The ad industry is broken. Some, like News Corp Chief Executive Robert Thomson, might even say that it is “dysfunctional.” Advertisers are losing confidence that their ads are viewed and clicked by real people, publishers are losing revenue, and consumers are getting fed up with seeing ads that are irrelevant to them. All these things point to a need for change and with the arrival of 360 degree and VR ad formats that can appear anywhere on the internet or in app, the question now is: Could this be the impetus that will turn the ad industry upside down while also fixing some of its wrongs? Before we can answer that question, let’s look at some of the glaring problems facing digital advertising today.

The Brand’s View

When advertisers hear industry experts report that more than half of all ads are not viewable or that nearly a third of programmatic ad impressions are fake, it’s no wonder that trust in the advertiser-publisher relationship has been eroding. What do we mean by that? Let’s say you’re a brand who paid for 5 million impressions. One might think this would mean that a brand’s ad was viewed by about 5 million people. Unfortunately, the reality is that the ad was more likely in view for half that amount of people as they explored a publisher’s site. In other words, a brand paid for 5 million views, but really only got 2.5 million. No wonder advertisers are losing confidence! As a consumer, that’s like paying for a pound of the butcher’s finest cut of beef, but only getting 8 ounces. No consumer would tolerate such a thing, yet that’s exactly what is happening in the digital ad space.

This “viewability” issue, however, is just the tip of the iceberg. There are other concerns as well such as ad fraud and inaccurate analytics (even by the likes of Facebook) – which justifies why brands are becoming increasingly skeptical of the existing ad ecosystem. Another concern is that programmatic buying is resulting in real ads being placed on fake or low quality websites that aren’t aligned with an advertiser’s position. This results in advertisers inadvertently bankrolling suspicious websites. Not to mention that brand equity, credibility, and image can be jeopardized as well.

“Brand appropriate context is #1. Hence, marketers must start paying attention to where their ads appear.”

– Forbes, What Advertisers Must Do to Counter the “Fake News” Phenomenon

All these things are leading to a deteriorating connection between the brand and consumer. In response, consumers are getting sick and tired of online ads. This results in them either ignoring the ads completely or even worse, installing ad blocking software, unaware that they are hurting the very media companies producing the content they enjoy so much. (The Economist)

As a result, more and more big brands and advertisers are getting fed up and taking action. As an example, take companies like Kellogg’s, AllState and Workable who recently pulled advertising from a certain political news site that was supporting “fake” news. Also add to the list MasterCard, whose Chief Marketing Officer, Raja Rajamannar, has gone on record saying he’d rather pay a bit more for ad placement, in exchange for knowing that their ads are on a verified site.

The Digital Publisher’s View

Digital publishers have it bad as well and are most certainly feeling pain on all sides. From revenue erosion, dissatisfied advertisers and readers agitated with the current ad experience, they could possibly be the biggest losers in this whole equation. The current system, that is driven by a currency of impressions and clicks, has them stuck between a rock and a hard place. Why? It’s because it’s this very system that is fueling the growth of low quality sites, collectively driving down the price of ad inventory. This problem, compounded by the pressure given by stockholders, seems to encourage sellers to report inflated numbers. All these has resulted in publishers handing over their most precious assets, ad spaces, to “swarms of programmatic bots” while simultaneously devaluing their ad inventory.

Loss of revenue is a major problem for publishers as the increasing frustration of consumers has led to an increase in ad blocker installations. One recent study even indicates that 92% of consumers are considering using the software. This concern has left publishers pondering on whether they should go the subscription model route at the risk of alienating and losing readers. The rise of ad fraud has also resulted in more loss as publishers are forced to absorb the costs, while every day, hackers are getting increasingly sophisticated to the point that they have cracked the system and are stealing $5 million a day from the ad market. To add to all these costs is the fact that publishers are losing money to behemoths like Facebook and Google who are swallowing upwards of 65% of every digital ad dollar spent, all while giants like Verizon and Amazon are circling the space plotting their next move to take market share.

“The system, set-up to reward clicks and impressions, has fueled the growth of low quality sites well beyond those focused on made-up political news. Honestly, the long tail is to advertising what subprime was to mortgages. No one knows what’s in it, but it helps people believe that there is a mysterious tonnage of impressions that are really low cost. But lo-cost impression would mean low-cost human attention. How can any publisher of quality content survive on low-cost impressions?”

– Joe Marchese, President of Ad Products for Fox Networks Group

In response to all this, publishers are taking action, some actually bypassing the programmatic route altogether. They’re creating their own technology, beefing up sales teams to work directly with advertisers and building up internal creative staffs to work hand in hand with brands to deliver unique, premium experiences. Publishers who have taken some variation of these routes include the likes of Refinery29, Vox Media, BuzzFeed, Vice, ESPN, the New York Times and more.

Necessary Changes

With all that’s amiss, it’s no surprise that many are calling for major changes in the ad industry – saying it’s critical to restore trust among all parties – sellers (publishers), buyers (advertisers / brands) and consumers. Some of the demands from all sides include:

• Transacting on viewability which works for all parties – buyers, sellers, and vendors.
• More transparency in reporting.
• Development of a new ad currency that is driven more by ad engagement and interaction as opposed to false impressions.
• More immersive brand storytelling opportunities that drive engagement.

Ultimately brands want to connect with audiences in deeper, more organic and meaningful ways. This bolsters the call for more engaging, interactive, higher-impact ads. Publishers and advertisers alike are on the hunt for big ideas that can drive ad engagement and help brands break through the clutter. In the end, the challenge to all is to evolve the user experience so that ads are less of an intrusion and more of a welcomed and trusted visitor to the content consumption landscape.

“In 2017, finding ways to use more entertaining and less intrusive media will become a higher priority to avoid alienating users.” ~Venture Beat, Mobile Trends to Watch for in 2017

360 / VR: A Possible Impetus for Change

While there is no magic pill to cure all the ills of the current ad ecosystem, emerging technology like 360 degree and virtual reality ad units can help resolve some of these issues. For starters, they have the potential to change the currency from being impression based to engagement driven. That’s because 360/VR ads come with an entirely new set of data collection points that are based on user interaction; thus, offering advanced analytics by which to measure engagement and ad effectiveness. This alone delivers better brand immersion and opens the door to new consumer insights that were never before possible. A new currency – perhaps one based on engagement – is likely to emerge from this enhanced data collection.

360/VR ads also represent a new premium ad unit that can be leveraged both by publishers and brands, as they can attract premium ad dollars, drive engagement, and strengthen the consumer-brand relationship.  Here are a few more compelling reasons how 360 degree and Virtual Reality digital display and video ad formats have the potential to serve as the catalyst that drives change in a broken digital ad marketplace:

• 360/VR ads that leverage HTML5 technology can report on whether or not an ad was actually in view. This can help alleviate the trust issue as they offer a level of transparency.
• Consumers overwhelmingly view brands that use 360 and VR content in a positive light which in turn ads value to the publishers & brands who leverage this technology today.
• Native advertising and branded content initiatives, which are expected to see continued growth, can be significantly bolstered by 360/VR thereby increasing the value of native ad products.
• 360/VR ads by their sheer nature answer the need for more engaging, higher-impact ads
• 360/VR ads can be non-interruptive and respect the user experience.
• Premium publishers focusing on premium experiences have a new tool to add to their sales kits.
• 360 VR presents advertisers with a new way to break through the clutter.
• Consumers are very interested in VR and 360 and the experience that comes with ads that leverage this technology can possibly thwart some ad blocking.
• Studies on 360/VR ads and content are showing that this content format improves brand recall, content recall and intent to purchase.

In the end, it will be interesting to see how it all shakes out. When standing on the side of advertisers and publishers, it appears that 360 / VR ads that can appear anywhere across the internet or in app present the market with much more than powerful new tools to connect with audiences. It’s possible that they also present the market with a new currency and can serve as a partial remedy to fix many of the ills that exist today. What are your thoughts?