Display Advertising

Display ads are conceptually similar to the traditional ads in newspapers and TV. And as a result, they began in the digital space as banner ads on websites, not very different from the ads you may have seen in print newspapers or magazines. Unlike static print ads, however, these ads can be interactive and may include text, images, or videos.

We learned previously that search ads are relevant for consumers who are actively searching for a product. Display ads, in contrast, often target consumers who are not actively searching for a product. The driving idea behind display advertising is to place ads in locations where your target customers are likely to come across them, even when they may be engaged in something unrelated to your product or service. For example, you may be reading your favorite newspaper on its website when you encounter a banner ad promoting a smartphone.

Display ads are also used to retarget consumers, that is, consumers who may have shown some interest in your product in the past, such as by visiting your website, searching for your product category, or clicking on your ad. You may have noticed that if you search for a product, for example, shoes, in the recent past, you start seeing display ads for shoes on multiple websites that you visit in the future.

For these reasons, display ads can work at various stages of the funnel. They can create brand awareness among potential consumers (the top of the funnel), target consumers who are interested in your product category and may be aware of your brand but have not considered buying it (the middle of the funnel), or retarget consumers who have shown some interest in your brand in the past but have not bought it (the bottom of the funnel).

As we observed earlier, the types of display ads and the number of channels to place them has exploded with the advent of digital technologies. This provides more options for marketers but also makes budget allocation across these options more complex. As we did for SEM, we will provide a brief overview of the process for placing display ads. But we will spend the majority of our time on the strategic implications of display advertising.

While the search ad landscape is dominated by a few players like Google and Amazon, the display ad world is much more fragmented, with countless content publishers selling ad space on their websites. These can be major websites, such as YouTube and The New York Times, all the way down to small ones, such as the sites of local businesses. Typically, intermediaries work to connect these content publishers with companies that wish to advertise or agencies working on their behalf.

Here is a more detailed description of the display ad landscape.

As you’ve now learned, display ads come in several different formats:

• Banner ads: These are ads that appear as a banner on a web page, typically at the top of the page.
• Expandable banner ads: These are banner ads that expand to take up a larger part of the webpage.
• Interstitial ads: These are ads that appear as full web pages before users are directed to the original webpage they requested.
• Rich media: These ads contain interactive components such as video, audio, or hyperlinks.

There is also quite a bit of complexity in the ways that display ad publishers connect with advertisers. The content publishers (i.e., those who own the ad space) typically find advertisers through intermediaries:

There are multiple different types of intermediaries, including:

• Ad networks: These intermediaries aggregate the supply of advertising space and match it with advertisers’ demand. They may also develop algorithms to help their clients optimally place ads on various websites. AdSense by Google is an example of an ad network.
• Ad exchanges: These intermediaries automate matching between advertisers and publishers using a real-time bidding (RTB) process, often called “programmatic buying” (chart below). Ad exchanges typically decide the placement and pricing of ads based on the supply and demand for the ads.

• In addition, large advertisers may also buy space directly from large publishers.

There are also other entities that help connect players in this complex landscape. These consist of:

• Demand side platforms (DSPs): These platforms act as “buyers’ brokers” and help buyers (such as ad agencies) manage ad inventories across multiple exchanges and networks through a single interface.
• Supply-side platforms (SSPs): These platforms act as “sellers’ brokers” of content suppliers and provide connection between ad networks and publishers.
• Data management platforms (DMPs): These platforms collect, interpret, and sell customer browsing and other information that may help advertisers more effectively target their ads.

Native Ads

OOFOS has recently decided to start investing in native advertising. Meanwhile, its spending on static display ads, such as banner ads, has not changed significantly.

In addition to search and display ads, OOFOS has also decided to invest in native advertising. These ads differ from traditional forms of display ads in two ways. First, they're designed to blend with the content of the publication or platform in which they appear. Second, beyond making consumers aware of the brand or product, native ads aim to provide value from the content that they are embedded in.

For example, the Philippines tourism ministry created a native ad on the BBC's travel website that contains interesting information about the Philippines set against images of the country's natural beauty. Readers are presented with engaging content on the Philippines in the form of a travel log, and at the end, the opportunity to learn more through a link to the official tourism page of the Philippines.

Some platforms like the New York Times have established their own in-house studios to produce native advertising for companies. An ad placed there by Allbirds presented information on how climate change is affecting bird populations. It was shown through a multi-page article, complete with animations and a background that gradually changed color as you scrolled. Interested readers learn how humans rely on these bird populations, how climate change is threatening their numbers, and what Allbirds and others are doing to help.

Not all native ads emulate articles, though. Native advertising continues to evolve in new and exciting ways. In the summer of 2022, Netflix partnered with Spotify to advertise the release of the fourth season of their hit show Stranger Things. This campaign built custom playlists for Spotify users, blending songs from the user's playlists with the songs from the upcoming show, as well as visual effects like a flashlight sweeping across the display and video of the season's villain intermittently appearing on-screen.

All these present consumers with a reason to engage with the advertising. At its core, native advertising works on a very simple principle. People engage with and click on content that interests them. And the brand behind this engaging content creates a positive halo in consumers' minds that might eventually lead to purchase.

Native advertising has been one of the fastest-growing ad segments in recent years. As adtech becomes more sophisticated, there are many more native ad formats available to advertisers. Today, native ad formats include carousel ads, outstream video ads, click-to-watch video ads, mobile app install ads, native social ads—the list goes on.

Native advertising has been called a disruptive force in advertising, publishing, and even news markets. But why have native ads made such an impact? Primarily, native ads offer consumers something beyond a push towards purchase. This added value makes them more engaging. And people certainly do engage more with native ads. Native ads are viewed over 50% more than regular display ads. Native ads also have consistently higher click-through rates than traditional display ads, making them more efficient.

Additionally, new privacy laws have limited companies' access to third-party consumer data. Native ads present a way for advertisers to target potential consumers without obtaining their data. This particular use of native ads is sometimes referred to as contextual advertising. For example, a display ad for financial products on the Wall Street Journal's website does not require data from consumers, such as cookies. It merely rests on the assumption that people who read the Wall Street Journal are more inclined to consider financial products.

Native advertising also presents new challenges to marketers. Although native ads are more engaging than traditional display ads, the upfront cost to develop a high-performing native campaign is greater. It requires more creative work and greater coordination with publishing partners than a traditional display ad campaign. Native ads also require brands to acquire editorial skills for content creation on topics that are much broader than their brand or product category, such as Allbirds writing about climate change and not just shoes.

There is also the question of trust. The growth of native ads, especially those on news platforms, has prompted many to question whether readers can tell the difference between advertising and editorial content. Some studies show that consumers trust native ads more than traditional display ads. But others worry that what makes native ads so engaging for audiences is the very fact that they cannot tell that it is advertising. This raises questions of ethics and integrity for both the advertiser and the publisher.

Paid Social

Let’s learn about another important display advertising channel: paid social.

As you have now learned, there are countless display channels that take many different formats, such as text, image, video, and audio. But marketers often think about display ads not just in terms of the format, but in terms of where they appear. Display ads that appear on social media sites, often called paid social ads, form a major component of digital display advertising. Paid social can also include paid influencer-generated content. For now, we will just stick to the ads created by the company and placed on social media sites like Instagram.

Paid social ads can take many forms, but the common thread is that the company has purchased the ad space from the site. These differ from posts that a company creates on its own social media account but does not pay the platform to promote it. We will address this topic later.

The usage and format of these ads vary across social media platforms, such as Facebook, Instagram, Twitter, and LinkedIn. Each site has different user demographics and behaviors, so marketers must develop a good understanding of how each of these sites are used and by whom. Despite these differences, paid social has some key advantages that are common across platforms.

Many of these platforms have broad reach to millions or even billions of users. Platforms, such as Facebook, can provide data on users that look similar to a company's current customers. Data on these look-alike users allows for easy and efficient targeting for prospective consumers. Paid social ads can be used to fulfill multiple objectives by targeting consumers at various stages of the marketing funnel. Finally, paid social is also an efficient way to retarget audiences who may have shown interest in your product but have not bought it yet.

Digital Video and Linear TV

Alongside native and paid social, digital video is another category of display advertising that has grown considerably. For example, OOFOS has decided to invest significantly more money in all types of video—digital, streaming, and offline or linear TV. In fact, OOFOS has decided to triple its budget on linear TV, and it is planning to spend more than a quarter of its overall budget on this channel.

Digital video has become an essential part of paid media for two reasons. First, the technology to create high-quality videos has become more accessible. Second, consumers are spending more and more time watching videos. Videos allow brands to tell their story in a more engaging way. This has led platforms like Instagram and Facebook to focus more on video. It has also allowed newer video-based platforms, like TikTok, to gain significant momentum.

Digital videos are often used by marketers at all stages of the marketing funnel. Compelling video content can generate brand awareness, educate and build trust for your brand. It can also enhance consideration of your brand, as well as drive conversion.

In addition to using digital videos on platforms like Facebook and TikTok, they can also be used on streaming services, such as Hulu, Netflix, and Disney Plus. These services are over the top, or OTT services that we referenced earlier.

Digital video and linear TV are both channels that involve reaching out to consumers with video. Each comes with its own advantages and challenges. Based on what you’ve learned so far, list at least one advantage and challenge for each channel.

Linear TV and digital video often have different objectives and metrics. TV has been historically used to build brand awareness at the top of the funnel and is often measured by its reach and its ability to increase brand awareness. It is difficult to measure direct returns of TV ads on sales and revenues. On the other hand, digital video ads on social media sites such as Facebook or YouTube can be targeted to specific audiences at the top or middle of the funnel. It is much easier to measure their impact through metrics like impressions and click-through rates.

Media channels often have synergy with each other. Here are Kate Laliberte and Steve Gallo discussing how linear TV campaigns complement OOFOS’s digital marketing efforts.

Kate Laliberte, OOFOS, Head of E-commerce:

When we look at this year, specifically, we're also looking at an always-on digital strategy. So we've invested a lot this year in TV, making sure that we're always on TV, that customers are aware of us, and that we're building our brand awareness out in the market.

In the past, for example, we've pulsed TV on and off. And we see the metrics in the KPIs go on and off with TV. So when we're on TV, we have a lot of brand search. We're spending a lot there. When TV would go off, we'd see it drop. And when we decide to turn it back on, it would take longer to recover, or to build those metrics back up.

So what we've had to do is, most recently, we said, we are going to commit, even though it's a higher funnel tactic. What's best for the brand is to have TV on all year, January through December. This is the first time we're doing that.

It increases our budget, increases the dollars in a less efficient channel. But we do see the benefits, not only in D2C, but also in our retail accounts, where just more people are aware of the brand, more and more people filling that funnel for us. Even though that's something that we can't measure the return as much on, we know it's a benefit to the brand, looking at brand lift surveys, looking at the brand awareness.

So we've decided to continue to invest there.

Kate outlined some of the benefits that linear TV has brought to OOFOS.

• Linear TV brought a positive influence on online channels, correlating with an increase in branded SEM activity, especially when advertising consistently. This points to the power of offline and online channels working together.
• Linear TV brought a positive influence beyond direct-to-consumer (DTC) channels, for example, in retail channels.
• Additionally, early data on the outcomes of OOFOS’s TV investment was promising: the first four months of TV advertising in 2022 increased site visits by 1.86 times, gross revenue by 1.78 times, and net revenue by 1.85 times. In addition, brand search volume doubled, and the click volume increased by 2.4 times.

OOFOS has had some early successes with TV, which it hopes to continue. It may be helpful to remind ourselves of the data we examined before. OOFOS has very low brand awareness, only 9%. And the category of recovery footwear is also relatively unknown to most consumers, which means OOFOS needs to educate them about the category. Thus, TV makes a lot of sense due to its sheer reach. This can be a great channel for building the brand awareness that OOFOS needs.

However, TV has several limitations. First, it is more expensive than other channels. Second, it can be relatively more difficult to target specific groups of customers. Finally, it is also difficult to measure the impact of TV, compared to digital channels, and it has lower return on ad spend compared to SEM or other digital marketing tools.

Although TV is expensive and has lower ROAS, it is good for creating awareness and building a brand. In the case of OOFOS, as we have now seen with several companies, the choice to invest in linear television ultimately comes down to balancing long-term brand-building goals with the short-term performance, marketing, and sales goals. In general, TV continues to play an important part in the overall portfolio of paid media, even as the number of online options continues to grow.

Although it is generally harder to measure the impact of TV, OOFOS has been able to see the impact of TV on search and sales by comparing these metrics when TV was on versus when it was off. This reinforces the fact that online and offline channels often work together.