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August 9, 2014

Future of Digital Advertising

Leading online research firm eMarketer's report for 2013, on media time spent by US population, had forecast that, on an average, adults in US would spend close to 5.25 hours daily on online media as compared to 4.5 hours on television. This indicates a shift in consumers' attention span towards online content, despite the extensive reach of television. Advertising dollars appear to have followed the trend as depicted by IAB's internet advertisement revenue report for 2013. As per this report, the online advertising market in US is close to $43 billion. Powered by stupendous CAGR of 123% in mobile, for the last four years, the overall ad revenue has been compounding at 18% per year, over the last decade.

However Nielsen's survey points out that online display advertising still attracts only around 4.5% of the total ad spend across the globe. Television, with close to 60% share, is the most dominant medium. The reach that television enjoys is obviously an important factor contributing towards such a high share. Another difference worth noticing is the quality of advertisements played on television. Supported by a rich combination of audio, video and bit of storytelling, television advertisements have a far superior narrative compared to the sometimes obnoxious ad popups appearing on web sites. They appear intrusive and try to sway users' attention from what their primary intent is. There is a serious need for display advertisements to align better with the content and blend with the main theme. This reformatting is necessary for both content and form of advertisements. Native advertising is a technique that recognizes this need and pushes for more context specific display advertising. As indicated in this article, though there is still disagreement on what constitutes a native advertisement, around three fourth of publishers already offer custom ad slots, suitable for native advertising. GE is leading the pack from advertisers' side in adopting this form of advertising and they have had good results like audience reach of around 5 million and CTR of 8 from some of their native advertising campaigns. Publishers adopt several different mechanisms to support context specific native advertisements. The most common one is paid editorial content written by the publisher's team or provided by the advertiser. Sponsored tweets and shares on social networking sites like Facebook are other popular forms of native advertisements. BuzzFeed, NewYork Times, Huffington Post, Mashable are some of the leading names offering custom inventory and have a definite strategy to support displaying context specific native advertisements.

Objective based buying is another encouraging initiative which could prove to be a disrupting change in the industry. Marketing function of an organization works to meet certain objectives which could vary from creating brand awareness, achieving a particular sales target or driving buyers to certain stores. The factor that influences advertisers most in achieving their objective is targeting the right set of end consumers who see these promotions. This is where data available with publishers comes into play. With proliferation of mobile devices, data collection points have increased while data storage and collection costs have declined, allowing publishers to collect a wide range of users' attributes. Big Data based analytic techniques are commonly applied on this vast information to derive metrics like overall size of audience, audience demographics, unique user count, and distribution of users across channels and their activity across different time durations. These metrics can be used to gauge audience interests that can be further used to deliver relevant ad impressions to end users. Imagine seeing advertisements on your favorite website(s) for nearby food joints during lunch time and taxi services during evening hours since the publisher captures and learns user's needs during different times of the day. Publishers have always been substantiating relevance of their inventory, for advertiser's campaign, by sharing audience related data. With objective based buying, however, they get more directly involved with the campaign by helping advertiser's strategize. Facebook has brought objective based buying into existence and has even integrated reporting aligned to advertiser's objective. This is a step in the direction of publishers aligning better with advertisers' business goals. A great deal of extra work required to be executed by an advertiser, to measure a campaign's effectiveness, can thus be reduced.

The rising importance of Programmatic buying and Real Time Bidding (RTB) is also counted among the growth engines in the digital advertising industry. As per eMarketer's estimates, by 2017, RTB will command more than double the spending of what it did in the year 2012. Programmatic is no longer viewed as the mechanism to dispose remnant inventory. Data driven decision making and instant availability of a wide variety of inventory are among the major benefits that programmatic buying brings in. However, standardization of content on offer is a limitation that needs to be overcome for programmatic to merge with popular trends like native advertising. Leading ad agency Publicis' has recently introduced a platform which allows more of native and custom inventory to be bought in programmatic fashion.

A common influencing factor for success of the recent innovations in display advertising is the manner in which insights drawn from audience data are put to use. As I have already mentioned, technology has made it feasible for organizations to collect and process consumer data at an unprecedented scale. However, securing private information and using it without infringing upon consumers' privacy is a challenge that the industry is grappling with. Concepts like native advertising have blurred the lines between editorial and advertisement, thereby leading to concerns around misleading viewers. Provided consumer's right to privacy and truthful information is respected, there is no doubt that digital advertising will keep growing at the exponential pace it has witnessed so far.

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