Tag Archive: digital advertising

  1. TikTok: the time is now

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    For nearly a decade, the Google-Meta duopoly raked in more than half the money invested into digital advertising in the US. And while they still dominate, 2022 was the first year since 2014 that that wasn’t the case. Their joint market share was 48.4% last year, and is expected to drop to around 44.9% in 2023. They’re still growing, just more slowly than the rest of the digital ad market. This slowed growth is likely down to the increasing number of formats available, the fact that people are spending less time online than they did during the pandemic and, of course, Apple’s infamous privacy update which requires apps to ask users if they want to be tracked.

    So who’s receiving the other half of US advertisers’ digital ad dollars? There’s Amazon, of course, whose ad business is powered by its ability to target users based on their purchase and browsing history. It commanded 11.7% of digital ad spend in the US in 2022, and that’s expected to rise to 12.4% in 2023. The streaming services are also getting a bigger share, with advertisers shifting spend from linear to connected and streaming TV. Roku, Hulu, Pluto, Paramount+, Tubi and Peacock combined made up 3.6% of the digital ad market in the US in 2022 – that percentage will rise significantly now that Netflix and Disney+ have launched ad-supported tiers.

    And then, of course, there’s TikTok. While the Chinese-owned short video app is still a relatively small player, with just 2% of the digital ad market in 2022, it’s the one that everyone is watching and packs a far bigger punch than its market share suggests.

    TikTok has a highly engaged, younger audience

    TikTok is taking up more space in marketers’ minds and media budgets thanks to its audience and how effectively it engages them. Insider Intelligence estimates that 61.3% of Gen Z in the US uses TikTok at least once a month, and adults in the country spend an average of 46 minutes on the platform – significantly more than the 28 minutes they spend on Instagram. These audiences are highly engaged – one study showed that the standard engagement rate of ads on TikTok is 6% – 10 times higher than Instagram’s 0.6%. Much of TikTok’s success in engaging its audience comes down to how it has shifted how social media is used, from finding things you like to discovering new things. It also allows its audience the opportunity for self-expression and to be authentically themselves. And the clincher? TikTok users are 1.7 times more likely to buy products they discover on TikTok compared to other platforms; TikTok’s commerce-focused hashtag, #TikTokmademebuyit, has been viewed more than 30 billion times.

    Lowering CPMs to attract investment

    TikTok is riding a wave just as advertisers are looking for ways to rein in their spending. It has responded to the economic downturn by reducing the cost of its ads in a concerted effort to appeal to marketers. The result is extremely attractively priced advertising, with CPMs half that of Instagram Reels, a third cheaper than Twitter’s and 62% less than Snap’s.

    How are advertisers responding to TikTok?

    In a word: enthusiastically. While a year ago, many would have viewed TikTok as an experimental platform, its popularity amongst young audiences and very high levels of engagement mean that it is now considered to be at least close to mature – but perhaps without the scrutiny that more established channels are put under. Some brands are prioritizing TikTok as much as Meta’s platforms on their media plans: the top 1000 advertisers in the US increased their spend by 66% to $467m from September to October of last year. Although TikTok has not been immune to the downturn in online spending – it slashed its revenue targets for 2022 by 20% – it is estimated to have made more than $10bn in ad revenue in 2022. Not bad for an app that launched worldwide less than six years ago…

    Fortune favors the cautious

    It’s very easy to get excited about TikTok, with its impressive reach and engagement – but there are reasons to be careful when advertising on the platform. As it grows it attracts, along with the other tech giants, increased scrutiny from national and international bodies. Washington DC is sufficiently alarmed about national security to ban government employees from using the Chinese-owned app on government-owned devices. India has banned the use of TikTok permanently, while several other countries, including Indonesia, have placed temporary bans on its use. Towards the end of 2022, an internal risk assessment conducted by TikTok’s parent company, ByteDance, found systemic issues with fraud and inappropriate data management. One employee familiar with such issues apparently said that it is impossible to keep sensitive data from being stored improperly on Chinese servers.

    These privacy and security concerns have the US government worrying about whether they should take the Indian route and restrict access to the app altogether. The Democrats are very reluctant to do so as it could alienate young people – an important part of their voting demographic – but are also aware that the platform could be used to spread disinformation in the presidential election next year.

    As things stand, there is no inherent risk of reputational damage for advertisers investing in TikTok ads. However, it would be wise to monitor the situation. While it is currently difficult to imagine tearing young people away from their favorite app, consumers are becoming increasingly aware of privacy and security. Things can turn quickly (just look at Twitter) and – teamed with the imminent and final demise of the cookie – brands should certainly be seeking to build robust audiences and communities and first-party data practices away from third-party platforms, for future-proof online marketing.

    Image: Shutterstock/Kaspars Grinvalds

  2. Creating a sustainable media industry

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    Over the last two weeks, the UN’s climate conference, COP27, has shone a spotlight on the urgent need for decisive action against climate change. Without immediate action, we are unable to maintain the Earth’s ecosystems. Change is happening, and there is more awareness of the problems facing the planet and what we can do about them. Many consumers are making a conscious effort to reduce their carbon footprint: more than eight in ten indicated that sustainability is important for them. This presents an opportunity for advertisers to demonstrate how they are meaningfully contributing to a more sustainable future, which will have a positive impact on both the planet and the bottom line. The obvious way to do this is to look at the business and transform supply chains and product packaging, for example. But it is possible to optimize for more sustainable media activity.

    Is the movement online enough to make media sustainable?

    On the face of it, the shift towards online and TV media seems to be a step in the right direction when it comes to the environmental impact of media. With fewer newspapers, posters and billboards being printed, this surely means a reduction in trees felled for printing. While this is true, it is important to consider the energy required to power the new digital age of media. The impact this energy consumption has on our planet means that more traditional media types might actually be more sustainable than online.

    The Shift Project’s 2019 report stated that digital technology was responsible for 3.7% of global emissions, which is around the same as the aviation industry. The explosion of video is partially responsible for this growth. Given that The Shift Project’s report was written prior to the pandemic, it can be assumed that these levels have since risen as a result of the worldwide reliance on the internet and video services during various lockdowns. The report notes that spending ten minutes streaming a high-definition video on a smartphone (which is the time taken to view approximately 20 adverts) is equivalent to using a 2,000W electric oven at full power for five minutes.

    Calculating carbon emissions

    Estimating digital carbon emissions currently requires complex calculations using shifting variables passing through numerous owners and so is not easily accessible. Even where it can be calculated, there is not currently a broadly accepted framework and so it is not reliably comparable. Moving forward, sustainability experts Carnstone are collaborating with other organizations to create an online carbon calculator called DIMPACT, which will be available to any company offering digital products and services.

    DIMPACT will help the industry gain further understanding of the carbon impact of digital media, giving companies transparency right through to the end-user. With this information available, it will facilitate more informed decision-making around sustainability and carbon footprints from both companies and consumers. It will also help prevent greenwashing. 84% of respondents in a Microsoft study said it is difficult to know whether brands are truly green or if they are greenwashing; 42% think brands should provide clear and comparable information on their products. This lack of clarity could be eradicated with the introduction of DIMPACT.

    Reducing carbon footprint for more sustainable media practice

    Many ways of reducing carbon emissions also positively impact the business as a whole. One key step that advertisers can take is to reduce their tech stack and potentially reduce the number of tech partners they work with. Reducing the number of layers between steps decreases the amount of indirect emissions and makes processes more transparent and easier to manage.

    Another suggestion is to reduce the data load of digital ads. This is beneficial for user experience, driving a faster ad load and higher CTR, and has a positive impact on carbon emissions. Some ad formats and compression rates have lighter data loads, and shorter ads are of course lighter than longer ads. Exploring the different avenues of data load reduction is an opportunity for both improved ad performance and environmental impact.

    Finally, a shift towards attention and away from viewability will improve both advertising outcomes and the carbon footprint of a campaign. Producing higher quality, better-targeted campaigns with ‘attention-grabbing’ creative drive higher user engagement and view times, and significant impact on brand lift metrics. And cutting out the ineffective online impressions that focus solely on viewability reduces energy waste, allowing the advertiser to deliver more sustainable media campaigns at a time when the health of the planet is at the forefront of the consumer’s mind.

    The major steps that the ad industry can take towards a more sustainable future are largely based on reducing the amount of energy used in the creation of ad campaigns. Perhaps another avenue to consider is how the energy that is used is produced. Could the industry start investing in green energy?

    Working towards a brighter future

    The ad industry is aware of the leading role it can play in driving positive change for the future of the planet. Major initiatives include Ad Net Zero, the industry’s drive to reduce the carbon impact of developing, producing and running advertising to real net zero; and the Cannes Lions new requirement that all entries include information about CO2 emissions from the work’s production process – using tools provided by Ad Net Zero. These efforts demonstrate the industry’s commitment to a greener future.

  3. Advertisers boycott Twitter as Musk unleashes chaos

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    We have written at length on ECI Thinks about Big Tech, especially Meta, Amazon and Google. What goes on at these companies often has a huge impact on the advertising industry, and it is therefore important to understand and reflect on their actions.

    While the likes of Meta, Amazon and Google sometimes seem a bit dysfunctional because they are ‘moving fast and breaking things’, to paraphrase Meta CEO Mark Zuckerberg, Twitter seems to have operated more under the radar. Although there have been issues with trolling and links to major events such as the insurrection on January 6th, there were rarely any scandals to do with the company itself and it was a solid, safe option for advertisers.

    And then Elon Musk came along, moving very fast and breaking lots of things.

    What happened when Musk bought Twitter?

    As suggested above, Twitter always used to be a relatively safe social network. The focus was on famous people, brands and institutions connecting with their fans and supporters, and political figures with the public and media. While it never attracted the same kind of advertising investment as rivals Meta, it was a great way for brands to capitalize on cultural moments and create meaningful connections with consumers. However, it was never on stable ground financially – 2019 was its last profitable year, and one of only a few in its history.

    It was against this background that the world’s richest man, Elon Musk, announced in April 2022 that he had launched a hostile bid for Twitter. Over the following months, there was a lot of seesawing, with Musk withdrawing from the purchase several times, only to then forge ahead again. The takeover was confirmed on October 28th of this year.

    As the New York Times put it, ‘If you thought Elon Musk’s will-he-or-won’t-he approach to buying Twitter was chaotic, the two weeks since Musk took the helm of the social media company have been downright anarchic, with his plans for Twitter flipping and flopping as furiously as a fish on a hook.’ Musk’s escapades have been covered in depth across the press, but involved laying off half of the workforce, scrapping the ‘blue tick’ verification feature and rolling out an alternative, before scrapping the new version very shortly afterwards.

    How are advertisers reacting?

    Musk assured advertisers early on that he valued their business and was worried about social media spreading partisan hate – indeed, he promised that Twitter would not become a ‘free-for-all hellscape’. However, his pledges to restore free speech have worried some that this will be a difficult line for the social network to tread and that it will indeed descend into a hellscape.

    Unsurprisingly, the threat to brand safety and the fact that investment in the platform is unlikely to be a major feature in their budget plans anyway means that many advertisers have chosen to boycott Twitter, at least for now. These brands taking a safety-first approach include major players such as General Motors, Pfizer, United and VW. Automotive advertisers are especially nervous about the fact that Elon Musk owns Tesla, and whether this means that their data will be less safe, or whether they will be at a disadvantage.

    Back in May, Twitter had 3,900 users, which decreased to 2,300 in August – before rising again in September when it temporarily seemed that the Musk deal was off. Musk reacted to news that advertisers were electing to boycott Twitter by threatening to ‘thermonuclear name and shame’ them, presumably not making a return to Twitter any more alluring.

    Perhaps attempting to smooth things over, Musk hosted a Twitter Spaces live audio discussion last week to address advertiser concerns and explain his vision for the future. Many left the session no clearer about what that vision is. Indeed, some even question whether Musk himself is certain. What does seem clear is that Twitter will move towards a subscription model – he has said that he wants half of Twitter’s future revenue to be from subscriptions. Many advertisers will be wondering whether this model will dilute the size and quality of audiences available to advertisers on the free tier.

    What’s next for advertising on Twitter?

    If advertisers are to return to Twitter with confidence, Musk will need to prioritize demonstrating to them that the platform is a safe place in which they can be sure of their brand safety. Advertisers will want to be confident that Twitter has clarified new policies for content moderation, that those policies will be consistently enforced, and that they align with industry standards. Lou Paskalis, the CEO of MMA Global, recommended in a thread on Twitter that Musk steps back from the day-to-day running of the company and hires a CEO with an understanding of how advertising works. He also said that Musk should publicly apologise for the damage he has done to the social platform. Musk has since said that he expects to reduce his time at Twitter and eventually find someone else to run the company – presumably in the hopes that this will have an impact on advertisers’ boycott of Twitter.

    The chaos at Twitter couldn’t have come at a worse time for the digital advertising industry, which is going through a period of unusual volatility. With a recession looming, advertisers are looking for certainty, and Twitter – with all its self-inflicted instability – just can’t offer that right now. With an upcoming recession that will likely lead to significant budget cuts, advertisers want to find easy places to pull spend from. If there is any uncertainty in a particular channel, that makes the decision easy. Other players in the online marketing sphere will be happy to step in.

  4. A cookieless future is coming, but not yet

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    The cookieless future has been a long time coming. Back in 2017, Apple started limiting the kinds of trackers that the iPhone would tolerate. Cookies were first in their line of fire. Apple created a program called Intelligent Tracking Prevention, which limited third-party cookies in the Safari web browser. Other browsers such as Firefox followed suit. At first, the advertising industry pushed back. They were worried that Apple’s plans would disrupt the digital ecosystem and all the content and services that it funds. However, five years later, the future looks to be inevitably cookieless – at some point.

    Google has delayed the third-party cookie’s demise… again

    Google first announced in January 2020 that it would be phasing out the third-party cookie in Chrome. It initially said that the phase-out would happen within two years, and confirmed this in March last year. However, in June 2021, it had pushed back the deadline to 2023. The reason they gave was a need for more time across the digital ecosystem to get the shift right.

    At the end of July this year, Google announced that it was again delaying the replacement of third-party cookies. In a blog post, Anthony Chavez, Google’s VP of Privacy Sandbox, said that they had received consistent feedback that there is a ‘need for more time to evaluate and test the new Privacy Sandbox technologies before deprecating cookies in Chrome’. Privacy Sandbox is Google’s program which develops new ways of targeting and measuring ads on Chrome without the use of personally identifiable information.

    This further delay has come as ad and e-commerce companies are affected by Apple’s App Tracking Transparency feature. This prevents advertisers can access an iPhone user identifier, thereby dramatically reducing targeting capabilities on iPhones. Meta announced in February that this initiative would cost it $10 billion.

    Why does Google keep delaying the cookieless future?

    To be fair to Google, killing off the third-party cookie is a huge, unwieldy task. Google’s dominance of the online media landscape means that any changes it makes will affect the entire ad ecosystem. Regulators therefore scrutinise Google’s every move to ensure that any changes won’t unfairly benefit Google or harm publishers and ad tech vendors. The UK’s competition regulator, the Competition and Markets Authority (CMA), for example, recently launched a fresh investigation into Google. It is assessing whether Google’s role in the ad tech industry could be having a negative impact on competition.

    Those who sympathize with Google’s decision to delay phasing out the third-party cookie say that the ad industry isn’t ready for drastic changes to the marketing landscape, particularly as much of the world faces economic uncertainty. Indeed, as we collectively brace ourselves for a downturn, many companies – including Google – will be prioritizing generating and preserving revenue. It’s probable that Google has redeployed resources that might otherwise have been focused on the Privacy Sandbox.

    On the other hand, cynics claim that Google is ‘finding a way to balance how they maximize revenue while minimizing privacy implications’. What’s more, can you really claim that something is a priority if, four years in, there are still no solutions?  You could also argue that any confusion around timeframes and outcomes is to Google’s benefit. After all, while there is no solution, Google continues to practically monopolize the digital advertising industry. Why would it want to change a digital ad industry of which it has unrivalled hegemony?

    Will marketing be worse without third-party cookies?

    There is justifiable concern around the demise of the third-party cookie and what it means for the future of advertising. Millions of advertisers around the world, from start-ups to international conglomerates, rely on third-party cookies to target ads online. A future without that ability is worrying, especially if a viable alternative is not yet clear.

    The cookie isn’t perfect

    However, few advertisers would disagree that digital advertising is far from perfect. In fact, the ability of the cookie to target consumers is not always as efficient as is often assumed – for example, when cookies target a customer who has already purchased the item in question, or when uncontrolled frequency far exceeds optimal levels.

    Consumers complain of ads following them around the internet, targeting them with products they’ve already bought, or decided against, or simply have no interest in. And that’s if it even works at all. Third-party cookies are unfortunately a key enabling factor in ad fraud. There have been great efforts across the industry for years to address the quality of online exposure and potential tools and solutions for issues such as fraud. But the problems persist because the cookie is so easily exploitable by nefarious parties.

    A more human era in digital advertising

    But it doesn’t have to be like that. The demise of the cookie could – and should – usher in a better, more transparent and more human era in digital advertising. First-party data will be king and many brands, especially larger ones, have already started investing in their own consumer databases. Major advertisers such as Procter & Gamble, Unilever and L’Oréal have rich consumer databases which will grow in value as they are used to target and model ad buys. Retailers who have their own treasure trove of first-party transaction data and direct consumer relationships will become very appealing to other brand marketers.

    A spotlight is shining on contextual advertising as an alternative to personalised targeting in a cookieless future. It’s not a new technology – indeed, it’s as old as advertising itself. But this privacy-first option, where ads are placed in contextually relevant environments, has been proven to be as effective as audience targeting. Furthermore, the ability for brands to understand the content that the user was consuming at the time of seeing the ad will become a new and highly effective identifier for a target audience and their preferences.

    Solutions such as a greater reliance on first-party data and contextual advertising also have another key benefit – they will reduce the prevalence of ad fraud, which is largely driven by third-party cookies. A Forrester study found that 69% of brands spending $1 million per month reported losing at least 20% of their budgets to digital ad fraud. Recouping the majority of that lost budget will help assuage the pain from the demise of the cookie.

    Reaching new audiences

    An interesting side note is that, while Chrome is of course the world’s dominant browser, there is a significant audience that is currently harder to reach for advertisers who focus on the cookie: those people who use Apple’s products, particularly Safari and apps. These consumers often have a higher spending power on average than those who don’t use Apple products at all – an attractive prospect for advertisers. Re-orientating digital marketing strategies so they incorporate privacy-first tools will help advertisers to reach this lucrative audience.

    So – how can marketers get ready for a cookieless future?

    To quote Gillette CEO Gary Coombe, ‘If it’s inevitable, get enthusiastic’. In our privacy-conscious world, the demise of the third-party cookie is a certainty. You might as well embrace it and prepare, so that you aren’t caught unawares. As Coombe suggests, enthusiasm is key. Advertisers should view this as an opportunity to move on to something better and build better relationships with their consumers. Most people find personalised targeted ads at best annoying, and creepy at worst. This is a chance for the digital ad industry to focus on what matters – what the consumer wants.

    A good place to start is understanding the facts. If possible, assign a team member to keep abreast of developments, educate the rest of the team and help you navigate the uncertainty. There is no doubt that your strategy will change, so this is a worthwhile investment. It will also be important to audit your technology so that you understand what will change, and how your technology partners will work without cookies.

    As we’ve touched on already, first-party data is the future. Advertisers will need to get to grips with their consumer relationships and start building up smart databases. Make sure that any platforms you work with allow you to own your own first-party data. To create an effective first-party database you need to build trust, so that consumers and prospects are willing to share their data with you. First impressions are key, as are innovative experiences. Consider the value you can offer, whether that’s discounts, content, loyalty schemes or personalization.

    A hard but worthwhile journey

    There’s no doubting that the journey to a cookieless future will be hard, but there’s also no doubting that it will be worthwhile. Digital advertising has become murky, complex and difficult. The death of the third-party cookie will likely create a landscape that is more straightforward, transparent and, critically, more human. And who doesn’t want that?

    Image: Natali Zakharova on Shutterstock

  5. Is this the end of the entertainment mergers?

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    Last week, AT&T announced a $43 billion deal to combine its content unit, WarnerMediawith factual TV network DiscoveryThe telecommunications giant will unwind its acquisition of Time Warner, which it renamed WarnerMediato create with Discovery a new media company that could be worth as much as $150 billion. The move is a sign that the huge conglomerates which resulted from a flurry of mergers just a few years ago are no longer big enough to contend with the major streaming giants Netflix and Disney. 

    What’s the context behind the deal?

    The much-discussed streaming wars are currently being won, by a large margin, by Netflix and Disney who both enjoyed significant growth during the pandemic. But even Disney is struggling to keep up with Netflix. Netflix has a huge 206 million subscribers and is still growing, albeit more slowly than Disney, which had 106.6 million subscribers as of early April. Netflix had a significant head start over the other streamers, and has a huge international footprint – crucial for continued sustainable growth in this competitive landscape. What’s more, Netflix is finally able to sustain itself financially, and no longer has to borrow money to fund its programming.  

    The American media conglomerates anticipated this situation, leading to a raft of mergers and acquisitions in recent years, such as Disney’s acquisition of Twenty-First Century Fox and AT&T’s purchases of DirecTV and, of course, Time Warner. These deals created huge entertainment companies, but the WarnerMedia/Discovery news suggests that even they are not big enough.  

    But the new company created by WarnerMedia and Discovery just might be. 

    Teaming up to win the streaming wars

    The Economist neatly summarised the four key things that a streaming service needs to compete successfully in the streaming wars: scale in the domestic market, high-quality content, a flexible balance sheet and the ability to expand globally. WarnerMedia’s HBO Max meets the first two criteria, but falls down on the third and fourth. Parent company AT&T’s financial woes made it difficult to keep up with Netflix in terms of programming spend, while the decision to licence content to foreign companies, such as Sky in the UK, means that its international footprint is very poor. The merger with Discovery will help WarnerMedia to address both of those problems: it will no longer be held back by AT&T’s revenue sheet, and Discovery+ already has a significant presence in Europe and India.  

    The resulting company will present a significant headache for the current winners Netflix, Disney and Amazon. WarnerMedia and Discovery’s combined content library will be huge and diverse: it will include HBO’s critically acclaimed dramas, Warner Bros’ blockbuster films, Discovery’s unscripted shows and a variety of sport and live news services. It will be very interesting to watch how the company unfolds. Will they merge their streaming services, creating a ‘one-stop shop’ that would compare favourably to Netflix but would undoubtedly have a high price point (HBO Max currently charges $15 a month, significantly more than competitors)? Or will they ‘bundle’ existing services and new ones for a discounted subscription price? 

    An admission of failure by AT&T

    The merger between WarnerMedia and Discovery is a de facto admission by AT&T that its foray into entertainment has failed. When it acquired Time Warner, which it renamed WarnerMedia, just a year after its purchase of satellite service provider DirecTV, the plan was to vertically integrate the businesses of content creation and content distribution – but that plan has been shelved. AT&T’s CEO John Stankey said that the telco giant lacked the global reach necessary to build a successful streaming business that could match the likes of Netflix and Disney. DirecTV will be sold to TPG. 

    What does this mean for advertisers?

    The question on every advertiser’s lips is ‘how many unique individuals can I reach through as few companies as possible?’. By merging, WarnerMedia and Discovery may provide the most convincing answer yet to this question. They will aggregate more inventory than the separate companies already do, and will provide advertisers with a huge, diverse audience. This will put them in a very strong position, particularly as Netflix does not currently host any advertising on its platform. 

    Interestingly, however, WarnerMedia’s ad tech arm, Xandr, is not part of the merger, and will remain under AT&T’s ownership. This is likely because it would take a lot of time, effort and money to disentangle Xandr from AT&T’s customer data, but given the importance of targeting and measurement in TV and streaming, and of mining media companies’ first-party data, it is would certainly be an advantage for WarnerMedia/Discovery to have its own tech stack. 

    A scramble to create more mergers

    With the streaming landscape now dominated by three giants – Netflix, Disney and now the company formed by WarnerMedia and Discovery – the rest of the industry is now scrambling to form mergers of their own. One of the most significant is Amazon’s purchase of Hollywood studio MGM, confirmed this week for a price of $8.45 billion. The deal will bolster Amazon’s TV and film library for its Prime Video service, and the jewel in MGM’s crown, the James Bond franchise, will help Amazon to compete in the streaming wars, even though it will only own 50% of 007. 

    AppleTV+ is yet to take off, despite giving away a huge number of free subscriptions – more than 60% of its 40 million users are thought to be on a free trial. However, it does of course have plenty of money to spend on acquiring another media company if it chooses to do so.  

    The other giants of American entertainment, NBCUniversal and ViacomCBS, themselves the products of huge mergers a few years ago, have found themselves in a difficult position. The very fact that WarnerMedia and Discovery have decided to merge is a sign that even NBCUniversal and ViacomCBS aren’t big enough to compete with Disney and Netflix. The problem? There isn’t really anyone left for them to merge with. They have too much competing content to merge with each other and anyway, the Federal Communications Commission prohibits such a move. That is unlikely to change given the current White House’s stance on antitrust. They could purchase smaller media companies, but this wouldn’t give them the global scale they need. 

    The race to grow and consolidate audiences continues

    As the world opens up again after the pandemic, people will be spending less time in front of their televisions. Many may decide to unsubscribe from some of their streaming services as TV no longer plays quite such a central role in their entertainment schedules. The race to grow and consolidate audiences – and therefore advertising dollars – continues, and the company resulting from the WarnerMedia/Discovery merger will be well-positioned to catch up with the current leaders. 

    Header image: atk work / Shutterstock

  6. Is the future all talk?

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    For 100 years, radio dominated audio media, entirely unchallenged. It still attracts the lion’s share of listeners and therefore advertisers: 92% of Americans listen to AM/FM radio every week – more than TV viewership (87%), PC use (54%) and smartphone use (81%). However, its dominance is becoming less certain with the rise of podcasts and now, social audio. So what does the future of audio look like?

    The impact of the pandemic on our listening habits

    The pandemic has had an impact on the way we live our lives, and that includes our listening habits. Despite fears that radio listener numbers would crash as commutes turned into 30-second walks to the kitchen table, in many countries, numbers increased as people turned to this trusted medium for information, comfort, connection and entertainment. In the UK, 40% of people working from home listened to the radio for an extra two hours and eight minutes a day. However, there is a belief in some quarters that, despite this increased listenership, advertising may have suffered because of radio’s great reputation for brand-building: amidst the hardships and budget cuts of the pandemic, marketers have been under pressure to deliver short-term sales results at the expense of longer-term brand-building ambitions.

    Podcasting followed an interesting trajectory over the course of 2020. Podcast downloads decreased by 10% when the US went into lockdown, and it seemed that the pandemic was threatening to throw off podcasts’ meteoric rise. However, as people adapted their routines, download figures recovered and are even improving. The top 10 US podcast publishers saw a 20.6% increase in downloads in the summer of 2020 compared to the previous summer.

    2020 was also the year that saw the rise of ‘social audio’: with people seeking connection but sick of screen time, social audio apps came on the scene, offering the ‘Goldilocks’ of connection – not too much, not too little, but just the right amount. But more on that later…

    Ad dollars are following ears

    More and more people are listening to podcasts: about 41% of Americans aged 12 and up now listen to one podcast a month, compared to 37% in 2020 and 32% in 2019. Ad dollars have inevitably followed: IAB PwC estimated that US podcast ad revenue would increase by 14.7% to near $1 billion in 2020, despite the pandemic. In 2020, 37% of marketers said they would likely advertise in a podcast over the next six months – compared to 10% in 2015. The highly engaged audiences that podcasts enjoy have shown a propensity to take action when hearing an ad, which is of course very attractive. What’s more, digital audio has the great advantage of not being reliant on cookies in the same way that other digital channels are. It offers other, privacy-centric ways of targeting listeners, such as topic-based targeting – indeed, this type of contextual targeting is likely to become more common across other digital channels after the death of the cookie.

    That said, it is difficult for marketers to track which users end up purchasing their products after hearing a podcast ad. Many are hoping that Spotify and the other podcast platforms will develop a pixel tool, similar to Facebook’s, which will be able to track user activity across the platform. Podcast platforms are aware that marketers need more tools if they are to continue growing their investments in the platform. This awareness has led to acquisitions such as Spotify’s purchase of Megaphone, a podcast ad tech company, in late 2020 in order to expand its self-service advertising platform. Megaphone claims to be able to target ‘types’ of users, so only listeners who fit a specific demographic will be served an ad.

    Social audio – the new kid on the block

    With the popularity of social media and podcasting, it was perhaps only a matter of time before someone created ‘social audio’, where people connect through conversation. The pandemic was the optimum time for these chat rooms to take off, with people yearning for connection but fed up with their screens. Clubhouse is making waves with conversations that people can sit in on or participate in, and its success has spurred established platforms like Twitter and Facebook to create their own equivalents. Twitter’s Spaces and Facebook Rooms are still in the beta phase.

    Clubhouse is, so far, ad-free and seems to actively discourage hard-selling. This means that working with the app’s influencers to create relevant, interesting conversations is the best way for brands to share their messaging with users – and has the added benefit of reaching people who have chosen to be in the room. However, as the social audio apps mature, it’s likely that advertising will become more prolific, as happened with the social media platforms. Experts predict that the explosion in social audio platforms will lead to a secondary explosion in analytics and marketing tools that will help influencers and, most significantly, brands understand their reach and impact in the social audio space.

    Digital audio: the new frontier

    Digital audio is the new frontier in advertising, with plenty of opportunities to engage with interested, relevant audiences. There is still some way to go in the development of tools for marketers to understand the impact of their investment, but they are in the making – this is not a space to be overlooked.

    The future may not be all talk, but there will definitely be more talk.

    Header image: atk work / Shutterstock

  7. Clear history: Google confirms its plans to kill the cookie

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    In a blog post released on March 3rd, David Temkin, Google’s Director of Product Management, Ads Privacy and Trust, confirmed that Google would be killing off the cookie, as early as January 2022. He also clarified the tech giant’s plans for targeted advertising and a ‘privacy-first web’. The tech, media and advertising industries have all known this is coming – Google first announced that it would be stopping support for cookies on Chrome back in early 2020, and it is not the first browser to do so. However, the blog post has got everyone talking about Google’s search for alternative solutions to targeted advertising, as well as proposals from other players. So what does it mean? And where will it leave advertisers?

    Why is Google stopping support for cookies?

    Google, like the other tech giants, has come under increasing scrutiny and regulation around the world, with regulators and lawmakers looking very carefully at the company’s privacy and antitrust record. Indeed, two hires that the Biden administration recently made would appear to confirm that the US will continue to robustly enforce antitrust laws and other regulations. What’s more, there is a prevailing and increasing sentiment amongst internet users that they are worried about their privacy: in research conducted by Pew Research Center in 2019, 79% of American adults reported being somewhat or very concerned about the way their data is used by companies. It’s also as simple as a change in consumer habits: in the third quarter of 2020, mobile devices (excluding tablets) generated 50.81% of global website traffic – a share that has consistently hovered above the 50% mark since the start of 2017. Mobile browsers and apps don’t accommodate web-based cookie tracking as effectively as desktops, so there is a hole in advertisers’ ability to target their users.

    What is Google proposing as an alternative?

    Google’s statement earlier this month and the ensuing debate makes it clear that the industry is still only in the early stages of redefining how the online media market will work when the cookie becomes defunct. There is still a lot of uncertainty, and the industry is in a period of frantic experimentation, urgently seeking the best way to effectively target consumers with advertising.

    In his blog, Temkin promised that Google would not implement new ways to track individual users around the internet, and vowed that the company would only use privacy-preserving technology that relies on methods such as anonymisation and aggregation of data. Google’s Privacy Sandbox initiative, which is seeking ways to protect privacy whilst allowing content to remain freely available on the open web, has plans to start testing one proposal with a group of advertisers in Q2 of this year. This proposal would group internet users based on similar browsing behaviours; only cohort IDs, rather than individual user IDs, would be used to target them. This approach is based on the same principle as Facebook’s, which offers advertisers the opportunity to target ads to certain categories of users based on their data. Google will be keen that this proposal is workable and appeals to brands, as marketers are already diversifying their ad spend up and down the funnel.

    Other players are exploring targeting alternatives as well

    It’s not just Google with skin in this game: other collectives and ad tech players are also seeking ways to balance privacy with personalised, targeted advertising. A major collective formed last summer, called the Partnership for Responsible Addressable Media (PRAM), has brought together the IAB Tech Lab, the WFA, major advertisers like Ford, Unilever and IBM, media agencies, tech vendors and publishers. PRAM is proposing relacing cookie-based tracking with tracking tied to individual email addresses, whereby a user would log into a participating site with their email address or phone number, which would then be scrambled and used to keep tabs on them as they navigate other participating sites. Google has called this email-based approach impractical, and claims that it wouldn’t meet ‘rising consumer expectations for privacy’, or ‘stand up to rapidly evolving regulatory restrictions’ – and therefore wouldn’t be a sustainable investment in the long term.

    Even taking into consideration Google’s motives for casting doubt on whether cross-site individual tracking will meet consumers’ and legislators’ expectations and therefore the wisdom of investing in such a targeting methodology, the tech giant isn’t wrong in its conclusions. Many view this as a bold act by Google – they are soberly letting go of bad habits while others are just trying to cut back on the worst parts and hoping it will be enough. Perhaps Google’s statement was in fact the most helpful thing that they could do for the industry as it approaches this crossroads, pointing out that what they are trying to do won’t work, and they need to start over.

    Industry experts aren’t yet sold

    While some industry experts and commentators believe that Google’s Privacy Sandbox proposal would be an improvement on the current, cookie-supported situation, others are yet to be convinced. They claim that Google is just swapping one form of invasive tracking for another and could, for example, work out who a user is by cross-referencing their information with an email address from one of Google’s owned sites.

    They are equally sceptical about the email address approach, pointing out that it would be easy to ‘reverse-engineer’ a user’s identity by combining scrambled information with other information available in the public domain.

    What are the implications?

    The implications of Google’s announcement are still unclear, and the situation will continue to unfold over the coming months. It’s safe to say, however, that we will never see anything close to the breadth and width of tracking coverage that cookies have given marketers over the last 25 years. It is thought that the demise of the cookie will affect 85% of online advertising as we know it. New solutions will come from a wide range of different sources and approaches, so will be fragmented. What’s more, a large share of online traffic may not be identified at all; outside walled gardens, contextual targeting is likely to become the main tool. That isn’t necessarily a bad thing – it offers marketers the ability to deliver ads to consumers when they’re in a specific situation or frame of mind, which can only be a positive as consumer behaviour becomes more fragmented and unpredictable. It’s also an antidote to many of the issues around brand risk and safety.

    It’s worth bearing in mind that, just because the ways in which we manage reach, frequency and targeting are being fundamentally redesigned, it does not mean that people will radically alter their media consumption patterns, or that there won’t be any ways to target people online. Large sites with good user experience and consumer trust will retain their traffic and they will still be open for ads, even if impressions are anonymous. Ad impact on brand metrics and sales will remain, even when conversions can no longer be tracked. As Google said in their statement, ‘advertisers don’t need to track individual consumers across the web to get the performance benefits of digital advertising.’

    How should advertisers prepare and adapt for the post-cookie era?

    For now, advertisers need to understand which tools will be lost, which will remain uncertain and which will not change. They should also keep their ad tech flexible and rely on their media agencies for guidance and updates. This is probably not the best time to be investing in ad tech or in-housing.

    Looking ahead, even when data outside of Facebook and Google’s walled gardens is scarcer, advertisers should not resort to increasing their spend with these two platforms beyond what is proportional to media consumption patterns. They should also refrain from resorting to last-click attribution as view-through conversions tracking and MTA fail. Survey-based data and insights on brand metrics will undoubtedly surge.

    Many advertisers are, rightly, focusing on their valuable first-party data, exploring ways to leverage it in order to make better-informed advertising decisions. Many will seek to work with partners to establish a data-exchange from different sources, including with the walled gardens. Marketers will also be able to integrate their consumer research with their first-party data, giving a clearer picture of what consumers do, and why they do it. This will in turn allow them more effectively target audiences with the best messaging in the best context.

    The key takeaway? Hold tight – there’s no need to panic or do anything rash. Alternatives are being worked on and anyway, a world without the ability to track your consumers across the web might not be such a bad place.

    If you would like to discuss how you can prepare for the post-cookie era, please feel free to contact us:

    Header image: atk work / Shutterstock

  8. The Upfronts: Is the old ship slowly changing course?

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    Our US Business Director Victoria Potter explores how the Upfronts format might finally be changing – and why that’s good for advertisers. 

    How did the pandemic affect the Upfronts format?

    A few months ago, I questioned in another of our ECI Thinks posts whether the pandemic would force through seismic changes in the Upfronts landscape. There has been a growing appetite for such changes in recent years, but it takes a lot to change the course of a huge, 60-year-old ship. Then the global coronavirus pandemic came along, and it seemed like the kind of storm that could expedite that change in directiontransforming consumers’ consumption priorities and their paths to purchase, and therefore affecting the media strategies of B2C brands. 

    But the change in direction didn’t happen as we anticipated. The Upfronts went ahead, and many advertisers bought their inventory. However, there are now indications emerging that some transformation is on the cards. Marketers are demanding changes to help them cope with the uncertain environment: 

    • Increased flexibility: Advertisers feel more comfortable committing to longer-term deals if there is greater flexibility and more options available to them 
    • More streaming: Many vendors managed to keep their revenue flat (rather than dropping) thanks to a shift in investment from linear to streaming. Streaming now accounts for one-third of ad dollars invested in TV. 

    Just a couple of weeks ago Marc Pritchard, Procter & Gamble’s Chief Brand Officer, declared that fundamental changes must happen, and must happen by next year. This is particularly important because P&G is such a key player in the Upfronts, and indeed has been a driver of the ‘FOMO’ (fear of missing out) that other advertisers experience, and which has been fundamental to the continued existence of the current format. Pritchard said the Upfronts are ‘inconvenient at best’ and that the system must change because ‘a level playing field means planning and negotiating when it fits the business – that’s calendar year for most.’ 

    So, what exactly is behind the desire for change – and the apparently increased willingness of the Upfronts system to accommodate that change? 

    Timing

    As Marc Pritchard observed, the Upfronts have long adhered to a schedule that suited the TV networks best, from October to September. Most advertisers work to a calendar-year agenda, so having to purchase TV inventory in a different schedule is disjointed. What’s more, the Upfronts format obliges advertisers to purchase inventory for almost a year away; as pandemic has laid bare, plans can change dramatically just a few months into the future. The old format was therefore driving inefficiency, with the purchase of too much inventory driving frequency and waste.  

    This year, however, was a buyers’ market, thanks to the deflation in media pricing (see our recent Inflation Report Update for more details) and a lack of content. Buyers could negotiate options that suited them more, forcing TV vendors to introduce more flexibility. Buyers were able to commit dollars by quarter, and to negotiate better conditions such as the ability to cancel a certain percentage in a larger window.  

    Traditionally, streaming and linear ads were sold in two separate packages, with the former offering more flexibility than the latter. However, vendors are increasingly selling the two as a combined package, again because of advertiser demand. This has resulted in less flexibility for streaming but more for linear – and that benefits most advertisers because the majority of investment is still in linear. It will be interesting to see if and how this changes in the coming years, as streaming becomes increasingly prominent.  

    Control

    Linear TV used to be the foundation of any media plan for the larger advertisers, but TV budgets are now divided across a number of areas, including linear, streaming, programmatic and addressable. Committing spend so far in advance, as per the ‘old’ Upfronts format, limits the opportunity for advertisers and their agencies to adjust to the rapidly changing landscape and optimize their buys. 

    It’s no secret that the media landscape is fragmenting, and that the most effective ad campaigns are optimized across all channels. Buying advertising separately, at the Upfronts, NewFronts and the podcast upfronts means that optimization is more difficult to achieve. Merging them, as 39% of media buyers favor, would help them to better understand measurement and research across screens, which would intern improve performance. The IAB’s new CEO, David Cohen, pushed for this ‘coming together’ to happen over the summer. 

    Optimization and measurement are key factors in the combined linear and streaming packages that vendors are increasingly offering at the Upfronts. Viewership is changing dramatically, particularly this year as more and more consumers have subscribed to streaming platforms during lockdown, and this is leading to an increase in streaming dollars at the Upfronts. However, recent Wall Street Journal article highlighted that measurement problems are holding back advertising in Connected TV. Keeping track of who is watching what, and where, as well as how many times they see the same ads, is becoming a source of frustration for advertisers seeking to move their dollars into the medium. Ad-supported streaming from the likes of Amazon.com and Roku is attracting more and more viewers, but a fragmented media-buying landscape can mean that viewers are hit repeatedly with the same ad. Ad inventory purchased from multiple sellers often shows up in the same ad break; the problem is exacerbated by the fact that there is a smaller pool of advertisers in streaming than in traditional TV. There is a lack of transparency on when and where ads run within streaming platforms and apps; while it is slowly improving, the situation is far from resolved and this is causing significant wastage for advertisers. We’ll be exploring this in more detail in an upcoming post on ECI Thinks. 

    So, what’s the bottom line?

    Advertisers are demanding transparency and that their media buys work together to drive maximum efficiency and effectiveness. The old Upfronts format is without doubt in need of an update so that it aligns more closely with the current media landscape. Furthermore, the vendors have work to do to ensure that measurement is unified and keeps up with the pace of change. The times they are a-changin’, and the Upfronts need to change accordingly. 

     

    Image: Andrey_Popov / Shutterstock

  9. AT&T’s digital advertising ambitions

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    Rumors have been swirling in recent weeks about AT&T’s plans to sell off parts of its business, and even whether it will pull out of its media play altogether. In recent years, it has purchased a number of companies – including, most famously, Time Warner – in order to become a major player in the digital advertising sphere. Pursuing a line of business outside its traditional telco remit has become increasingly important in order to ‘keep up’ with key competitors Verizon and Comcast, who have both expanded their offerings: Verizon invested in a fiber-optic network for high-speed internet, while Comcast has focused on bundling content, mobile, internet, cable and landline. AT&T’s proposition, on the other hand, was seen by many as somewhat antiquated; this could only be remedied by upping its technological capabilities through investment or acquisition. AT&T chose the acquisition of companies that would make it a major player in digital advertising. This, said new CEO John Stankey, would allow it to ‘compete with companies that are incredibly strong and capable, like the Googles, Amazons and Apples of the world – and so we’re playing big’.

    Rumors that DirecTV will be sold off

    AT&T started its journey into advertising with the acquisition of DirecTV for $49 billion in 2015; however, it made the purchase just as the TV market started to change dramatically and irrevocably. It was a time when the likes of Netflix and Amazon Prime started to make cord-cutting a viable option, and new live TV players like Hulu Live and YouTube TV have since made inroads into the appointment viewing arena. Subscription numbers have been falling, so it is perhaps unsurprising that AT&T is under pressure from shareholders to offload the unit, even though it is now reportedly worth less than half what AT&T paid for it.

    Digital advertising moves

    Having acquired a source of inventory for its digital advertising capabilities, AT&T then purchased AppNexus to serve as the foundation of Xandr, its programmatic marketplace for targeted TV and digital video advertising. To complete its digital advertising triumvirate, the telco giant famously acquired media titan Time Warner in 2018, giving it access to assets such as HBO, the newly launched streaming platform HBO Max, Warner Bros and CNN.

    Expanding digital capabilities

    So have these big purchases, which have left AT&T in a large amount of debt, paid off? AT&T’s rumored sale of DirecTV led to speculation that it was also seeking to offload Xandr (this was later dismissed by CFO John Stephens) and that led some to wonder if Warner Media (as Time Warner was rebranded) was also for the chop. As far as we know, AT&T is not entertaining these ideas at all; WarnerMedia is an important revenue-driver for the telco giant, and Xandr has recently partnered with the Dentsu Aegis Network (DAN) in Asia to create Dentsu Curate, which leverages Xandr’s tech platform to create a new programmatic supply solution. Xandr was struggling to make its product offering appealing as it was unable to pull together inventory from enough platforms to make it interesting to advertisers; the Dentsu move could help address this issue and increase Xandr’s reach. It will also be enhanced by the launch of HBO Max’s advertising-supported tier in 2021.

    Could bundling streaming services be part of AT&T’s future?

    With the uptick in the streaming wars at the start of this year, many consumers are likely wondering whether they want to pay for several subscriptions at once – the cost could start to look like the high cable costs that led to so many cutting the cord. AT&T’s ownership of WarnerMedia, particularly HBO Max, could make it a viable option to start ‘bundling’ streaming services. These streaming bundles could be used to incentivize consumers to stick with AT&T’s telco services and will, of course, create an even richer inventory list for Xandr – a win-win situation for AT&T.

     

    Image: Connect World / Shutterstock

  10. The Facebook boycott: what are the implications for brands and for Facebook itself?

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    Facebook has faced significant challenges over the last few years, notably since 2016, which saw the tech giant embroiled in controversies relating to the election of President Trump in the US, and to the UK’s Brexit referendum. 2020 is not proving to be any easier.

    The world’s largest brands boycott the world’s largest social media platform

    The current controversy was sparked when President Trump reacted to the Black Lives Matters demonstrations in a post on Twitter and Facebook, which he ended with the phrase ‘when the looting starts, the shooting starts’. Twitter reacted by hiding the post behind a warning that it ‘glorified violence’; Facebook, on the other hand, did nothing, with Zuckerberg saying that it was “better to have this discussion out in the open”.

    Shortly after this debate, a consortium of civil rights groups started urging advertisers to reduce or even halt their spending on Facebook throughout July, under the #StopHateForProfit hashtag. The campaign gathered momentum, peaking with Unilever’s announcement last Friday (June 26th) that they would cease all their US advertising on Facebook until the end of the year. Within two hours of the announcement, Mark Zuckerberg released plans to prohibit hate speech ads and to better protect groups such as immigrants on Facebook. He also said that the platform, undoubtedly with one eye on President Trump, would label posts that violate their policies but need to remain published ‘in the public interest’.

    Facebook’s changes weren’t enough

    But Zuckerberg’s pledges weren’t sufficient to stem the flow: over the weekend and into the beginning of this week, more and more brands announced they would be joining the boycott. Facebook is now facing the loss, at least temporarily, of income from 150 brands as large as Verizon, Starbucks, Adidas, Coca-Cola and Honda – as well as Unilever of course. To give an idea of the amount of money this means, Unilever and Verizon spent $850,000 and $504,000 respectively on Facebook in the first three weeks of June alone. The World Federation of Advertisers claims that a third of the world’s biggest brands will, or are likely to, suspend advertising on social media, while an additional 40% are undecided.

    What are the implications for Facebook?

    The loss of income because of the boycott will undoubtedly be a real blow for Facebook – but by no means a fatal one. The majority of its income comes from the longtail: eight million small and medium-sized companies who are priced out of TV and therefore can’t afford not to advertise on Facebook. However, Facebook’s share price was affected by the boycott, down by 10% to $212.50 over the course of the week to June 28th. They have no choice but to closely consider their next steps, particularly ahead of what is sure to be a contentious presidential election in November.

    The Facebook boycott was catalysed by the Black Lives Matter movement, but came amid a context of haphazard policing of the site. Facebook’s stance on hate speech has long been less clear than its position on other controversial content such as nudity; this is partly because it believes that it shouldn’t be responsible for this content, and partly because it’s so much more difficult to automate this work. It has made significant progress in this area: according to its Community Standards Report, in 2017, Facebook identified just 25% of hate speech removed from the platform itself, relying on users to flag the other 75%. By the spring of this year, however, 88% of the hate speech removed was found with its own tools, meaning it could remove or restrict four times as much as it had two years earlier.

    Facebook, and many of the other social media companies, continue to maintain that they are tech platforms, not media platforms, with the limited responsibility for content that that status implies. However, in introducing measures such as those described above, they are arguably de facto admitting that they are publishers and therefore have a duty to ensure that their content abides by local and international laws.

    What is motivating brands to boycott Facebook?

    Facebook has long been a key advertising platform for brands, giving them access to billions of users across the planet. Boycotting the company as part of the #StopHateForProfit campaign is a very sound PR move, and a great example of the world’s largest corporations using their power for good – in this case, holding social media companies to account. Advertising budgets for many brands, especially travel and consumer goods brands, are shrinking as the world faces an almost certain recession following the coronavirus pandemic. They will be seeking to make cuts and the #StopHateForProfit campaign may have presented an opportune moment to start making those cuts whilst simultaneously spurring change. What’s more, media cost deflation for most traditional media types and lower-than-expected inflation for digital channels mean that advertisers may feel they are in a strong position regarding where they place their advertising spend, allowing them to boycott a previously key channel. However, it’s important to remember that, while this move by advertisers may have been partially instigated by the fall-out from Covid-19 crisis, digital is a key channel and has become even more so during the pandemic as billions seek entertainment and information at home – this is a big move. Some brands will also undoubtedly use their break from the platform to evaluate the impact that Facebook activity has on their marketing results. In short, the move by marketers to boycott Facebook is both altruistic and strategic: it will be fascinating to see how it pans out.

    Brands have long been uneasy about advertising on Facebook, thanks to historical brand safety issues and because they are worried about contributing to the consolidation of the Facebook-Google duopoly. No matter what the reasons or motivations for the boycott, perhaps now is the time that Facebook will be forced to implement fundamental change to the platform, including allowing marketers to better control where their ads are placed, and making the algorithms that control content more transparent.

    Image: BlueSkyImage / Shutterstock

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