Will Advertisers Of The Future Need To Pay Consumers To See Ads?
A major concern facing digital advertising today is how to balance privacy concerns with sending consumers messages that are relevant to them. On the one hand, most of us prefer to receive ads that hold some interest for us. I have to say I was taken aback when my Facebook feed started including ads for new homes in Colorado, which is more than 1700 miles from my home. This was likely prompted by the fact that I am searching for housing at the moment, but as I have no plans to leave Philadelphia seeing these ads was a bit startling. While I can speculate on a data-driven as to why I would get such an ad, in this case, the analytics were obviously lacking.
While relevant messages are important, many consumers are simultaneously becoming increasingly concerned about the use of merged databases the product levels of knowledge about us that I’ve heard my students refer to as “spooky.” Sometimes it may be clear that the advertisers know quite a bit about not only your buying habits but other information such as income and health-related issues.
So where is the sweet spot that allows for effective targeting of ads toward consumers without crossing boundaries on privacy? Gener8, a U.K. based company is launching software aimed at addressing this dilemma. The product is a browser add-on, as opposed to a separate browser, that allows consumers to block ads they don’t want to see but get paid to view those they personally identify as being of interest. Consumers are thus allowed to select the type of ads they want to see and this applies across the web (excluding Facebook). For each ad viewed, the user receives tokens that they can either convert into currency or donate to charity.
To get more insight on this business model I spoke to Sam Jones, CEO, and Founder of Gener8. Jones believes the time is right for this model, stating, “Our mission is to be amongst the world’s first brands that enable people to control and monetize their data. We believe we will shake up the advertising industry by putting the consumer first.”
Jones, who previously served as Global Brand Manager for Red Bull emphasizes the advantage of data transparency for consumers. He states: “We believe in transparency and we believe that people should be told about what’s happening with their data and that they should have a choice to engage with it, to disengage with it or to do something about it. At Gener8 we simply educate people about the fact that they are valuable, about the fact that on nearly every website they go to their data is being used (sold) and, if the user would like, we enable them to participate in this transaction and be rewarded from it. We explain that companies pay more to show people what they are interested in, therefore when a person fills out their preferences this enables us to charge the advertiser more.”
So will the new technology take? First, my view of a few advantages:
Advantage 1: Advertisers avoid blocking and target more effectively
Advertisers are all too aware that ad blocking has become common, especially among very young consumers. More than 650 million people worldwide used ad blockers last year, costing advertisers an estimated $40 billion. By using Gener8’s system, advertisers can reach an interested audience and collect additional data in a way that allows for even better future targeting. CEO Jones notes that strict new data sharing law in Europe actually benefits this product: “Within Europe, we are now in a post GDPR environment which means that access to first-party data is harder than it used to be. Gener8 has a rich source of first-party data which the user has consented can be used for advertising purposes. This enables us to charge advertisers a premium in order to advertise to their target audience. They are happy to do this.
Advantage 2: Consumers Avoid Ads They Don’t Want And See Those They Do
There is little question that Gener8’s system will lead to consumers seeing more targeted messages. This should lead to a more engaged consumer and ultimately lead to more purchases and better ROI for the advertisers. Jones notes: “Based on the case studies that we have run so far we have seen a 7.6x increase in click-through rate vs the industry standard CTR. So it appears that Gener8’s common sense approach of showing people what they want, when they want does work.”
Steve M. Edwards, Professor and Director of the Temerlin Advertising Institute at Southern Methodist University’s, an expert on digital advertising, sees good potential for Gener8’s approach. He states, “When commercial speech is restricted, the ability to reach consumers with marketing messages becomes more valuable. If consumer opting-in is the price to pay for access, then the company which controls the pipeline to those consumers holds great power and a valuable commodity. If Gener8 can get enough consumers to participate and scale to the level of demand from advertisers, their first mover advantage will be huge. This is why Facebook is so valuable.”
Advantage 3: People Get Paid For Viewing Ads
While getting more relevant messages is a benefit in and of itself, the fact that there is monetary incentive to do so, assuming it is sustainable, provides an additional reason to participate. As Jones notes his advice to consumers is, “Companies pay to show you ads online and you should ask one question: ‘who gets paid?’ If not you, then you’re the product.”
While there are some clear advantages to this new system, a few potential roadblocks exist too:
Roadblock 1: Does Privacy Really Matter That Much To Everybody?
From a U.S. perspective, it is important for us to remember that our regulatory system has historically been less protective of consumer privacy than most other countries. While “opt-in” is the norm through much of Europe, “opt-out” has more often been the standard in the U.S. Yet, concerns in the U.S. do seem to be growing at least on some level. So while the advantages may be clear in the U.K., there is an argument to be made that it may be more difficult to get the technology to take hold. Still, in the wake of Cambridge Analytica and new European regulations, there does seem to be a global concern. Moreover, Gener8 cites a global trend toward transparency in which consumers will demand more control over the use of data.
Roadblock 2: Media Outlets Cut Out of Profits
There is a long history of media content being supported by advertising, and consumers have some level of resistance to paying what would be “sticker price” for consuming media if there was not advertiser support. Obviously, magazines, newspapers, and websites that operate online have a vested interest against this technology as they are cut off from the system. A full shift toward advertising that pays only the middlemen and the consumers would clearly have a negative impact on the ability of some media outlets to survive. So media outlets have considerable incentive to resist Gener8’s technology and try to convince ad agencies and advertisers not to participate. How this falls out will be interesting to see.
Edwards of SMU thinks the time may actually be ripe for this type of approach in the U.S., stating, “Consumers are concerned about privacy, but they are still willing to provide companies a lot of information. That being said, government action may force companies to move from targeting without greater opt-in mechanisms. Gener8 may be at the right place at the right time to get ahead of the competition and solve a problem for companies resulting from future government regulation.” Further, he says, “The issue with privacy and consumers is do I trust Facebook or Gener8 or no one? If consumers opt out of targeted marketing messages, they will be bombarded with irrelevant information. Advertising overload.”
My own take on this is that it is going to be really interesting to see how it falls out because the advantages of the technology are significant. At the same time, the shake-up required is substantial, and the impact on advertiser-supported media a concern. One wonders whether, over time, some type of middle ground solution where media companies are involved in the process as well as middlemen and consumers could be the optimal solution. Time will tell.
Article written by: Charles Taylor0