The Theory of Peak Advertising, is a paper that presents the argument that there is an overall slowing in the online advertising industry, a slowing that will ultimately create a very different web to the one we know now.

 

While our media guys disagree with their conclusion and have a far more positive take on the situation (see below), it is a fascinating read, using the conceptual language of ‘peak oil’ to present another huge, perhaps slightly less cataclysmic, shift in an environment.

 

The first Internet banner ad had a click through rate of 78%. A figure that would get today’s digital advertisers looking for the typo. By 2011, the average ad on Facebook had a click through of 0.05%. Online advertising is declining in its effectiveness. Because advertising pays for a large amount of the content and framework of the web, large changes to the financial models behind the web are going to have to take place if it is losing its effectiveness. A few facts:

 

  • Online ads still, to some extent, work on older audiences but are far less effective on younger demographics.
  • Ad blocking is ubiquitous (again, especially among a younger generation).
  • Click fraud is a well documented and growing problem.

 

The theory posits that business, online at least, cannot continue as normal under these circumstances. Adverts need to be seen, media space owners need to get paid and users want their content. What gives?

 

The authors of the theory end on a pretty bleak note. Either technological innovation changes the game or we will witness slow stagnation, where an ever dwindling flow of revenue will lead to a few big players dominating the scene, “eroding privacy and blurring the line between real content and advertising”.

 

The paper is right to notice the change, and right to notice that as things stand, the web cannot pay for itself. Despite that we see a far rosier future ahead.

 

The internet is changing rapidly, most obviously toward a closer synchronisation with our real, walking, talking lives (think the internet of things). Advertising is in a very good position to take advantage of this – not least because advertising is, as is often the case, driving the case for change. We see the future of advertising online as being part of a wider media mix. A successful online environment needs to have closer ties to the walking, talking offline world for it to work. This from The Economist last month: “In May Google and AOL each bought a measurement firm (Adometry and Convertro, respectively). Facebook has formed a partnership with Datalogix, a data broker, to try to connect its online advertisements with offline buying”.

 

Online advertising isn’t dying, it’s evolving. And as advertisers and avid users, we can’t wait to see where it takes us.