How Advertisers Waste Their Budget: The Truth Behind The Numbers

In the late 1800’s John Wannamaker famously said: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half”. Most marketers would agree that, if Wannamaker was alive today he would give a rather different assessment. The rise of digital channels has made it easier to quantify the results of campaigns and advertisers can now rely on an abundance of data to draw conclusions. Over reliance on numbers can be dangerous though, especially when it comes to measuring human behaviours and interactions (ask any economist). Clicks and impressions can be counted but are they all the same quality?

After an extensive study, UK research company Lumen depicted a gloomy picture for digital advertisers: only 3% of digital ads get more than a second’s worth of attention; only 1.4% get more than 2 seconds. With such poor results it’s clear that paying for a campaign based on a CPM model would most likely lead to a significant waste of money. Some prominent publishers have changed the way they charge for their advertising space, moving from number of impressions to time spent on content. This system seems more logical: it’s fair to say that not all impressions should be considered equal and one associated with long, expensive content is more valuable than one generated from less reputable short pieces. Time on content might provide a fairer metric for publishers, but does it result in improved ROI for advertisers? Prolonged exposure does not necessarily translate into valuable impression, as most ads are never even seen: only 35% of digital display ads receive views, according to Lumen.

The Pay-Per-Click model is, on paper, a safer choice but it is plagued by ad-clicking bots that can eat up to 36% of budget spent. Even when the ads are clicked by a real human being, there is a high chance (estimated 60% for mobile) that the ad is clicked by accident and not out of genuine interest.

It’s clear that the number of impressions and clicks are affected by poor visibility and fraudulent technologies; but let’s assume for a moment that they all reached the target audience as intended. Is digital advertising generating positive brand awareness? People are constantly bombarded by ads, as brands fight for their (already very limited) attention. The constant rise of ad blockers (90% annual increase) should send a clear message that people are having a negative experience with the way digital ads are displayed and interrupt their activities.

At Ksubaka, we believe that brand owners should focus on what truly makes advertising successful: creating a positive emotional connection between the brand and its target audience. It’s nearly impossible to build this connection in the less than 2 seconds attention span that a traditional digital ad will get out of 96% of viewers. Some sort of metrics system (however flawed) will always be required to set a price on digital media spaces but we can minimize waste by shifting focus from quantity to the quality of engagements.