Whose winning with online advertising? Look at Google and Facebook

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duopoly
This Financial Times article reminds us of the trends towards Google and Facebook's media duopoly
duopoly
This Financial Times article reminds us of the trends towards Google and Facebook’s media duopoly

There’s one piece of clear information in marketing trends: Overall business spending on advertising has been shifting to the two biggest online players: Google and Facebook. Not surprisingly, other media players are either seeking to live with this trend (through alliances) or are crying in their desperation as they struggle to rein in internal costs and find a way to retain their clients.

See this Financial Times report. While this is a UK publication, these trends are world-wide:

The bulk of spending by brands on digital advertising is going to Google and Facebook. Combined, they accounted for 75 per cent of all new online ad spending in 2015, according to the Internet Trends report published this month by Mary Meeker of Kleiner Perkins Caufield & Byers, the US venture capital fund. In the US, 85 cents of every new dollar spent on digital went to the two companies in the first quarter of 2016.

This matters because digital is fast becoming advertising’s biggest source of revenue. It will eclipse television in the US next year, according to eMarketer, the research firm, with the lion’s share likely to go to the digital duopoly of Facebook and Google. Executives in Cannes put a brave face on what this might mean for their industry but the consequences of two companies becoming the gatekeepers for most digital advertising are profound.

Google and Facebook compete in some areas such as digital video advertising but are present “across every part of the food chain”, according to one ad executive. This seismic shift to a digital and mobile ad landscape effectively controlled by two companies has wide repercussions for agencies, media buyers, publishers and the brands that want to sell more products.

Advertisers like the targeting they get with Facebook and the trove of data it has on its 1.6bn users, just as they like the efficiency of Google search. But they are worried about a concentration of market power in two companies that not only own the playing field but are able to set the rules of the game as well.

Facebook and Google “are hegemons” that could soon be taking campaigns away from television, says Brian Wieser, analyst with Pivotal Research. Paul Frampton, chief executive of Havas Media Group UK, says they are “black boxes” that have too much power. “They don’t give agencies or the brands access to their algorithms and the data being mined are for Google and Facebook — and not for the brand.”

The two companies have unwittingly had an impact on print advertising revenues, which have tumbled in the UK and the US in the past six months. The Financial Times reported this week that UK newspaper executives have had discussions about pooling resources to form a single ad sales operation, partly because so much print spending has shifted to Facebook and Google.

There have been similar discussions in Cannes with the aim of creating a “third block” of television advertising inventory to rival the might of Facebook and Google. Talks are at a very early stage but have centred on owners of television networks pooling inventory, according to people who have been briefed on the discussions.

While these trends undoubtedly have more impact on my business than yours (our organization earns the bulk of its revenue from advertising sales), they provide some challenging clues and observations about where the “smart money” is heading with its marketing.

Should you shift from your current media to the online giants? Or, if you’ve never advertised before in conventional print or other media, should you start spending primarily with Google and Facebook?

My natural bias (remember — we sell advertising ourselves) — is to say: “Consider the numbers, but make your own decisions.” In our case, we serve specialized markets and communities. If your goal is to reach the construction industry in places like Chicago, Florida, North Carolina or in Canada, the highly focused editorial resources, coupled with links to social media, allows you to “get” your message out quite quickly and effectively. (The paradox: our search engine rankings/results with Google for relevant categories are really high, and with effective cross-posting through Twitter and Facebook, your message originally published in our publications/resources will certainly reach the social media demographics you are seeking.)

That said, only an ostrich would ignore these trends. If you’ve “always done it this way” — say with trade show exhibits or  (horrors), ongoing Yellow Pages listings, take a few minutes to assess your results and satisfy yourself you are getting your money’s worth.

Personally, I’m hedging my bets, with a meaningful investment of personal funds in Alphabet (Google) shares. Probably I should buy some Facebook as well, though if I do I feel like I would be a traitor in the competitive battles.

What do you think about online advertising trends? Have you changed your spending practices or are you thinking of new things? Please feel free to comment or email buckshon@constructionmarketingideas.com.

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