On the heels of all the bad publicity generated about the online advertising industry lately, key marketers are beginning to pull back spending. Fake traffic, automated buying, consumer annoyance, foreign influence, fake news, security issues, privacy, and other concerns are finally piling up and threaten to spoil a party that has been going on for about 15 years. After all, internet advertising is still the most efficient way to develop the one-to-one relationships between consumers and brands that all marketers crave; but the industry is currently facing far too many problems and appears to be in need of some basic regulation.
And so major advertisers, on whom the industry depends for revenue and profit, are cutting spending on internet ads. Proctor & Gamble, owner of many brands and spender of $7.1 billion per year on advertising, is a great example. Marketers at P&G cut spending by $200 million last year in a nod to recent findings that much online spending has proven to be wasteful. And ad agencies are reporting poor performance, so the effect is beginning to be felt across the industry. Until recently, big-time brand marketers raised ad spending every year as internet media comprised a greater and greater share of a company's ad budget. After all, developing a relationship with the consumer is easier to do online than in any other way. And, because it costs so much more to get a new customer than it does to keep an existing customer, marketers love to develop relationships that lead to loyalty and positive word of mouth.
Internet advertising isn't going away by any stretch of the imagination, but the growth of the industry may be slowing in no small part due to its problems. Online advertising is expected to grow by just over 4% this year overall, which is fairly healthy, but when major players make changes, you can bet that market followers will do so as well. Currently, online advertising is dominated by a duopoly, Google and Facebook, and so the industry has had little reason to change what it has been doing. But things are changing-- privacy issues are resurfacing, ad effectiveness is in question, and it looks like some sort of regulatory reckoning might be in store for both advertisers and the companies that provide the media for communication. Stay tuned.
Discussion: What sorts of online advertising are you more likely to respond to? Are you at all concerned about being tracked online by advertisers and their media? Do you think there needs to be more regulation? Explain your answer.
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