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InContext / An inside look at the business of digital content

Bad Ads: Research Shows They May Cost More Than They’re Worth

May 14, 2015 | By Jason Kint, CEO—DCN

No one likes to click a link on a tantalizing bit of content only to be assaulted by a barrage of intrusive and annoying advertising. That fact is as in your face as a blinking pop-up ad prompting you to punch a monkey to win an iPad. And unless it’s the result of fat fingers, you aren’t clicking these annoying ads; you are hitting the back button as fast as you can to find a more pleasant place to consume content. And here’s the part that should send a chill down the spine of premium content publishers: Microsoft research has found that they’re not just bad in customers’ eyes; there’s also a high cost to be paid by the publishers that run them.

The research, The Economic and Cognitive Costs of Annoying Display Advertisements, set out to better understand the cognitive impact of annoying ads on users, and also to quantify the economic cost of annoying ads for publishers. Let’s just say their findings are more than a little jarring. The research shows the economic cost of “annoying” ads is about .153 cents each (for the revenue wonks, this works out to a $1.53CPM). Given that Turn reports that more than 53% of all online ads sell for between $.10 and $.80CPM and we know premium publishers typically earn around $1.35CPM from open exchanges, a little math paints a disturbing picture. We’ve always known digital ads can impact users and the bottom-line but not in the wrong direction.

If you believe the research—undertaken by an impressive team of researchers whose experience includes work for Yahoo, Google and Microsoft—then publishers need to know that running ads which site visitors find to be irritating, annoying, inappropriate or offensive has a significant net cost, both to brand value and the bottom line.  Private marketplaces reinforce this need for brand safety for all.  Chasing page-views and impressions at scale has diminishing returns and makes a sites more vulnerable to bad ads. What this means is that by running these ads, often to maximize sell-thru rate of your inventory, you’re actually chasing short-term revenue rabbits without understanding where that rabbit hole leads.

The Microsoft researchers conclude that “the practice of running annoying ads can cost more money than it earns.” That’s right: a site might be better off not running ads at all because of the net loss they will incur if some or all of their ads are perceived as bad by their users. A site or app actually needs more quality content and premium ads to make up for the economic loss from bad ads.

As is the case with bad advertising, we all know great ads when we see them. And research shows that there is a “halo effect” to advertising that is positioned within the context of a strong media brand with quality content, so it only stands to reason that the reverse would be true: that there would be a negative effect to a media brand associated with bad advertising. Microsoft’s research confirms this, finding not only that people notice annoying ads and complain about them, they are more likely to abandon sites on which they were present. Interestingly, in the presence of annoying ads, people had to work harder to understand content that contains annoying ads. In other words, they’re distracting and a general nuisance to user experience.

 

Again, it’s very important to note this isn’t simply about low-quality dating ads, yellow-teeth and belly-fat ads. Media companies need to consider the subtle and long-term effects that any ad running on their sites may have on user retention and revenue. The alarming rise of Adblocking software adoption makes clear that customers are fed up with poor advertising experiences. And once customers are driven to this extreme, they are taken out of the ecosystem for everyone, good and bad advertisers alike. Already 41% of 18-29 year-olds in America have opted-out of digital advertising altogether by installing an adblocker.

But we can’t simply take the lazy position that “people just hate ads.” It simply isn’t true. And the Microsoft research backs that up. We can also clearly see examples of superior advertising and content experiences on Vox and Conde Nast sites, among many others. Premium publishers like the members of DCN who focus on high-quality content, premium, well-lit experiences and brand-safe environments should be well-served as this all shakes out because they are laser focused on creating great customer experiences that are only enhanced by the relevant, quality advertising experiences that support all of the terrific content that they enjoy.

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