How Digital Technology is transforming Advertising

Theodor Schaefer, Mar, 2020

Few industries have been transformed as radically by digital media and technology as the advertisement industry. After being introduced in 1994, digital advertising has drastically changed the role of advertisers, modes of communication and ways of targeting and is projected to comprise more than 60% of global ad spending by 2023. The following will explore how digital technology has and continues to revolutionise the way brands communicate and what opportunities and challenges this brings for the future of the industry. / licence @PhotoMIX-Company

Most importantly, digital technology has made advertisers’ dreams come true by enabling social media and thus creating a platform where consumers constantly expose themselves to media, react to it and share information about themselves. Previously, ads like billboard or TV ads were exposed to a mass audience. With this new channel however, advertisers can now effectively target individual consumers based on their age, interests, behaviour or even location. Focusing the budget on more relevant groups of consumers notably raises the conversion rate and consequently reduces the customer acquisition cost. / license @LoboStudioHamburg

With this shift into digital advertising, the application of artificial intelligence to the advertising process provides a lot of new opportunities, most importantly for campaign optimisation. When using the Facebook Ad Manager, for example, more and more tasks can be completed by algorithms. They can analyse groups of buyers based on their profile information and online behaviour and create lookalike groups of the people most likely to buy. Further, when given an objective like maximising the reach, engagement, clicks or conversions, the algorithms can constantly adapt the target audience independently, using the information they receive from users’ reactions to the ads. licence / Mohamed Hassan

One example for companies that made it big using social media advertising successfully is Dollar Shave Club. The brand optimised its campaigns for engagement using campaign optimisation algorithms and designed its ads accordingly. The relatable, engaging ads were played out to the right target audience of users likely to share them, thus creating a viral effect. Their video titled “Our Blades are F***ing Great” hit 26 million views and marked the start of a successful social media marketing campaign. Their quick adaptation to the new opportunities provided by social media advertising helped them capture a 7% market share from industry giants such as Gillette that spend millions sponsoring superstars like Roger Federer or David Beckham.

Source: Dollar Shave Club ; provided solely as example for general information and reference purposes

However, the application of machine learning and data science to advertising can be taken even further with the use of psycho-graphic data. A prime example for this is the work of political consulting firm Cambridge Analytica. Combining behavioural science and data analytics with addressable ad tech (i.e. social media targeting), the firm had a great impact on electoral results, most notably on the 2016 presidential election in the United States. licence / Mohamed Hassan

With the help of data science and users’ “digital footprint” created through online activities, advertisers can create psycho-graphic models of consumers or voters, identifying their personality traits and the issues they care about the most. Often this is done using the OCEAN model that measures personality using the categories openness to experience, conscientiousness, extraversion, agreeableness and neuroticism. Consequently, this information can be used to tailor the content of one’s message to the recipient to make it more persuasive. This technique known as psycho-graphic microtargeting is a powerful tool and, according to Stanford psychologist Michal Kosinski, can boost click-through rates by more than 40%.

Excerpt from Kosinski et al. (2017) “Psychological targeting as an effective approach to digital mass persuasion” ; solely used for informative purposes

There are, however, doubts about the ethical legitimacy of these practices. Firstly, when applied to politics, they have a divisive effect and undermine the democratic legitimacy of an election, allowing politicians to be inconsistent with their opinions to appeal to different audiences. Secondly, to generate these “digital footprints” one needs large amounts of personal data. This has raised concerns about privacy issues. To effectively use personality profiling, Cambridge Analytica, for instance, illegally acquired the private Facebook data of tens of millions of users. Following this scandal, Twitter has now banned political advertising and concerns have been raised that AI can be used to “manipulate and suppress human ideas”. Nevertheless, AI enabled behavioural microtargeting remains a powerful tool for the future of advertising. / licence @pexels

With the dynamics of advertising evolving, consumer behaviour is also ever-changing which poses new challenges to advertisers. As a result of constant exposure to ads online, consumers have become more critical and less impressionable, making itharder and costlier to capture their attention. Consumers’ shrinking attention span and the power to skip ads has triggered a change in content to adapt to these changes, with ads attempting to get their message across as quickly as possible. This significantly limits creative freedom, discouraging advertisers from creating narratives. Using the opportunities of social media, advertisers attempt to overcome this challenge by establishing a dialogue with consumers and involving them into the content creation through contests, surveys or customer comments. Moreover, as a result of digital technology, consumers are constantly updated on public opinion. This has given rise to online influencers serving as paid opinion leaders that guide consumers’ judgements. licence / Mohamed Hassan

Lastly, further advancements in digital technology and the opportunities they generate will be monitored closely by the advertisement industry. This includes wearables and the new advertisement channel they spawn, 5G and how this facilitates interactive and video advertising, the new creative potential for ads using augmented reality and the opportunities of using conversational AI for persuasion. The world will watch with excitement as advertisers find creative ways to capture the opportunities these technologies bear. / @fancycrave1

With the application of digital technologies, advertising has experienced a shift from a creative to a progressively analytical profession. Powerful new tools for digital mass persuasion have been developed with the help of AI as advertisers adapt to the challenges posed by changing consumer behaviour. Furthermore, the constant development of digital technologies generates new advertising opportunities and channels. The industry will be subject to fast-paced change as advertisers compete to exploit new technologies. We must, however, monitor these developments with care to ensure their ethical legitimacy and to protect our privacy and self-determination.

Written by Theodor Schaefer


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