Digital Advertising Today

RCM Managed Asset Portfolio 

By Christopher Chiu, CFA

September 2025

Digital Advertising Today

Advertising Before the Internet

Rather than take a spray and pray approach to advertising, the companies that know how to advertise know they need to place ads where the most eyeballs will be. For example, they know that most American adult males will have some interest in football. And the place where they most want to place their ads is during some portion of the NFL season. It is no coincidence that CBS, NBC, ABC, and FOX and also streamers such as Amazon Prime and Netflix want a part of the rights deal to televise NFL games. Everyone wants to be where the action will be.

Conversely, what gets advertised during these telecasts are the products that will have the most interest to most people—autos, beer, food, and snacks. Companies will not waste this time advertising their niche products but rather popular products, which stand a much better chance with a would-be customer. Supplied with just Nielsen data, these companies are playing the odds, using their ad slots to advertise what will most likely have a return on investments for ad dollars spent. 

The Long Tail

Contrasted with this approach is the Internet, which takes a more informed way of creating a market that matches advertiser to audience. In 2004 Chris Andersen wrote a famous article in Wired magazine in which he detailed how the availability of information provided by the Internet is enabling matches between buyer and seller in the niche areas of the Internet or along what he called “the long tail.” That is, if you think about people’s tastes and interests distributed as a bell curve, most people’s tastes and interests will fall under the largest part of the bell curve, as with the NFL audience I highlighted above. But there is a huge portion of consumers that are not being advertised to for their interests farther along the tails of the bell curve. Examples of this may be crafts like embroidery or needlework, which get no attention at all but are practiced today by tens of millions. Even in the realm of popular sports there are niche subjects like Bill James’s work on sabermetrics that were virtually unknown by much of the public prior to the Internet. In the area of investing, instead of the popular 60/40 stock-bond portfolio there may be more suitable investment products for some people, like certain options strategies, had the investor only known about them.

Google: The Value of Knowing the User’s Revealed Interest

A company like Google can capitalize on people’s narrower interests because it has (1) made it easier for people to search for information about their interest on the Internet and (2) because it has allowed people to reveal their narrower interest through their use of this search. Every time you search using Google, they have made a record of it. This is because knowing who has which interests allows advertisers on Google to monetize this interest. This kind of advertising is valuable precisely because Google has found people out there who have an interest in something that was thought to have little to no interest before. 

Why this revealed interest is valuable for advertisers is that it creates a greater certainty that placing an ad on it will result in an adequate return on investment on the ad money being spent. Because with interest, there is a more likely chance that there is demand for this interest or a product associated with it. Before Google, such interest would not have been monetized. And these associated products would never have been made or sold to people with such interests. They would have been simply overlooked. To naysayers about the economic value of the Internet, I would argue that this has been part of the economic growth that the Internet has created these last twenty years, allowing some business to exist purely from the Internet that previously could not. 

Facebook: The Value of Knowing the User 

Yet this is only one side. For what Google has done for would-be advertisers is merely find people who have revealed an interest. There is the other side, which is knowing more of the person’s other tastes so as to successfully display ads for products that they have not yet expressed an interest in. To do that one has to know the person; one has to keep a record of their Internet behavior and analyze it among a grouping of similarly gathered data.

One could argue that better than Google, a social media company like Facebook, which has collected large amounts of data and used machine learning on that extensive data collection, can deliver personalized ads that better align with users’ interests, behaviors, and demographics. In this sense the umbrella of companies under Meta, Facebook’s parent company, will eventually have deeper and more useful knowledge for turning over product than Google’s knowledge of user interest.

Added to this too is Amazon which has kept a history of a users’ lifetime purchases and browsing to not only recommend things they might consider buying but also sell ads space on its website to third party sellers who would want that user’s business. And recently, Amazon made a deal with Roku to marry their household data with Amazon Prime’s household data to better target a user’s taste with ads that they can be shown to them.

These are just a few of the many developments that have happened. They are part of the ongoing trends from the Internet to gain more predictive power of what a consumer, who is just navigating the Internet, might want to buy. One can safely say that with the onset of AI, these predictive powers will only grow over time.