Chapter 7 Digital Technology and Advertising

Digital technologies are radically changing the advertising business which has profound consequences for both consumers and firms. Some of the tremendous impact of digital technologies on advertising are as follows:

  • Behavioral profiling has gone viral across the Internet, enabling firms to reach users with specific messages based on their location, interest, browsing history and demographic group. Therefore the ad mantra of `reaching a right person, with the right message, at the right time’ has become a reality. Behavioral targeting helps firms to increase their ROI by 30-50%.
  • Extreme personalization of advertising is now made possible by the digital technologies.
  • Advertisers no longer rely on media as proxies for consumer profiles, because they have more tools and data to target precisely the people they want to reach.
  • Online advertising space in unlimited and prices are low, so for advertising agencies making money is not as easy as it was in offline world, even for digital natives such as Yahoo.
  • The growth in digital advertising is primarily due to following three factors:
    • Mobile devices: Smart phones, tablets, apps. Mobile devices enables ``geofencing’’ where advertisers can reach a target consumers within a geographic region.
    • Social networks: Facebook, Twitter
    • Real time bidding: Programmatic approach to target consumer precisely and swiftly with online adverts in real time.
  • The convergence of social and mobile has given an addressable online audience that is bigger than ever.
  • A web-site is no more just a `company’ but it has become a site of tens of hundreds of companies all looking at what consumers are looking at. The tracking of consumers’ web troll across multiple devices has made it feasible to target them with relevant ads at relevant time and location.
  • Data gives advertising agencies competitive advantage. They gather data from two sources:
    • First Party: Data comes from firms with which the consumers have direct relationship.
    • Third Party: Data are gathered by thousands of specialist from across the web using technologies such as cookies.
  • Combining data from multiple sources may lead to identification of individual consumers defying their anonymity and privacy. Therefore, in digital environment privacy is going to be paramount concern in coming future for sustainability of firms with good customer relationship.