The Current and Future State of Advertising

In my strategic management class we were “discussing” Google and its competitors. I put “discussing” in quotes because it was really the teacher and two other students who had read the case study but none of them understood the points they were trying to make. Class that day was equivalent to pulling teeth for a first year dental student. It was painful for everyone involved.

According to the “discussion”, Google makes 97% of its revenue from its ads platform. The point of the “discussion” was whether Google should continue to stay down this path or if it should pursue other areas of revenue more aggressively. My teacher expressed a point of view that I disagree with but held my tongue during class. I tend to challenge his and other’s point of views during class and figured this wasn’t worth another class “discussion”.

My teacher, we’ll call him Josh since that’s his name, thinks the future will have less advertising. He thinks there is already a downward trend in online advertising and that will continue, thus hurting Google’s bottom line. This is where Josh and I disagree. I think advertising is not on the decline but actually increasing. Yes, this is my opinion hence why this is on my blog. And the reason Josh thinks it’s on the decline, (since he presented no numbers to support his claim I will assume he does not have any, same as I), stems from how integrated advertising blends with our lives. He doesn’t notice how intertwined advertising really is with our daily lives.

Let’s take a step back and look at the current product landscape. Sitting at my desk I can think of three major examples at how integrated ads have become part of our lives.

  1. In-app ads:
  • After every round of Temple Run I play on my girlfriend’s phone (Windows Phone still doesn’t have it) I am presented with an ad. A nice little X on the top right-hand corner allows me to close the ad and return to fleeing from some strange gorilla monster. I pay no attention to how this app is throwing an obvious advertisement in my face post-success run. Normally, I would be furious if some marketer bought the time after I successfully ran away from giant monster and ruined my celebration but I am not. I don’t bat an eye. It’s just the norm now. I’ve come to expect it. And it allows me to play the game for free.

2. Kindle:

  • Amazon sells a version of the Kindle with ads. It’s not a based on the Freemium model. It functions 100% as a Kindle without ads works. Users can download books to their device and check out books if they have Amazon Prime. The whole shebang. When the device is just sitting there on the bed a nice, unobtrusive ad appears. All this saves the consumer money on the device and Amazon easily makes up for the difference on ad revenue.

3. Indian cell phone plans

  • In India they have a different structure for their phone plans than what we have here in the States. Many companies charge little or even nothing for text messaging. In exchange for the steep discount, users allow the company to send them targeted text messaging advertisements. I don’t have specific numbers but this blog says 40% of urban Indians get this service with about a 12% conversion rate on those ads. Seeing as companies can offer text messaging for practically nothing today, they’re making money a good chunk of change by throwing in ads. This saves consumers on their monthly bill and providers make up the difference.

Have you noticed a pattern yet?

If consumers are willing to give up their screen space for a few seconds then we save money. Products allow us the ability to pay less for a device or service we already want in exchange for allowing to run ads when the product is not in use. I imagine we’d be far more annoyed with an in-app ad if it were to appear mid-turn as I am jumping onto a rope in level 13 (if there’s such a place; I’ve never made it that far). But that’s not the case. Presented at the right time and place, consumers willingly accept product placements if they benefit from it somehow. I tend to be a big fan of my wallet being fat, so of course I will let you run some ads on my device when I am not using in exchange for keeping my wallet on the porky side.

I don’t know what the future looks like but let me guess (or hope). Gentlemen, imagine watching TV at home and never seeing those awkward tampon commercials again. Gosh. I would pay someone to not subject me to those ever again. But maybe they’ll pay me? The next TV you buy could (read: should) come at a discount if I allow the cable company to anonymously know my basic demographics: age, income, occupation, location, maybe even interests. These targeted ads benefit the consumer because they don’t waste my time with cat litter commercials since I’m a dog person. It benefits the service provider with better data to provide potential marketers with. A lot of this would be made more accessible if we switched from an always-on cable market to a demand-driven cable market. I pay for a subscription to a content provider or a TV show and then give me ads that I may actually like and end up paying. We don’t have to live in a one-size-fits-all world any more. We have the data to live in a this-fits-me-and-no-one-else world.

Other places I can see these integrated ads in:

  • My phone screen saver – give me five dollars off my monthly plan and I’ll allow you to put ads as my screen saver. Saves me money and gets you more ad revenue.
  • Idle TV screens – When I’m not watching TV feel free to throw a silent ad up there. It’d work just like a Kindle.
  • Digital picture frame – Feel free to rotate an in every 10 pictures in exchange for a discounted price on the digital picture frame.

The initial “discussion” from class warrants a whole different blog post.

What do you think of this concept? Am I completely off? Where can you envision ads in the future? Let me know in the comments below!

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