media to the web and still get people to see their ads. In fact, in some ways it’s easier to target ads to specific audiences on the web than it is on television. But now we are seeing a huge growth in the use of ad blocking software and one has to wonder what that is going to do to web advertising.

Advertising on the web has been growing quickly. For instance, Kantar Media reports that advertising spending on the Internet grew over 15% last year while advertising for network TV dropped 3.4%. But one can foresee a big gray cloud hanging over that growth due to ad blocking.

Several surveys show that 25% or more of US Internet users now say they are using some sort of ad blocking software. It’s been estimated that ad blocking cost Google about 10% of their advertising revenues, or $6 billion last year. So this is quickly becoming a huge problem for web sites and services that rely on advertising revenues.

It’s not hard to understand why people use ad blockers. Last week I was looking at fish aquariums, something I hadn’t looked at in years. Afterwards I think six of the next ten sites I looked at had ads for aquariums with a few showing the exact same one I had last looked at on Amazon. This whole process feels too targeted and a bit creepy to me.

We will probably be seeing a lot more ad blocking soon. For example, Apple has said that they are going to build ad blocking into the next version of Safari for the iPhone. That is clearly going to make web browsing on the smartphone a lot faster, but it’s going to remove a whole lot of users from advertisers.

There is also now a movement for web pages to fight back against ad blocking. For example, PageFair, a Dublin-based startup, has developed software that will defeat ad blockers and still allow the ads to pass to users. This presages a war between ad blocking software and the software to defeat it, much like the ongoing fight between virus purveyors and anti-virus software. Ad companies will find ways to get their ads viewed and then the blocking companies will find ways to block again.

It’s obvious that a lot of people don’t like ads. How many of you have looked at the web sites that show top ten lists for a wide variety of topics? These sites are so loaded with ads that they seem to take forever to load, and in some cases they simply freeze during the process of loading ads. I avoid these kinds of sites, but even just reading tech news pages every day gives me an average of 50 new adware tracking cookies, almost all of which are passed to me through ads.

I understand why advertising is needed on the web. There are many news sites and other interesting web services that are 100% funded through banner ads and other advertisements. As somebody who likes a lot of these sites I would hate to see them disappear, but I also hate the ads. I think this has always been the case and it’s the rare person who loved the ads on broadcast television. Even if you like a new ad the first few times, it gets very old by the fiftieth viewing.

This is going to be an interesting battle to watch and a lot of what we think of as the best stuff on the web is going to depend upon who wins between the advertisers and the ad blockers.