My friend, the display ad

Those of us who view banner ads and other Internet advertising as annoying or just something to ignore may have missed important developments in this line of business.

For the first development, let me draw the comparison to Amazon.  It started out as a book selling website.  It later expanded into selling books for other bookstores.  It had become a distribution outlet for its competitors.  Its reach into various segments of the marketplace exceeded that, or complemented that, of bookstores and publishers.  When Tom Friedman wrote The World is Flat, he gave a hint as to this kind of development.  But it is stunning to see it in action.

Now back to Internet advertising.  We all know that Google is a whiz at this, placing ads on it search engine page that reflect your personal history and preferences.  It also scans the text of your emails on Gmail and sends you personalized ads based on some algorithm.*

Now, though, Google has out-Amazoned Amazon when it comes to reselling its competitors services.  I missed it over a year ago, but Google bought Invite Media, and now offers "The first universal buying platform for display media."  The company offers access to 99% of Internet users in selling advertisements.  For example, do you want an ad on Yahoo, Google's competitor?  They will sell it to you.

Why would Google's competitors put up with this?  For the same reason Amazon's do.  They are benefiting from their competitor's use of their platforms.  Once your spread is wide enough, you can enable your competitors to reach market segments that were previously out of reach.

But it is more than that.  In Google's words: "Real time bidding technology is an important part of this ecosystem. It enables advertisers and agencies to tailor their bids on an impression-by-impression basis, based on their own data, when bidding on websites that choose to make their ad space available through an advertising exchange."  Beyond this, they offer "real-time optimization system to maximize performance."  This is the equivalent of dynamic ad buying, based on the responsiveness by customers to the particular ad you purchase on each of the platforms.

Also, you can change the substance and frequency of ads at a moment's notice.  Heat wave approaching the Midwest?  Change the ads for Target stores in Ohio to focus on fans and air conditioners.  Here's an example from Teracent, another Google acquisition:

In the "old days," the closest you could get to this was represented by Bose Corporation.  Remembers those ads for the Wave® Radio on the back page of the New York Times Magazine?  Bose would test out different sales approaches on those ads.  Some would mention the price of the radio.  Some would mention the price per month if you bought on a time payment.  Some would have no price information.  Then, in old-day "real time," they would monitor the ads types for relative effectiveness.  But it would take weeks to see the results, and then more weeks to refine the ads to the most effective model.

Now, it can happen instantaneously.  Or to put it in other terms, "The technology takes the ad creative, breaks it up into pieces such as background and ad copy, and builds it to serve up the assembled creative to consumers based on data feeds."

These are not just ads.  They are part of a social structure more powerful than ads: 

While social networks have empowered customers to provide brands' feedback in real time, technology has enabled those same features in display ads. Integrating into display ads a variety of social elements such as product reviews and feedback could help marketers gain loyal customers, too. About 59% of all people online use social networks at least once monthly, Mohan says. "We are learning that the Web is social, just like real life," he adds.

Think about building brand loyalty by gaining a percentage of the 5 billion pieces of content shared weekly on social sites across the Internet, or a percentage of the 50 million tweets on Twitter talking about the company's products.

What does this mean for advertising agencies?  It is not good. Think of the term "disintermediation."  Back to Teracent:

Think you have to choose between the science your business demands and the art your customers crave? Think again. Take control of the look and feel of your display media ROI with Teracent’s proven advertiser solutions.

Aaron Shapiro at ClickZ notes:

For creative and media agencies, ad exchanges are a different story: ad exchanges promise to completely transform the digital agency business. ...The result is that core media agency competencies - buying and planning - become less important.

What does it mean for us at home?  Simply this.  There will be no escape from the onslaught of targeted advertisements to our homes and businesses.  I think I recall that in the pre-Internet days, a person living in a city was hit with about 3000 advertising images per day.  The goal during that time was to make your message pervasive and memorable by being clever, funny, or disturbing, or having a stick-in-your-head jingle.  The goal now is to make an ad part of your social structure, so comfortable and tailored that you don't even think of it as an ad; so convenient that you immediately click through and make the purchase; and so much a part of your life that you feel like you have had a warm conversation with a friend as s/he takes your money.

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* For a humorous take on the accuracy of the algorithm, read this New York Times op-ed by Seth Freeman, "Me and My Algorithm."  Excerpt:  I sometimes find myself wondering what the algorithm knows that I don’t. This was particularly true, and disconcerting, when a recent e-mail about earthquake coverage for my home, several miles inland from the ocean in California, prompted an ad for Clearance Swimwear.