The #1 way advertising budgets will change this year

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Brands continue to invest more in digital advertising: This year, spending on digital display ads in the US is anticipated to hit $32.17 billion, eclipsing search ad spending for the first time.

However, a rise in spending doesn’t necessarily translate into better customer relationships or more ROI (return on investment). Click-through rates remain paltry, and consumers are indifferent to or annoyed with advertising — tuning out the vast majority of display ads that they see.

Marketers are still struggling to engage people across devices and channels, and consumers have never been harder to understand and reach.

It’s not that marketers don’t realize the need to deliver relevant experiences. Their primary challenge in a cross-device world is this: The cookie-based tracking methods they have used since the mid-1990s don’t work well in a mobile-first world.

But the tide is turning. Advertisers are realizing that addressability is the solution to the many challenges created by cross-channel behaviors. As they experience the benefits of known targeting, brands and media buyers are increasing investments in people-based efforts that help them leverage their data to connect with real customers in real time.

The emergence of addressable advertising

In a recent survey (registration required) conducted by Econsultancy and Signal (my company), advertisers and media buyers shared their perspectives about addressable media — the process of using authenticated first-party data about customers to serve targeted one-on-one communications. This is also often referred to as people-based advertising.

The survey found that advertisers are bullish on a people-based approach because it solves the problem of knowing exactly who they are reaching across devices. Rather than targeting an unreliable cookie or singular device ID, people-based advertising uses the gold mine of information brands already have about their customers to reach the right person with just the right message.

Additional key findings include:

Advertising budgets are moving to people-based advertising. The vast majority of media buyers polled (92 percent) said that they and their clients were increasing their people-based media buys. Nearly half of buyers are increasing them quickly.
Advertisers aren’t just testing the waters with a campaign here or there. They’re investing a significant amount of budget towards addressable advertising. One-quarter of media buyers say that their clients spend more than half of their budgets on people-based marketing.
Addressable advertising works. Early adopters of a people-based approach are experiencing the competitive advantages of higher performance and return on ad spend. Eighty-three percent of media buyers report superior performance across their clients using people-based targeting, compared to standard digital media buys. More than half — 63 percent — of advertisers report higher click-through rates with people-based ads, and 60 percent report higher conversion rates.

A solution to the cross-device conundrum

Budgets are shifting to addressable media because it helps advertisers keep pace as their customers journey across time and touch points, understanding individual behaviors and intentions at each step along the way. Consider this: The average person uses three devices a day, and some use up to seven.

A customer might start her search for a product on her desktop, then compare email offers on her phone and seek advice through social media on her laptop, before finally trekking to a store to make a purchase — all in the span of a few hours.

Because consumers have the power to tune in and tune out what messages they want to receive, when they want to receive them, marketing experiences need to be seamless, relevant and timely across all devices.

In fact, according to research by Marketo, nearly 80 percent of consumers worldwide say they will only engage with a brand’s marketing offers if those promotions are based on how they have interacted with the brand previously.

Relying on cookie-based targeting leaves advertisers without the ability to recognize their customers and respond to signals in real time, wherever they are, so the opportunity to engage with accuracy and value has been lost. On the flip side, people-based advertising takes the guesswork out of audience buying for more targeted experiences — eliminating wasted budget and increasing conversions.

The results are in: People-based advertising is a proven strategy to increase return on ad spend. This is why advertisers want to extend their addressable media buys to more channels and more news and information sites where their customers go.

So while there is much hype around advertising budgets moving away from search and TV and towards digital display, expect people-based advertising to be the prevailing trend that will change advertising budgets this year — and into the future.

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