SmartAds:The Future of Advertising

It's becoming increasingly possible to target "smart ads" specifically to people who want them. And best of all, you can do this for a fraction of the price of mass-market.

Andrew Fano is showing off the living room. It's a plush, teaky, well-appointed affair, but what really catch the eye are several thin-screen video displays, including a few smaller ones that are embedded in furniture and picture frames. The displays are slowly cycling through what appear to be family digital photographs -- an appealing idea, considering many of us let our thousands of digital photos sit unwatched on a computer hard drive. "But would you want to see an ad stuck in there?" asks Fano, indicating one of the digital slide shows, apparently of a family vacation to a theme park. "No? Because you just saw one." One of the theme-park photos was a professional image designed to "enhance your memories" of the park, explains Fano, a senior researcher at consulting giant Accenture who is exploring new ways for advertisers to get their messages across. The tony living room is actually part of Accenture's technology laboratory, and the displays are an experimental prototype of a service that would arrange your photos into slide shows in exchange for the right to slip relevant sponsored pictures into the mix.

The world is awash in advertising clutter. For decades marketers have been spending more and more to try to get their message out -- only to find their pitches drowned out in a sea of noise generated by countless other marketers trying to do the same thing. In effect, companies have been paying big bucks to be ignored. Now, inspired by the Internet's ability to do a better job of targeting prospects and measuring results, advertisers are dreaming up new ways to break through the clutter and connect with potential customers at a lower cost.

The big advances in advertising technology once favored traditional giants like Procter & Gamble, which could afford to mass-market its message. The new techniques are affordable to smaller companies, too.Though the advertising revolution got started online, some of the new techniques are already finding their way onto streets and walls and even into clothing pockets around the world. Perhaps just five years from now, companies will be able to routinely and inexpensively embark on ad campaigns that hit exactly the right prospects -- and hardly anyone else -- with entertaining, hard-to-ignore messages that can follow people via new high-tech media into their cars, offices, living rooms, and bedrooms. For companies that master the new techniques, the payoff is potentially enormous: a big jump in customer mindshare while holding the line on marketing costs. And whereas the big advances in advertising technology once favored traditional giants like Procter & Gamble, which could afford to mass-market its message, the new techniques are affordable to smaller companies, too. "Over time," says Karen Breen Vogel, CEO of ClearGauge, one of hundreds of interactive ad agencies that have sprung up to focus on online advertising, "we can cut the cost of the advertising in half while maintaining customer response."

Fixed in an archipelago of art galleries and airy cafes at the periphery of Chicago's North Loop, the offices of ClearGauge have the hip, slightly subversive look you'd expect of a boutique advertising agency. Except that where the halls of other agencies regale visitors with blowups of their all-important creative, ClearGauge has proudly plopped a wicked-looking bank of servers front and center against the exposed concrete walls. It's a tip-off to the agency's sensibilities -- and to a sea change in the advertising industry.

Advertising has long been a sort of black art with a murky ROI, and for a simple reason: Clients rarely know for sure who sees their ads, let alone whether the ads influence anyone. Even though companies spend a third of a trillion dollars a year on advertising, those ads often end up being irrelevant to the people who see them. On average, Americans are subject to some 3,000 essentially random pitches per day. Two-thirds of people surveyed in a Yankelovich Partners study said they feel "constantly bombarded" by ads, and 59% said the ads they see have little or no relevance to them. No wonder so many people dislike and ignore advertising, and so many business owners feel gun-shy about investing in serious campaigns.

The Internet has begun to change all that. The ability to measure the impact of an ad simply by counting how many people click on it, and to link advertisements to search-engine results, in large part drove Internet advertising to $9.6 billion in 2004, a 33% jump from 2003, according to Interactive Advertising Bureau reports. (For a cautionary tale about counting clicks, see "So Many Clicks, So Few Sales," on page 29.) But the real advantage is going to companies that figure out how to use these tools to hunt down specific types of prospects and nail them with the right pitch. "We look for subsegments of Internet users who care about certain things," explains Breen Vogel. "We find them when they're online, we intercept their activities, and we start a relationship with them."

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