Clicks and Mortar

In a recent issue of The New Yorker, James Surowiecki wrote in his column, The Financial Page, how the rise of the Web and newer click-based business models (such as Netflix’s e-commerce store) led to Blockbuster’s demise. More specifically, Surowiecki believed that the video giant’s adherence to traditional models deterred the company from recognizing the importance of the Web. 

“Why didn’t Blockbuster evolve more quickly?” Surowiecki wrote. “It was because of what you could call the ‘internal constituency’ problem: the company was full of people who had been there when bricks-and-mortar stores were hugely profitable, and who couldn’t believe that those days were gone for good.” 

Blockbuster’s decision-makers were so used to investing in traditional stores that they missed the opportunity to service customers both digitally and traditionally. Failing to adapt emerging technologies, such as online rentals, video streaming and the like, was an irreversible misstep that led to the company filing for Chapter 11 in 2010. The Web was what Blockbuster didn’t see coming, but clearly should have.

Surowiecki’s “internal constituency” thesis holds some key lessons for the online advertising business as well. Industry thought leaders have been saying for years that the death of the click is imminent, yet it’s still the most commonly used ad metric. As decision-makers at Blockbuster were reliant on bricks, advertisers are far too invested in clicks. When you consider how the digital ad industry is evolving toward more sophisticated formats, including mobile, now is the perfect time to leave the clicks behind. 

In December 2010, eMarketer projected that total U.S. mobile ad revenue would surpass $1.25 billion in 2011. This means that mobile advertising is no longer a new trend on the horizon, but will instead break through to become a mainstream option for marketers.

With the rise of mobile advertising—and, more specifically, in-app advertising—we must see the adoption of new metrics to measure the return on ad spend. The reason? The click simply won’t hold up as a reliable gauge of how users are engaging with in-app ads. 


Typically in mobile advertising, users are taken to a Web landing page after clicking on an ad. This means that if a person is viewing an app, he is forced to leave it to navigate to the landing page, creating a slow and sub-optimal user experience. As Steve Jobs eloquently stated when discussing the iAd platform at Apple’s iPhone OS 4 event, “Today when you click on a banner ad, it yanks you out of your app and throws you onto the advertiser’s Web page. So people don’t click on the ads.” If users aren’t clicking, then marketers will be forced to measure the success of mobile advertising another way. This is precisely why we must shed our click addiction.

The mobile ad market is still in its infancy, and while some marketers have had success with Apple’s iAd platform, just as many have not. Earlier this year, Nissan became the only automaker to take full advantage of iAds by producing a campaign for Leaf—the first fully electric car available in the U.S. But other marketers haven’t been as successful. Adidas pulled its $10 million iAd campaign due to creative differences with Apple. As The Wall Street Journal reported, Apple’s tight control over ad production made the creative process much longer and more difficult than Adidas—and other brand marketers—were accustomed to.

The move toward mobile is paving the way for alternative ad platforms and pricing models. App developer Brisk Mobile, for instance, doesn’t offer click-based display ads, but instead monetizes apps using sign-up offers.
 
As an industry, if we’re going to adapt to the mobile app deluge and learn how to make money from advertising in these apps, we need to adopt new ways to measure our results. Otherwise, we’ll become like Blockbuster. Instead of evolving beyond bricks, we must evolve beyond clicks.

Zephrin Lasker is CEO and co-founder of Pontiflex. He can be reached at zlasker@pontiflex.com.