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Ad Tech’s Impossible Mission
Why ad tech won’t be the internet’s savior in its battle for television dollars.
When it comes to the promise of the internet conquering advertising and solving Wanamaker’s dilemma of “Half the money I spend on advertising is wasted, the problem is I don’t know which half,” the internet’s main weapon in its arsenal has always been advertising technology, known in the industry as simply “ad tech.” The improved technology of advertising was to be the secret weapon that would bring additional efficiency and solve Wanamaker’s dilemma. To this day, financiers and other bullish proponents of the internet claim that all of the ad money spent in our economy will inexorably migrate over.
While the internet has recently begun to expand past its advertising roots, advertising dollars still comprise a massive share of all internet-related revenue — to the tune of over $200 billion worldwide. Moreover, advertising shapes the very products of the internet. As we’ve mentioned before, ad spending has exceeded VC investment in the internet every year since 2001.
Ad tech showed early promise on the internet, vastly improving upon older media and methods for direct advertising: that is, sales- and promotion-based advertising. Google was instrumental in the migration of billions of dollars, as their keyword-based advertising siphoned money from our yellow pages, classified ads and newspapers. One would be forgiven if one looked at the money migrating to digital in the first decade of this century and thought that the internet was unstoppable.
As we’ve seen, however, the bulk of the other $200 billion spent on advertising is a different type of animal: brand advertising (Just do it!). This type of advertising is less receptive to the internet’s charms. The appeal is emotional, and thus cannot be easily tracked. And the bulk of this money is spent by a relatively small number of large brands, whose audiences are effectively every human being on the planet, rendering the internet’s improved targeting ability of limited value. This nuance is lost on many internet economy pundits, and most predictions about the internet’s seemingly unstoppable appetite foresee the internet continuing on as before, cannibalizing more and more ad money from other mediums. The truth is not…
