Why Facebook ads are what online banners always wanted to be
Online banner advertising (aka standard display, display advertising) is 22 years old this year. Over £2BN was spent on this channel in 2015. Yet most people I speak to struggle to make this channel scale or drive an impressive return on investment. In the late ’90s, banner ads were measured on click through rates and conversion rates. As the number of people clicking on ads started to fall (now only 1 in every 1,666 banner ads served is clicked on and 50% of those are incidental), the industry decided that banner ads shouldn’t be measured on clicks, but on views. The game was being changed to suit media networks; they needed to justify the value of their inventory to make money. The trouble is that view conversion data is completely unreliable, 45% of adverts which are paid for are never seen by the end user. It demonstrates, quite embarrassingly, John Wanamaker’s 100+ year old challenge - “Half the money I spend on advertising is wasted; the trouble is I don't know which half”. While the industry has woken up to this and started to introduce the viewability metric (that is advert impressions which have actually been seen by the end user), the vast majority of people I speak to continue to question the true impact of their online display budgets. The advent of programmatic display in the second half of the last decade, where advertisers can target specific groups of people online using 1st and 3rd party cookie data, promised more effective, data fuelled, scalable opportunities, helping identify and reach a target audience quicker and more cheaply. There has been much fanfare about ‘real time bidding’ where advertisers can set a price for each impression bought at the point an advert is served to a website. Programmatic display should in theory have made the channel more effective, but that didn’t happen. What happened instead was that advertisers were forced to spend lots of money on data and technology and weren’t really seeing the returns.
Birth of native
When Facebook launched their ad platform called Beacon in 2007 they received so much backlash they made a U-turn and cancelled the programme altogether. For a while it felt that Facebook might not be able to successfully monetise through advertising, but they continued to work on a successful format and in 2012 launched ads in the newsfeed. The industry decided to rebrand these ads as ‘native’ (a word I hate) to separate them out from standard display ads, and within a few months they were hailed a success. Practically speaking paid Facebook ads are glorified online banners. Yes they’re shaped differently and appear within newsfeed content and not outside of it, but they’re banner ads. The ‘native’ concept is also not new, Google’s paid search ads are ‘native’ but unsurprisingly nobody thought to call them so back in 2002. The reason the industry is so keen to separate out ‘native’ ad formats from banner ads is because they work in the way standard ads are supposed to.
Click through rates on Facebook ads can reach 2% or more, this would make them 32 times more effective than standard banners. Targeting specific audiences on Facebook is significantly more robust and effective than using cookie data because the people are real and identifiable irrespective of whether they are on their mobile, work computer or home laptop. If you want to target mums in London, CEOs in Helsinki or dog owners in Sydney, Facebook is your easiest and quickest route. This is exactly what programmatic display had promised to deliver. 85% of Facebook’s traffic is from mobile devices, their adverts fill the user’s screen; online banner ads don’t work on mobile devices, they slow page load times and give the end user a poor experience. The rise of ad blockers should be raising alarm bells for everyone in the digital advertising industry about the effectiveness, and future of online banners.
A critical advantage of paid Facebook adverting is context; their adverts are served to a user’s personal account. The same is true of email marketing and mobile app push notifications; both are also extremely effective marketing channels, all are served to a user’s personal and private space. These trusted environments, the newsfeed, the inbox and the mobile phone home screen provide a context for advertising which is unparalleled. Online display can only watch and weep on the side-line. Standard display, with all the bells and whistles of programmatic real time bidding, is being transcended by paid Facebook advertising on all counts: measurability, effectiveness, scale, targeting and context. I can only see the growth of Facebook advertising continue, eventually at the expense of standard display advertising.
Footnotes  http://mashable.com/2013/08/09/first-banner-ad/#1Te8ARNIbkqN  http://www.iabuk.net/about/press/archive/uk-digital-display-advertising-revenues-rise-275  The number of times an advert is clicked on divided by the number of times the advert is seen  The number of actions (i.e. purchases, transactions, leads etc.) that occur as a result of a user clicking on an advert divided by the number of clicks  http://blog.hubspot.com/marketing/horrifying-display-advertising-stats  http://blog.hubspot.com/marketing/horrifying-display-advertising-stats  http://www.thedrum.com/news/2015/07/20/programmatic-surges-viewability-rates-decline  http://www.quotationspage.com/quote/1992.html  http://www.iab.com/guidelines/state-of-viewability-transaction-2015/  https://en.wikipedia.org/wiki/Facebook_Beacon  http://venturebeat.com/2013/06/27/facebook-news-feed-ads-generate-49x-more-clicks-at-45-less-cost-study/  http://uk.businessinsider.com/ad-tech-executives-refuse-to-admit-ads-slow-down-web-pages-2015-7  http://www.theguardian.com/technology/2015/oct/03/ad-blockers-advertising-mobile-apple