The three laws of display advertising physics

Wednesday, February 23, 2011 | 9:11 AM

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As we’ve written on our blogs before, new technologies are profoundly improving display advertising. In the last few years, there’s been a technological Big Bang, creating new ways to buy display ads across the web: exchanges involving real time bidding, demand side platforms, improved ad networks and more.

These technologies are enabling marketers to seize the digital moment and run far more effective campaigns, but just as the universe changed dramatically following the Big Bang, the digital buying marketplace has changed forever, requiring some new “laws.”

The three laws of display advertising physics

1. The Theory of Relativity: What’s better, a demand side platform, or an ad network? It depends

Our clients often ask us if they should use our DSP (Invite Media), or our network (the Google Display Network), especially as the distinction between the two platforms blurs. We often answer with an analogy from the world of stock investing (it’s not perfect, but it’s a first step). The first question is whether to buy and sell yourself, or engage someone else to manage your portfolio:

  • The online broker model: For buyers looking to manage the details of their ad buying and use their own technology and data, a DSP like Invite Media is often the best option. This is similar to an online broker that lets you log in and closely manage your investments (and, as with Invite Media, get access to special trading features, market intelligence and expert advice).
  • The stockbroker model: Some marketers have a desired campaign result (such as a target reach for a new car campaign, or a number of conversions for a sporting tickets campaign). They want to outsource the details and have a customized, transparent media solution designed for their campaign. The Google Display Network most often fits this bill—it’s like having a stock broker manage your portfolio to meet your investment goals.
Both platforms enable access to huge pools of ad space, deliver the same types of ad formats and facilitate similar ways of targeting ads. Again, it’s like buying stocks—whether you choose an online broker or stockbroker, you can select from thousands of types of stocks, markets and investment products.

2. Fusion Theory: Why contextual and audience buying release more energy when combined

Some have suggested that audience buying (delivering ads based on users’ interests) and contextual advertising (targeting ads to content) is an either/or proposition. However, we believe it’s the combination of the two that is most powerful.
  • With effective contextual advertising, you can get the maximum reach while delivering your message in highly relevant locations—like news articles related to your products—in the precise moment a person indicates interest. Contextual advertising is vital to building brand awareness and reaching new prospects at relevant moments.
  • Audience buying—such as remarketing—enables marketers to reach people who have already shown an interest in a particular topic or brand. This is especially effective for re-engaging consumers.
Marketers combining these types of buying can reach a broad range of people, then hone their messages to particularly good prospects to maximize the impact of their campaigns. We’ve seen that this approach drives better campaign performance; third party studies back it up.

3. The Law of Perpetual Motion: Why marketers should embrace a rapidly moving industry

Display advertising is in a state of constant motion, caused by the acceleration of online media consumption and the explosion in new technologies.
  • The industry is literally moving faster as media buyers start to increase their use of real-time bidding (RTB) technology, which allows them to evaluate and bid on ad space on an impression-by-impression basis. We recently undertook an industry study with Digiday, surveying more than 300 digital media buyers, agencies and intermediaries about their thoughts on RTB in the year ahead. Some revealing findings:
  • 88% of buyers plan to buy via RTB in 2011, up from 75% last year.
  • 47% of media buyers say that the benefits or RTB will increase their overall digital advertising budget this year (16% said it would not, 37% were unsure).
  • Spending on RTB is quickly moving out of the "test budget" range: 79% of buyers estimate that more than 10% of their digital display budgets will go to RTB in 2011. 33% estimate that 50% or more of their digital display budget will go to RTB. And 7% estimate 90-100% of their digital display budget will go to RTB.
  • 29% of media intermediaries (such as DSPs, ad networks, and exchanges) anticipate their volume of real-time bidding will increase by 100% or more versus last year. 19% believe it will go up by at least 200%.
  • More formats are moving to RTB: 34% of buyers say they are extremely or very likely to purchase rich media ads via RTB this year, 32% are extremely or very likely to purchase dynamic creative ads via RTB, 20% are extremely or very likely to purchase mobile display ads via RTB, 18% are extremely or very likely to purchase in-stream video via RTB and 14% are extremely or very likely to purchase mobile rich media via RTB.
  • Nearly half (48%) of publishers surveyed say they plan to increase the amount of inventory they will make available via RTB. 28% are still deciding. Only 24% said they were not planning to increase RTB inventory.
We’re seeing this rapid growth and change first-hand. Since we acquired Invite Media in June 2010, the number of advertisers on the platform has doubled; agency spend has grown by almost 300%. And spending on display ads on the Google Display Network is growing more than 100% annually in a large number of countries. Publishers are benefiting from these changes as well (for example, a recent study found that publishers who participated in the DoubleClick Ad Exchange see an average 188% revenue lift when the exchange wins the auction).

In this new era, the most effective campaigns will be driven by marketers who rethink how they connect with people in this rapidly moving industry. Whether it means partnering with technology providers to buy better, or exploring the infinite possibilities of today’s creative units, embracing new media and technology provides a key way for marketers to differentiate and grow their businesses in a new universe.

The future

Unlike the Big Bang, the expansion in our industry is not chaotic or random. We’re moving towards a single platform that seamlessly incorporates the best technologies for planning, buying, serving, creating and measuring display ads; one that will enable marketers to effectively reach and engage people across desktops, tablets, videos, mobile devices and TVs.