Ad infinitum: companies will unleash a deluge of digital marketing
Is there a place where you won’t soon be assaulted by digital advertising?
Uber revealed this week that it is set to show ‘travel ads’ when you hail a ride – commercial messages related to your destination that appear on your phone, and possibly in the future on a screen at the back of the car. Are you about to take an international flight? A duty free shop can sponsor your entire trip to the airport.
Meanwhile, Netflix just put early November for the launch of its new ad tier, a discounted streaming service in 12 countries for people who want to watch an average of five ads per hour. It’s true that this is a new optional service, so no one will be forced to watch any advertising – but as the economic downturn bites, this might be the only realistic way for many people to continue to broadcast.
Uber and Netflix are far from alone in clinging to advertising as a new source of revenue. Delivery apps, e-commerce marketplaces, mass-market retailers, gaming services: it seems like no place is ad-free these days.
There are obvious reasons for this rush into the digital advertising industry. When public attention shifts to new services and channels, ad spend inevitably follows. The rise of streaming poses a serious threat to the linear television model that still accounts for nearly all of the $170 billion in global television advertising each year.
Ad dollars, euros and high-margin pounds are also gravy for companies in industries where profit margins are thin or non-existent. For a loss-making delivery app like DoorDash, which processed $13 billion in orders last quarter, channeling that much buying power creates a clear opportunity. Apps like this are in an ideal position to show up in front of retailers and restaurants to suggest things their users might want to buy.
Retail media networks are also starting to take off, as merchants like Walmart and Target collect valuable data on shopper habits that advertisers can use to fine-tune their campaigns, either on retailers’ own sites or on other sites. networks. Walmart unveiled the size of its advertising business for the first time earlier this year, with revenue of $2.1 billion in 2021.
But while there are good reasons these and other companies are turning to advertising, there’s one overriding factor driving this shift: unmet advertiser demands. Some of the targeting methods that have shaped the digital advertising industry throughout its history are falling apart.
Apple’s decision to let its users choose whether they want to be tracked was a seismic event, robbing advertisers of valuable data. The second shoe to drop will be Google’s long-delayed plan to end cookie support in its Chrome browser, removing core support for behavioral targeting.
This is starting to shake the duopoly that has dominated the digital advertising world for 15 years. Google and Meta generated a total of $325 billion in ad revenue last year, a huge chunk of a total market that Zenith Media estimated at $405 billion.
The search for new forms of targeting means that any company with a large store of first-party data – information about its own customers that can be freely used to refine advertising – could be well placed. As ad analyst Eric Seufert says, everything is an ad network these days.
Netflix, for its part, has relatively little information about its users and will only require people signing up or its ad-supported tier to provide basic personal information. But there will always be ways to improve this, according to Chad Engelgau, CEO of data brokerage firm Acxiom: Advertisers will also be able to use their own data, refining their understanding of viewers.
In this new world, the companies with the best data and the largest audiences and user bases stand to win. Apple, which is taking advantage of shifting demand for mobile advertising created by its privacy changes to develop his own advertising company, has over a billion iPhone users. Amazon’s knowledge of the purchase histories and intentions of its users has already enabled it to build an advertising business that brought in $31.2 billion last year.
These giants will be in a strong position to take on Google and Facebook. But there are plenty behind them for whom advertising is about to become a serious source of income. Whatever the next 15 years in the advertising business, it won’t be like the last 15.