Written by: Pedro Campos, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
On May 8, 1704, the first-ever newspaper ad was published. Two centuries later, in 1922, AT&T launched what was known as the first radio advertisement. 19 years later, on July 1, 1941, the company Bulova Watches airs the first TV commercial in history, on a local channel in New York. At the turn of the 20th century, in 1994, the world saw the first-ever online ad from AT&T, a banner ad on HotWired.com. This gave birth to what we now know as digital advertising.
Since 1994, digital advertising has grown tremendously. Fast forward into the 21st century and it's the preferred way for businesses to acquire customers. In fact, US digital ad spending surpassed traditional media spending in 2019.
The Old Way To Advertise Online
AT&T's first advertisement pushed many of the biggest brands in the world to use the banner ad as an effective way to reach their ideal customers.
Back in the day, banner ads used to get 44% click-through rates. Crazy, right? As brands started to use them more and more, they also started to lose effectiveness. These days, if you're getting 2% click-through rates on your banner ads, you're in the hall of fame. This phenomenon was called “banner blindness.”
Essentially, people are ignoring banner ads a lot more than they did 20 or even 10 years ago.
Display Advertising
In today's digital world, we categorize banners as a form of display advertising.
These ads can show up on different sites across the web and can be static or animated, also called HMTL5 ads.
Banner Blindness
Essentially, display as a whole is facing the same problems banners do. They're losing effectiveness. This is because the nature of the placement is the same. Click-through rates went from 44% to 2% and might even get lower in the future. Many advertisers are realizing this and are mainly using display ads for remarketing. They're still relatively cheap and can be effective to convert warm and hot audiences.
What about reaching cold audiences? The truth is that for most businesses, this isn't the best option due to the increase in cost per click and low engagement. These days, display ads can cost you almost as much as pay-per-click, which has higher return potential.
Pay-Per-Click
Banner ads also gave birth to other types of digital advertising, namely Pay-per-click or PPC ads. The most well-known form of PPC is search engine ads on platforms like Google or Bing. Google launched AdWords in 2000 and has since become the preferred channel for many businesses to attract customers.
Rising Costs
When Google AdWords first came out, it was very profitable for companies. It was so easy to make a profit back then, and you didn´t even need a great product or optimized landing page.
As more and more advertisers started to become aware of the opportunity, ad costs also started to increase. At the beginning of the 21st century, you could spend pennies per click and get amazing returns. Today, that´s no longer the case. In some industries, with a lot of competition, for example, insurance or banking services, keywords can cost you up to $100 per click and sometimes more. That´s correct… per click, which is insane!
Google paid search is still one of the most effective ways to get new customers online, even better than other popular, organic ways, such as SEO. In fact, pay-per-click visitors are 50% more likely to make a purchase than organic. However, as I mentioned, it´s also getting very expensive and you better bring your A-game to the ad auction with quality ads and offers.
PPC Limitations
One of the biggest drawbacks of search advertising is scalability. This is because you're limited by the search volume of the keywords you're targeting. So, if you're in an industry where people don't search too much for what you offer, at some point, you'll have to either look for other channels or pay more for keywords that don't necessarily relate to your product.
This can be a problem, especially for companies with complex or disruptive solutions that require more explanation, and people aren't really searching for that type of product. That´s where branded content can help, as you'll see later on.
Social Media Advertising
In February 2004, Facebook was founded. 8 years later, Facebook acquires another social media player, Instagram, for $1 billion. Today, Facebook is called Meta and is one of the most valuable companies in the world with revenue exceeding $85 billion a year. The bulk of this revenue comes from advertising.
Good-Old Scroll Stopping Ads
Over the years, Facebook and Instagram have become the go-to platforms for small businesses to attract customers online. The reason is that they're fairly easy to get set up and don't require a big investment.
You can even start with $1 a day on Facebook. Similar to Google, ad costs have risen with popularity and continue to rise. Despite the low barriers to entry, for some businesses, Facebook ads are actually getting too expensive.
Not So Cost-Effective
Just from 2014 to 2018, US advertisers saw the average cost per click rise from $0.19 to $1.71. Today, in some industries, companies are paying up to as much as $12.00 per click. You could say this is mainly due to recent privacy changes or the pandemic. While that is true, there are other factors that influence ad costs.
These include competition and lack of inventory. That's right, Facebook is running out of places to show ads. Recently, they even started limiting the number of ads you can launch at any given time.
From my experience, Facebook and Instagram as advertising platforms are getting increasingly difficult to scale and make sense of the ad costs. With more and more advertisers there, they're also losing quality. Let's face it, almost anyone can launch an ad there.
B2B On Social Media
If you look at the other end of the spectrum to platforms such as LinkedIn, for example, the scenario is even more frightening. You can expect to pay at least $5.58 per click and around $6.59 per 1,000 impressions, on the most professional social network in the world.
However, in some cases, higher prices don't mean higher quality. LinkedIn ads have the same limitations as Facebook, other social media platforms, and paid search. They don't give you a lot of scaling opportunities.
Where Is Your Audience
LinkedIn currently has over 740 million members. That's not the biggest problem though. On average, people only spend 17 minutes per month on the platform. Yes, per month!
If your pool of traffic is relatively small, this makes it very difficult to reach your ideal customers at scale. When the audiences shrink, the frequency goes up and that leads to lower click-through rates and even higher traffic costs.
Despite this, many companies still advertise on LinkedIn. It can be a good profit center for your business by using it for remarketing. Keep in mind that with smaller audiences, you're going to actually have more work because your ads will fatigue more often.
There's A New Way
While display, search, and social media ads are still effective, nothing comes close to what were going to talk about from now on. I'll prove that to you in this section.
Companies you and I know the name of, generate the bulk of their revenue from this one channel. Some experts say it's the future of digital advertising. I couldn't agree more!
Some Things Never Change
You'd probably agree that consumers are getting smarter. Anyone has access to almost any information at their fingertips. These days, people are also more digital-savvy than ever before and know how to avoid ads. If they can't avoid them, they'll just ignore them.
Amongst the sea of changes that are happening right now, there's something that hasn't. People don't like to be sold or interrupted with annoying ads. Research shows that 70% of consumers prefer to learn about new products through content.
Introducing Native Advertising
The concept of native advertising was first heard in 2011. However, most business people have actually never heard of it. You might say, “Well, if it's so good, how come most don't know about it?”
That's a good question. My theory is that people gravitate toward what others are already doing or saying. You're mainly used to seeing your friends in business talking about Facebook, Google, or even YouTube. Very few might say they do native advertising. If many don't know about it, it's probably a good time to consider it.
So, what is native advertising anyway? Simply put, it's the new newspaper ad. Native means associated with the place or circumstances. These are ads that match the look and feel of the content they have around and show up on sites like Time, CNN, or the New York Times, to name a few.
Instead of being interruptive, annoying, or disruptive, they blend in with the site's content. That's what makes them so powerful.
Content Is Still King
Not all content though. What I'm talking about here is branded content. Going back to the previous point, people don't like to be interrupted by ads and want to discover new products through content.
A study shows that branded content on premium publishers, also known as a native ad, creates a 50% higher brand lift compared to having that content just sit on your blog.
Higher Quality Placements
Platforms such as Outbrain or Taboola allow you to launch native ads on what it's called premium ad inventory. This means your ads will show up on high-quality publishers' sites. Unlike Facebook or Google Ads, the barriers to entry for native advertisers are a bit taller. To advertise on Taboola, for example, you have to go through an application process and when accepted, you're assigned a dedicated account manager.
In essence, higher barriers to entry also mean higher quality platforms.
Brand Safety
One of the reasons native is so appealing to brands like Nestlé, L’Oréal Paris, Bosch, and many others is that high-quality ad inventory comes with extra safety options. Unlike display ads, for example, it's a lot harder to control where your ads show up. Certain placements might not exactly be in line with your brand's guidelines and in some cases, can damage your brand.
Most native ad platforms will allow you to customize your placements or adjust the risk tier so that your ads show up on the most adequate sites without the risk of damaging your brand.
Cost-Effective
We recently compared Outbrain vs Taboola, two of the most popular native platforms and one of the aspects covered was ad costs. The average cost per 1,000 impressions is between $0.37 and $3.00, and the average cost per click is between $0.15 and $3.00.
This is quite cheap considering the quality of placements where your ads show up. Even if you have to pay more, you still get higher quality placements that you can't target on Facebook or Instagram, for example.
Huge Scaling Potential
Advertisers on the Taboola network, for example, reach over 500 million daily active users. Outbrain's network of publishers has over 1.3 billion active users. If you go outside these platforms, the sky is the limit as they say. These are just two of dozens of native platforms out there.
This is also one of the reasons why you'll find some of the biggest brands in the world using native advertising to grow and scale profitably. You don't need to worry too much about ad fatigue here. You spending $1,000 on native ads is like taking a bucket of water from the ocean.
Builds More Trust
In another comparison, Outbrain vs Facebook ads, we alluded to the fact that social media platforms are not as good as we might think in building trust. In reality, they're at the bottom compared to certain publishers' sites.
A study concluded that only 41% of US consumers trust Facebook. If you look at Twitter, the number is even lower.
The bottom line is premium publishers, where native ads show up, project more trust than the most popular social media platforms.
Where To Advertise Your Business Online
While some platforms are in decline others are flourishing. Facebook is getting harder to justify as costs rise and quality doesn't improve, it actually gets worse. For B2B companies, LinkedIn is a good alternative, that is if you can reach your ideal audience. Google is still one of the best platforms, which for some businesses it's just too expensive.
On the other hand, native advertising is growing and it's expected to be worth over $402 billion by 2025.
Like many other types of advertising, native isn't perfect and it's certainly not the most beginner-friendly way to grow a business online. It can actually get overwhelming. Native requires a great deal of research, planning, and experience to make it work. Plus, you also need too prepared to invest more to test and that obviously comes with more risks.
Truth be told, any advertising comes with risks. As Warren Buffett said, the way to reduce risk is to know what you're doing. That would be my advice to you as well. Learn everything you can about the subject until you have complete confidence to either outsource it or do it yourself without worrying too much.
Pedro Campos, Executive Contributor Brainz Magazine
Pedro is a Portuguese-born who fell into the media buying world by chance after watching an ad online. Despite being mentored by some of the best advertisers in the world early on, his first attempts to succeed at digital media left him bankrupt three times. He then realized in this industry, there was a bigger price to be paid to obtain mastery. That's the price he's helping companies avoid. He's the founder of Advertongue, a native advertising agency helping global brands grow and scale efficiently online. Over the years, he's been responsible for million-dollar budgets and made appearances in publications such as Content Marketing Institute, G2, or Funnel Magazine, to name a few.
