What to Expect from 2018: Algorithms, Ad Blocking and Online Video

At our first quarterly ‘Shaping the Future’ Breakfast this January, Aydin Moghaddam, ROAST’s Head of PPC, kicked off the morning by digging into the biggest challenges facing marketers in the 2018 media landscape. Aydin gave insights into how algorithmic businesses create more personalised experiences, how we can tackle the rise of ad blocking and top tips for online video.

Algorithmic Businesses

Google is aging in reverse. Every time you Google something you improve its algorithm by three billionth of a percent. This may sound small, but it is significant because there are now over 3.6 billion searches on Google globally every day. Google looks at what searches are relevant for you and uses this data to improve its search results. Google’s ad revenue has grown considerably over the past decade. This is partly due to the continuous improvement of its product coupled with decreasing prices, making it more attractive to advertisers.

Last week, Google announced a new beta for advanced targeting called Detailed Demographics. This is based on data such as relationship status, education, and household income. We expect better targeting on Google to further improve advertisers’ quality scores, and subsequently lower cost per click for most advertiser’s long term.

Another player harnessing the power of algorithms is Amazon. Amazon’s search business has grown by 11% year on year (Activate, 2017). More people now start product searches on Amazon than they do on Google. We predict that Amazon’s search business could grow to Google’s size over the next decade as more users and ecommerce businesses shift their focus onto Amazon.

Amazon’s dominance is partly due to fewer affluents now able to identify a favourite brand (YouGov Survey of Affluence and Wealth, 2016). Searching for product benefits and other generic terms is becoming more popular than searching by brand terms. What does this mean for advertisers? Relying solely on brand search will no longer be a sustainable growth strategy. Investing in generic searches will be key.

Recent studies show that 51% of smartphone users find new brands and companies through search (Percolate, 2017). This means that Google and Amazon’s search results dictate what your new favourite brand is. The rise of Voice Search has reinforced this trend. As consumers shift online, there is no packaging and familiarity to draw your attention – something Amazon is taking advantage of. For example, if you ask Alexa to buy you batteries, it will often give you just two options: AAA batteries by AmazonBasics, or 9V batteries by – you guessed it – AmazonBasics.

The key is that Google and Amazon’s success comes from their ability to use algorithms to personalise the consumer experience. Why is this important? A recent survey by Salesforce showed that 52% of consumers say that they are likely to switch brands if a brand fails to personalise communications. And 65% say that personalisation influences their brand loyalty.

Eight out of the 13 companies that are out performing the S&P 500 (for five years straight) are businesses that use algorithms to tailor the user experience (L2 Inc., 2017). Who is the best at this? Amazon. Amazon will tailor your homepage with product recommendations based on your search behaviour and recent purchases. In contrast, other traditional UK retailers, such as Debenhams, are not tailoring the user experience for logged in users yet.

The power of algorithmic personalisation is also found in social networks. Instagram has overtaken Snapchat (in monthly active users) partly because of its ability to personalise your feed. For example, Instagram will show you content similar to the posts you already engage with. Whereas, Snapchat shows content in chronological order irrespective of your interests. Snapchat have admitted the need for a personalised algorithm in 2018, but it may be too little too late.

Another company that uses algorithms to personalise the user experience is Netflix. Netflix shows you movie recommendations based on the shows you watch. However, Netflix’s algorithm takes it a step further and personalises the visuals. If they want to pique your interest in an unfamiliar title, they will tailor the film cover to an actor or actress you are familiar with. For example, if they want to interest you in Pulp Fiction, and you have watched films starring Uma Thurman, you will see the cover that features Uma Thurman. On the other hand, if you watch more John Travolta films, you will see a modified film cover featuring John Travolta. This is one way that Netflix differs from traditional television. Netflix doesn’t have one product, but over 100 million products tailored for every member.

What do you do if you work in a business which doesn’t have the resources or algorithms to give customers a personalised experience? The simplest way is through language. The most powerful word in marketing (after the word ‘free’) is the word ‘you’. We respond to you-orientated language because it feels personal. Visit your Amazon homepage and count how many instances of the word ‘you’ you find. I found nineteen: ‘your recommendations’, ‘your orders’, ‘your wish list’, etc. This simple writing technique is something ever business can harness to bring even more humanity to the user experience. The best part: it’s free!

 

Ad Blocking

74% of Netflix users say they would cancel their subscription if Netflix started showing ads (All Flicks, 2016). Netflix are leaving an estimated two billion dollars on the table by not showing advertising – a strategic move to retain their customer base. The reality is that ad blocking is on the rise, and it is no longer just millennials. 57% of ad block users are now aged above 35 years old (Global Web Index, 2017).

How do we buck this growing trend? The solution is better targeting, better creative, and better ad formats. A recent study shows how ad block users feel about different ad formats; users say they prefer static banners and skippable video, over auto-play video, auto-play audio, and non-skippable video (PageFair, 2017). The lesson here? People dislike interruptive formats which disturb their online experience.

On 15th February 2018, Google will embed a native ad-blocker to the Chrome browser. This will not block all ads, just those formats which are interruptive (e.g. auto-play audio ads). The key is that people do not hate all ads; they just hate the ones that are poorly targeted and interruptive.

 

Online Video

First impressions count – especially in online video. Snapchat say that the first two seconds of video drives two thirds of brand awareness. And Facebook say that the first two seconds drives sales (L2, 2017). The challenge is that most brands still have their main message in the last five seconds of their video, not the first five.

The brands which win in 2018 are the ones who stop recycling TV ads online but create bespoke and tailored content online which focuses on delivering the message in first five seconds.

 

Conclusions

There are three key takeaways:
1) Remember to get your main message across in the first five seconds of online video
2) To minimise ad blocking: avoid poor targeting and interruptive ad formats
3) Consider how you can use algorithms or language to personalise the consumer experience for your customers