Digital Advertising's Economics

An interesting article in Adweek entitled "The Surprising Economics of Digital Advertising" got my attention on Twitter today.

It discusses a report published by the AAAA -- "A Marketer's Guide to Understanding the Economics of Digital Compared to Traditional Advertising and Media Services". You can download the full report here.

As always, I have mixed feelings.
The insights in this document are generally good. I'm not sure exactly where the "surprising" part is, though. Digital is different that traditional. Not a big leap there.

One thing I find interesting, though, is that it's really not a matter of "digital" versus non-digital channels. It's about good, well-planned, long-term, targeted, and careful marketing versus sloppy marketing.

Here's what I mean, for each of four primary drivers that the report states contribute to the (seemingly) higher costs of Digital advertising services:

1. "Growth in labor intensity, driven by an increasing volume of assets, technologies required and complexity of the process from creation through measurement and continuous engagement.

This is really only because we demand so much of digital advertising. When we treat it like a traditional campaign on a new medium (and many advertisers do), we simply create a small number of ad variations, run a very straightforward media campaign, avoid unique sponsorships or other custom opportunities, not bother with much tracking and optimization, and report very high-level numbers at the end of each flight.

Because it's possible to do so much more than this, though, the standard is to give much more care and attention to digital campaigns. They're inherently accountable.

One day (soon I hope), clients will demand the "digital" level of care and attention for all campaigns, regardless of medium used. When this happens, digital campaigns will no longer seem so relatively expensive.


2. "Shift from external third-party production resources to in-house agency resources".

Okay, I just don't get this one. Why would digital activities require in-house resources more than traditional ones do? Yes, it sometimes makes a lot of sense to do digital production in-house, but it's hardly a requirement. I would think that this actually makes digital more cost-effective, since an agency can decide ad-hoc whether to use internal or external resources for a particular project or client.


3. "Blurring the lines between media, production and agency services"

As with #1 above, isn't this just a sign of "good" marketing? Some of the best campaigns I've ever worked on, regardless of medium, have come from teams where media, design, production, account planning, branding, copywriting, technology, etc. etc. etc. have worked closely together and where some team members wear multiple hats.

And, as with #2 above, digital campaigns don't require that the lines be blurred, but generally most effective when this happens.


4. "Establishment of new job functions and new organizational structures within agencies and client organizations, with related supply & demand cost ramifications"

(Holy cow. And I thought I tend to be wordy)

This is essentially just re-phrasing the three prior factors and saying "agencies need to change their structure to do digital stuff".

Once again: sort of. It's not a necessity that agencies do this, or that all digital campaigns be managed in a complex, labour-intensive way. But it's great when they do. BUT, they should ideally be doing this for projects in every medium.

The report uses the example that "a traditional 'traffic' function is usually insufficient for managing complex Digital projects."
No offense intended to the traditional traffic people that I've met, but this is only true because the traditional 'traffic' function is so simplistic. It's not because digital projects are complex that this function is insufficient, it's because traditional traffic function has been more closely related to accounting than marketing strategy.


I guess what I'm getting at is:
Agencies, advertisers, and everybody else in the advertising world need to do things in a better way. Digital channels are pushing much of this change, but are not alone in benefiting from it.


Accountability.
Flexibility.
Responsiveness.
Targeting.
Long-term thinking.

These are all great ideas. Take them or leave. Online or offline.