Tag Archive: Google

  1. Is Snap really a threat to the Google-Facebook duopoly?

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    A few weeks ago we wrote about how Amazon poses a serious threat to Google’s search dominance. But Amazon is just one of a few companies snapping at the heels of the Google-Facebook duopoly that has for so long dominated digital advertising. Third quarter results, released in the last few weeks, revealed that the ad businesses of Amazon, Pinterest and Snap all grew more rapidly than that of the industry giants in Q3. Amazon is the biggest disruptor in terms of size, but it’s Snap – owners of Snapchat – that is enjoying the fastest growth.

    Snap’s growth is remarkable

    The latest round of quarterly results were not a resounding success for Facebook or Google. While Facebook’s results were better than expected, it recorded its third consecutive quarter of sub-30% expansion; meanwhile, Google’s growth is languishing below 20%, at 17.1%.

    Things were much brighter for Snap: its ad business grew 50% year on year in Q3, and its stock price surged by over 175% this year as advertisers increasingly look to the platform to provide a return on their investment. Why?

    What is behind Snap’s success?

    Snap’s CEO, Evan Spiegel, has credited two major changes at the company for their success. The first is an initially poorly received redesign which Spiegel says boosted time spent watching premium content by 40%, thereby increasing ad revenue; the second is their adoption of a self-serve ad platform over the last two years, which has made it easier for brands to buy ads on the platform and expanded Snap’s ability to sell ads.

    Those ads are increasingly popular as Snap is good at leveraging its hard-to-reach audience and building innovative, intuitive ad products that increase ROI for advertisers. Its core userbase is the often hard-to-engage youth audience: 90% of 13-24 year-olds in the US say that they use Snapchat, and they’re highly engaged – they open the app on average 20 times a day, and dwell time is around 25-30 minutes, significantly longer than that of other social networks. All this gives brands plentiful opportunities to reach their audiences at the right time, with the right message – and that amounts to increased ad revenue for Snap.

    Snap’s range of ad products come in a range of different formats, including Snap ads which allow users to swipe up to visit the advertiser’s website or app and can be optimised against reach, clicks and sales; and commercials, a more premium offering which are unskippable and appear within premium content. They feel more like a TV buy for advertisers and have high viewability and completion rates. In October, Snap launched a new product to target direct-response advertisers, for whom Instagram – their historical home – is starting to feel a bit crowded. Its new dynamic ads allow advertisers to create ads linked directly to their product catalogues and can be served to users based on their interests, using a variety of templates created for mobile. This new product brings Snap’s offering more in line with that of its bigger competitors, and is one of a range of features that has helped to make Snapchat more shoppable, engaging and effective for marketers.

    Snap’s focus on the development of effective advertising formats is commendable, and will be key to its future success; indeed, it will be key to the success of the digital advertising industry as a whole. Traditional channels continue to have the upper hand when it comes to the price-effect ratio, and digital players must aim to emulate their success.

    AR is key to Snap’s future success

    While Snap’s star is certainly in the ascendant, there is still plenty of work to be done: it is still unprofitable and it only has 210 million daily active users – mediocre compared to the 500 million who use Instagram’s Stories product every day. CEO Spiegel stated on the quarterly earnings call last month that augmented reality (AR) will be crucial for the company’s future: each daily active user interacts with a Snap AR product, such as lenses and filters, an average of 30 times per day. This month the company is launching Spectacles 3, a redesigned version of its augmented reality sunglasses, and in the next seven to 10 years plans to integrate other AR wearables into its range. Snap has historically led the way in AR and has had viral success with some of its AR filters, but Instagram and Facebook are moving into the space, so Snap will need to move quickly to retain its first mover advantage and remain the dominant AR platform.

    So, is Snap a serious threat to Google and Facebook?

    Snap’s product development and innovation are turning it into a serious contender for advertisers’ ad dollars, and its growth rate means that the digital advertising giants – Google, Facebook and increasingly Amazon – need to pay attention, particularly as Snap has such high access to the millennial and Generation Z audience. It does however have a lot of work to do if it is to grow exponentially and become a real threat.

    Image: Shutterstock

  2. Should Google be worried about Amazon?

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    It’s no secret that Amazon is no longer ‘just’ the world’s biggest retailer. Its ‘other’ business – digital advertising – is having a seismic impact on the advertising industry, so much so that is now a threat to the traditional digital advertising duopoly, Facebook and Google. This week, eMarketer released a report claiming that Amazon is ‘chipping away’ at the very core of Google’s business – search.

    Amazon is increasing its share of US digital ad spend

    Amazon’s star has been on the ascendant for a significant period of time, but 2019 has truly been a stellar year. Revenue for its ad business climbed by 37% to $3 billion in the second quarter of 2019, while back in February eMarketer predicted that Amazon would claim 8.8% of US digital adspend this year, up from 6.8% in 2018. This is impressive in itself, but even more so when you consider that Google’s share was predicted to drop to 37.2%, down from 38.2% in 2018, while Facebook would only increase theirs by 0.3%.

    Google’s near-monopoly of search is set to decrease

    This was the backdrop for the latest eMarketer report about Amazon’s search share. The US search market is set to grow by 17% this year, to a huge $55.17 billion. While Google still of course owns the lion’s share of the market, with 73.1% ($40.3bn), eMarketer anticipates that that will fall to 70.5% by 2021. Amazon, on the other hand, is expected to have grown its share of the market to 12.9% by the end of 2019, and to 15.9% in 2021. Microsoft has now been relegated to third place in the search market, with a 6.5% share.

    What’s behind Amazon’s success in the space?

    So what is behind Amazon’s increasing prominence in digital advertising? The key reason is its understanding of consumers’ purchasing behaviours. It has a treasure trove of data about buying habits which is of course very valuable for advertisers, as they can reach customers right at the time that they intend to make a purchase. Amazon’s data even allows advertisers to understand when a buyer might want to repurchase a product, so that they can be targeted at the right time, with less wastage.

    Consumers’ research behaviour is changing as well: they now increasingly use Amazon as a research resource rather than just a purchasing platform, and use broader search terms such as ‘gift’ or ‘makeup’, offering ample opportunities for brands to reach them. And it’s not just brands that sell directly on Amazon that can benefit; advertisers that sell products and services that can’t be bought on Amazon, such as cars or insurance, can use the retailer’s extensive customer data to understand who might be interested in buying their products. Finally, Amazon has very high conversion rates, particularly for products sold on their platform: 20-30%, versus 1-10% on Facebook, for example, where ads are seen as more intrusive and trust is an issue.

    Harnessing its advantages

    Amazon has wasted no time in harnessing these advantages over its competitors. Last year, it simplified the branding for its advertising products, creating Amazon Advertising. This includes sponsored ads which work in a similar way to Google search, allowing advertisers to bid for search terms, with the highest bidders more likely to appear in ad listings. Display ads are available programmatically for both Amazon and third-party sites using the Amazon DSP, which allows advertisers to see easily how well their media spend translates into sales.

    In 2018, Amazon acquired Sizmek’s adserving and dynamic creative units; the dynamic creative allows for more tailored ads which incorporate data such as location or shopper behaviour, while the ad server side helps advertisers to place ads and measure effectiveness, helping Amazon to better compete with Google. Overall, these acquisitions have helped Amazon improve the functionality that had been lacking in comparison to its two major competitors in the digital advertising space.

    An unexpected benefit for both Google and Amazon

    While Google will no doubt be alarmed that Amazon is encroaching on its search dominance, there is something of a silver lining. Both organisations are being examined by regulators at the Department of Justice and the Federal Trade Commission – Google because of its search stranglehold and Amazon for using its e-commerce marketplace to promote its own brands over those of rivals. While these investigations continue, it won’t hurt either of them to have increased perception of competition.

    An increasingly important player

    As Amazon increases its functionality and collects and organises evermore customer data, it will become an increasingly important player in the digital advertising sector and undoubtedly an ever more worthy recipient of valuable ad dollars. Advertisers – even those that don’t sell via the platform itself – should seriously consider Amazon’s advertising solutions for three reasons: lower pricing thanks to increased competition in the search space; remarkable conversion rates; and Amazon’s wealth of rich data from its sales funnel.

    Image: Shutterstock

  3. How smart speakers are changing the way we search and shop

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    Its Black Friday at the end of this week and bargain hunters across the US and Europe are readying themselves and their wallets to snap up bargains both online and in store. One thing that we can comfortably predict is that many will have their eye on a new smart speaker. The rise of the smart speaker over the last few years has been remarkable: in the US, an estimated 43.9m Americans used a smart speaker at least once a month in 2017, rising to 61.1m in 2018 and expected to increase to 76.5m by 2020 (source: eMarketer, 2018). This proliferation of smart speakers has inevitably fuelled a spike in voice search and voice commerce – and those, of course, have implications for marketers.

    Who’s using them?

    In May this year, eMarketer released its report,‘Hey Alexa, who’s using smart speakers?’. In it, the research firm points out that ‘not since the smartphone has any tech device been adopted as quickly as the smart speaker’. In fact, growth has been so strong that they predicted that the number of smart speaker users would surpass that of wearable users this year. The typical user is still the classic early tech-adopter – affluent, older millennial male – but the device is gaining traction in other demographics, particularly younger generation X women with children. What’s driving this surge? As eMarketer’s co-founder and Chief Content Officer Geoff Ramsey pointed out in his ‘Emerging Trends’ session at the ANA Masters of Marketing last month, it’s easier to talk to a device than to type into one and – crucially – smart speakers adapt to our voices and behaviour, not the other way around.

    The new battleground for the tech giants

    As is to be expected with any major technological development, the smart speaker has become the latest battleground for the tech giants, Google, Amazon, Facebook, Apple and Microsoft. Facebook and Microsoft are still to make waves in the field: the former delayed the release of its smart speaker due to user privacy concerns (understandable, given the year it has had), while Microsoft has partnered with another hardware maker instead of creating an own-brand speaker. Apple released its HomePod speaker, but the high price point and less-than-glowing reviews means it is yet to be a major player, in this space at least. That leaves Google and Amazon as the undisputed kings of the smart speaker arena. Google’s Google Home has a 29.5% share of the market, but eMarketer projected that Amazon Echo – of Alexa fame – would claim 66.6% of the smart speaker market in 2018.

    Transforming how we shop…

    As we discussed in an earlier post, Amazon is well on its way to adding a third leg to the Facebook-Google digital duopoly by increasing its advertising revenue – and its Echo smart speaker is a key way in which it will achieve this. eMarketer points out that voice is the next frontier for online commerce, and while the number of people who shop using their purchases is small (28.2% of US smart speaker owners), they predict that the number of US smart speaker buyers will double to 17.2 million between 2017 and 2018. And it is of course Amazon that benefits from this, thanks to their success in the smart speaker space and their dominance of the general ecommerce space. Echo owners can and do shop using Amazon Prime: indeed, they spend an average of $1700 a year, according to a CIRP report. That’s $400 higher than what ‘regular’ Prime customers spend annually on Amazon and 66% higher than non-Prime Amazon shoppers. CIRP’s co-founder Josh Lowitz said “We’ve long thought that Amazon is keenly focused on building increasingly loyal and frequent shopping customers, and Echo seems to promote that goal.” Brands can also create third-party apps; however, many are choosing to do this with Google Home rather than Alexa so they don’t have to compete with Amazon’s inventory.

    …and how we search

    That’s not the only way that Google may have an edge over the thus-far dominant Echo. The second most popular way that consumers use their smart speakers, after music, is search. Ramsey noted that 72% of US smart speaker users who have a smart device use them to search – it’s the second most popular activity after listening to music, and that doesn’t even include the news, weather or traffic. One third of users use them every day to search for something that they would previously have typed into a device. The implications of this for brands are particularly important. Why’s that? Because voice search usually only yields one result: consumers don’t want to listen to reams of results, and that actually could be a reason that they are choosing to use their smart speaker rather than traditional methods, so that they don’t have to sift through results. Furthermore, they don’t have to stop what they are doing.

    A voice search optimisation strategy

    The fact that there is only one search result on smart speakers means that brands either get first position or no position: it’s critically important that they start developing a solid voice search optimisation strategy to take them to the top of the search results. Econsultancy suggests that an effective way to do this is to help people when they need support with a specific task, such as cooking or trying to remove a stain – what Google has termed a ‘micro-moment’. That fits in with Ramsey’s view that voice is not just another ad vehicle – it’s a utility, and advertisers need to see it as a personalised experience that will bring consumers closer to their brand. Voice can be used to literally start a conversation with a consumer and ultimately set them along the path to purchase. As far as paid search is concerned, sponsored ad words aren’t yet available but that can surely only be a matter of time.

    Will mobile ads be impacted?

    Something else that brands need to bear in mind is that, as consumers are increasingly drawn consumers away from their mobile devices by smart speakers, they will be exposed to fewer mobile ads. We believe that it is unlikely that Amazon and Google will allow brands to ‘broadcast’ ads via their smart speakers; could this mean that digital advertising will start to see a decline?

    Agility and readiness are critical

    As the tech giants look to implement their voice assistants into other gadgets, household appliances, furniture and even cars, the opportunities for brands to become intrinsically valuable and useful to the consumer grows. With that opportunity comes complexity that will need to be navigated. As Ramsey pointed out, even the pneumonics of brand and product names will need to be considered! There is much to be gained by those who are most agile and can stay ahead.

    Thumbnail image: Shutterstock

  4. The evolution of the role of the marketer – and what that means for the future of the industry

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    The role of the marketer has changed almost unrecognisably over the last four decades. As technology has progressed and our tools have advanced, we have a greater understanding of our audiences and how our messages are landing with them. This can and does drive increased performance for both the media and, ultimately, the brand. However, it also adds many layers of complexity to the marketer’s role: today’s marketer not only needs to be able to tell great stories, they need to be able to understand data, numbers and technology – or surround themselves with people who do.

    The 1980s: WHAT to say?

    The 80s were perhaps the last time that advertising resembled the fabled ‘Mad Men’ era. In the ‘brand positioning’ decade, marketers had the freedom to be creative and tell stories that would catch the audience’s attention, cutting through the noise to drive loyalty and recognition. There were far fewer channels to orchestrate; TV ruled the day, with out of home and radio jostling for position as well. Direct marketing had started to emerge, but was in its infancy. Most importantly, communication largely ran one way – from brand to consumer – meaning that the brand, and the marketer, held the power over messaging and could decide whatstories to tell.

    The 1990s: WHEN and WHERE to place ads?

    The 1980s became the 1990s, which were something of a watershed moment for the advertising industry. Why? Because it was the decade that saw the very first digital advertising: US communications giant AT&T placed the first digital banner on hotwired.com – Wired Magazine’s online platform – in 1994. What’s more, the proliferation of cable TV and the increased length of ad breaks (up from nine minutes per hour to nineteen). The advertising landscape had become rapidly more complex, and the marketer’s role had changed forever.

    This plethora of ad spaces had an important implication: it meant that the marketer could – and indeed needed to – optimise their media planning and buying strategies so that they were reaching their audiences in the optimal time and place. Whenandwhereto place ads were the key questions of the day: this meant adding more skills to the arsenal, such as the ability to understand and act upon ‘web analytics’ – the precursor to digital marketing optimisation.

    The 2000s: HOW much?

    If the 1990s was the birth of the digital advert, the 2000s were the decade that procurement-driven marketing was born. It was then that procurement processes were introduced to marketing, leading to increased control of – and therefore more focus on – pricing and effectiveness. This is undoubtedly intrinsically linked to the rise of the media buying houses – off-shoots from the creative agencies who were channelling their media planning and buying capabilities into separate entities. These entities would buy up huge amounts of inventory and sell it on to their clients, driving down prices. Procurement professionals were brought in to ensure that brands were getting the best deal from their agencies, resulting in pitches that were run on excel sheets rather than judged on relationships and strategy. The pressure on marketers and agencies to keep asking ‘howmuch?’ was intense, and has arguably not eased since.

    The 2010s: WHO are we reaching?

    The 2010s is the decade of the data-driven marketer. The most important marketing trends of the decade – data and technology – have transformed the practice of marketing. Modern tools allow marketers to understand their consumers like never before, optimising for their behaviour and preferences in real time and watching money come in in a way that is beyond the

    80s marketer’s wildest dreams. However, it hasn’t all been positive: transparency has decreased, leading to a crisis of trust between brands and their agencies, and there are grave concerns around data ownership and regulation – as some of the tech giants have discovered to their detriment.

    Who to reach – the individual – is now the priority, often at the expense of the mass-media, storytelling approach of the 1980s that built the strong brands of today. The focus has shifted to performance for each and every ad dollar and the cost per acquisition, rather than telling a brand story that leads to loyalty and trust. As we learned at the ANA Masters of Marketing conference last month, direct to consumer(DTC/D2C) brands are winning at the performance game, and more traditional brands can learn a lot from them. However, we mustn’t lose sight of the fact of the end destination – brand and business growth. Data and transparency are only the vehicles to get us there and are not the destination itself.

    The 2020s: what should we be asking ourselves?

    What does all this mean for the marketer as we approach the 2020s? Will there be a new paradigm? At ECI Media Management, we believe that marketers are now like the conductor of an orchestra: the instruments are in place, and the CMO is the conductor who is responsible for leading them to create the great symphony. An effective media strategy needs to ask ‘WHAT should we say?’, ‘WHERE and WHEN should we say it?’, ‘HOW much should it cost?’ and ‘WHO are we saying it to?’ in order to secure the highest ROI.

    Marketers must define KPIs based on a clear marketing objective linked to business growth, so that all stakeholders, brand owners, media planners and buyers, procurement leads and tech and data experts share the same language and have one version of the truth to work towards. The theme of this year’s ANA Masters of Marketing was ‘driving growth’, and ANA CEO Bob Leodice, opened the conference with a rallying cry: it is within the power of CMOs to recover growth, particularly with so many tools, skills and technology at their fingertips. Harnessing the lessons of the last three decades – telling a brand story, optimising time and placement, achieving the best cost and using data to understand the consumer is surely the way to do this.

    ECI Media Management can help marketers conduct the orchestra and position themselves for success. We forensically audit and benchmark all media activity, including (and uniquely) programmatic investments, to drive higher media value and increase the impact of media on business performance.  As well as helping to manage media agency partners, we can offer advice to marketers looking to increase control by bringing more agency services in-house. Along with our other services– financial compliance audit, pitch management and contract consultancy –  we can ensure that the modern marketer has all the tools at their disposal for success and growth in the 2020s and beyond.

    Thumbnail image: Shutterstock

  5. Amazon is coming for your ad dollars

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    The online shopping platform has streamlined its advertising offering, making it a real threat for Google and Facebook.

    Turning the duopoly into a triopoly

    When we think of major digital ad platforms, our thoughts naturally turn to the giants, Google and Facebook. There is no doubting that for many years the ‘big two’ have had a duopoly of advertisers’ digital budgets across much of the world. Google’s ad revenue in quarter two of this year was a huge $28 billion, while Facebook’s was a smaller but still very sizeable $13 billion, of which 15% was generated by Instagram. We’ve discussed in our blog before how Facebook seems to be struggling to grow in the face of privacy scandals and user stagnation and, conversely, how Google appears to go from strength to strength.

    However, there is a third player that’s turning the duopoly into a triopoly. A report published by eMarketer in September revealed that Amazon will more than double its US digital ad revenues this year, meaning it will overtake Oath and Microsoft to become the third largest digital advertising platform. This news came as Amazon revealed that it had streamlined its somewhat messy advertising offering into a single brand, Amazon Advertising.

    Amazon’s key advantage is its deep understanding of consumer purchasing habits

    Amazon Advertising’s model is based on the fact that around 49% of product searches in the US start on Amazon – and that offers invaluable insights into the minds of purchasers. While Google can store your implicit shopping intention, Amazon knows your actual purchasing behaviour – what you bought, when you bought it, how many clicks it took you and what other product categories you bought or considered at the same time. These insights can be used to create intelligent retargeting campaigns that showcases products that the consumer is more likely to buy at a specific time. With the drive towards Amazon Prime and the purchase of Whole Foods, those insights can become even more pertinent. Furthermore, ads on Amazon can be optimised within a matter of hours, allowing advertisers to drive a much higher return on their investment.

    Advertisers are moving budgets from Google search into Amazon ads

    It is these razor-sharp insights and real-time optimisation that are the headache for Google and Facebook, particularly the latter. Media agency executives have revealed that some

    advertisers are moving more than half the budget that they would normally invest with Google Search (an estimated 83% of Google’s ad revenues) into Amazon ads, amounting to hundreds of millions of dollars. The brands in question are almost all from the consumer product goods category, whose products are sold on the Amazon platform, and are attracted by the offering discussed above as well as the seamless shopping experience: there’s no need to set up an account or input card details, as there might be with a Google search ad. Amazon is also unburdened by the fake news problems that have dogged Facebook and, as an apolitical space, it is unlikely to be leveraged as a political tool.

    Will the lure of profit be at the expense of user experience?

    It’s possible, even likely that Amazon will be bewitched by the huge profits that can be won from advertising, at the expense of the user experience. The purchasing behaviour data that Amazon has at its fingertips means that they can develop much better targeting tools than Facebook – and just as good as Google’s. Highly effective branding campaigns therefore become a reality, and while the consumer could find these at best a distraction and at worst disturbing, it will be difficult for Amazon to resist short-term profit for something in which it is unbeatable.

    Google and Facebook are safe for now – but challenging times are ahead

    Google and Facebook aren’t in any immediate danger. Amazon is a distant third in the triopoly: it commands 4.1% of digital ad spend in the US, compared to Facebook’s 20.6% and Google’s 37.1%. And while Google’s Search revenues may be flattening somewhat, some of the drift is going into other Google properties such as YouTube, and not just Amazon’s coffers. Furthermore, brands from very lucrative advertising categories such as automotive and travel don’t currently have much incentive to move any investment to Amazon as their products are not easily sellable on the platform.

    Challenging times are ahead for Google and Facebook, in this and many respects. Amazon is certainly one to watch in this space.

    Thumbnail image: Shutterstock

  6. ECI’s DMEXCO download

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    ECI was at DMEXCO in Cologne this week: from ethical hackers to in-housing, here’s what we learned.

    Important questions and lots of answers

    ECI joined thousands of fellow ad industry professionals at DMEXCO in the German city of Cologne this week. The digital marketing and advertising trade fair and conference has become a key feature on advertisers’ calendars as they seek to understand and capitalise on the countless opportunities – and avoid the pitfalls – offered by ad tech. There are so many questions on these people’s minds – should I bring my ad tech in house? Who are the right suppliers? How can I best leverage my company’s proprietary data? If the answers to these questions are anywhere, it’s at DMEXCO – although you have to filter out a lot of noise on the way…

    We came away from our two days at DMEXCO with two big takeaways. The first is how cluttered the marketplace is and the (perhaps related) knowledge gaps, particularly among those who should really know better. The second – quite possibly a result of the first, as we’ll discuss later – is the debate around inhousing ad tech versus outsourcing it.

    A cluttered marketplace and knowledge gaps

    DMEXCO is crowded, noisy, hot and very exciting – much like the industry that it showcases! As we found while we were there, the more you learn, the more you realise just how much there is to learn, and the effort required to keep up with the latest developments in online marketing. As is so often the case in the digital world and particularly the digital marketing industry, buzz words and phrases were swirling around – ‘performance marketing’, ‘attribution’, ‘intelligent’, ‘data’, ‘personalisation’ and ‘disruption’. Our old friend ‘email marketing’ is still up there, with general consensus that it remains an important tool. The new phrase on everyone’s lips – one to watch out for – is ‘ethical hacker’, the information security experts who identify vulnerabilities that non-ethical hackers could exploit: critically important in these times of cyber threats and security breaches. We observe, with a wry smile, that DMEXCO is perhaps the only place where the words ‘AI’, ‘machine learning’, ‘algorithm’, ‘performance’ and ‘optimisation’ can be used in the same sentence unironically.

    Despite this lack of irony, there was some healthy scepticism at the conference. Taking to the stage in the event ‘The next mission in marketing’, Philipp Markmann talked about the ‘absurd level of complexity’ in the media market, with far too many services to choose from, meaning that advertisers are overwhelmed by choice. Is this because publishers and vendors are targeting and talking directly with CMOs rather than focusing on agencies, who traditionally identified the best solutions on their clients’ behalf?

    Perhaps this is partly down to surprisingly low levels of knowledge in the industry. A common opening line from exhibitors at DMEXCO was “do you know a bit about ad tech?” We raised this with one of them who explained that a large proportion of attendees had a lower than expected knowledge of ad tech and digital advertising. AppNexus, one of the largest ad tech suppliers which was recently sold for $1.6bn, was mistaken for an app creator by more than one attendee, while one ad tech exhibitor said that they met with a media agency rep who didn’t know the difference between a first and second price auction, let alone the implications of each. There is evidence that the struggles, illustrated here, to keep up with online media markets are leading to irresponsible media buying, ultimately resulting in advertisers taking matters into their own hands by bringing their activity in house.

    In-housing or outsourcing?

    It was no surprise, therefore, that the in-housing of media buying was the subject of many of the events and discussion at DMEXCO. It’s being driven by a feeling that media agencies need to be doing more to earn their clients’ trust, but also by the understanding that marketing and sales in general, and online marketing in particular, should be closely integrated with a brand’s core business – especially when it comes to technology and strategy. Philips’ global head of digital marketing Blake Cahill, speaking at an event entitled ‘Brave the seismic shift – the future of creative digital consultancy’, recommended a mix of in-house and agency, with the latter focusing on media strategy and planning. This consultancy role would allow them to increase their fee – a glimmer of hope for agencies alarmed by clients taking activity in house. Meanwhile, in ‘The next mission in marketing’ event, speakers concluded that, in order to thrive into the future, agencies need to be experts, strategic and proactive thinkers, and reduce their complexity. Interestingly, as we reported last week, WPP’s new CEO, Mark Read, announced this as part of his strategy to future-proof the group.

    Media and creative agencies were notably quiet at DMEXCO – is that because of the problems they are having keeping abreast of developments in the space? Advertisers and publishers, as well as Google and Facebook, were prominent on the stages, while ad tech providers and publishers dominated the exhibition floors.

    But that’s not all

    Of course, discussion at DMEXCO also went far beyond whether advertisers will move their tech stacks in house and what that means for their agency partners and others. To succeed in digital advertising, marketers must ‘focus on the real consumer needs, understanding their behaviour’, as Alexander Ewig said in ‘The next mission in marketing’ talk. Rahmyn Kress, Henkel’s Chief Digital Officer and Debora Koyama, Mondelez’s CMO, also spoke about what success looks like in digital marketing at the ‘Future skills in brand marketing: how to transform into a modern marketing department’ event. They agreed that the FMCG sector is lagging behind when it comes to digital marketing, and that they – and all brands – must focus on the problem they want to solve, rather than the tools at their disposal. Kress and Koyama also concurred that data must be at the very heart of digital marketing; this is indisputable, but there was also a feeling across DMEXCO that advertisers should seek a balance between hard data and a more human gut feeling.

    A final observation has to, of course, come from Google. Their space on the exhibition floor was colourful, eye-catching and designed to look like a garden, complete with a wooden fence around the perimeter. A witty take perhaps on how Google and fellow tech giant Facebook are often called walled gardens for their reluctance to allow third-party tracking? We mentioned this comparison to a Google rep outside the fence, who laughed and then gave a very reasonable explanation for the fence: some advertiser heavy-weights were inside, making important deals with Google. Funny that in our world of AI-optimisation, data driving and agile bidding, business is still done over coffee and sealed with a handshake.

    Thumbnail image: Helene Kruse

  7. New WPP chief hits the ground running

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    WPP has filled its CEO vacancy – and there’s a lot to do.

    A popular choice to fill big shoes

    Since Martin Sorrell’s acrimonious departure from the top job at WPP earlier this year, there has naturally been speculation around who would replace him. Charismatic and combative, and the chief architect of WPP’s growth from a wire and plastics company into the world’s largest advertising company, Sorrell left big shoes to fill.

    WPP announced this week that those shoes have been filled by Mark Read, who had been running the organisation on an interim basis, alongside Andrew Scott, since Sorrell’s departure. Read is a popular choice both within WPP and among shareholders, and was the leading internal candidate for the role. He has a proven track record in running WPP digital agency Wunderman, as well as in digital leadership and as a board member from 2006 to 2015. He is viewed as a steady pair of hands and someone who can hit the ground running – perhaps less charismatic and pugnacious than his predecessor, but that is widely seen as a good thing.

    Read has industry challenges to contend with…

    Read has his work cut out for him. The day after his appointment was announced, WPP suffered a sharp drop in share price, and the company recently announced a somewhat mixed set of results, with a small Q2 global revenue growth of 2.4% but a continued decline in its North American business, which dropped by 2.9%.  WPP is suffering from many of the same problems as its industry peers, including navigating the seismic shifts that the advertising industry is experiencing thanks to rapidly advancing technology. Many clients are looking to take at least some of their marketing activity in-house, forcing agencies and in particular media agencies to re-examine what the future looks like. Those that aren’t yet taking their activity in-house are simultaneously cutting costs and demanding greater transparency in the wake of brand safety scandals and the like. Furthermore, a new generation of competitors is springing up: not just the small boutique and niche agencies, but also in the form of companies such as Accenture and other consultancies, who are establishing capabilities in high margin marketing services such as data and programmatic

    …and in-house problems too

    Read’s challenges aren’t just those faced by the advertising industry at large: WPP has its own set of unique issues to resolve. It is famously huge, with hundreds of agency brands across the world, more than could ever be needed to manage conflict and who indeed often compete with one another. The many P&Ls

    make it unwieldy and, crucially, ‘impenetrable to understand’ for clients, in Read’s words. This is a major cause of concern for some of the group’s key clients such as P&G and Unilever, while Ford – WPP’s biggest client – announced earlier this year a review of its global creative business, currently handled by GTB, the dedicated agency established by WPP for the automotive brand.

    ‘Radical evolution’ is needed

    In response to WPP’s issues and in order to future-proof the organisation, Read has announced a ‘radical evolution’ strategy that will streamline WPP’s structure, consolidating some of the 170,000-strong workforce across 112 countries and 3000 offices. As Read said, “WPP needs to come closer together, not further apart. There are many good things about the business. It is a question of simplifying the offer, refocusing the portfolio and investing more in data and technology alongside creativity.”

    Read has ample experience in the digital side of the WPP business, and his transformation strategy includes turning WPP’s approach to how it works with data and tech on its head. He recognised that, in a world where the likes of Facebook, Amazon, Google and Alibaba own the lion’s share of consumer data, the most realistic way for WPP to monetise its data capabilities is to effectively borrow data from the tech companies and charge clients for data consultancy, rather than execution. GroupM agency MediaCom is already progressing in this area.

    Other elements of Read’s approach include actively helping clients take elements of their marketing in house by consulting on the strategy rather than focusing on the execution; and management of their data investment or research portfolio – it appears likely that Kantar Media could be sold in the not-too-distant future.

    The keys to success: steady hands and an open mind

    Mark Read is stepping to the fore at a time when strong winds are buffeting WPP and the wider advertising industry. However, a combination of steady hands at the helm and a willingness to transform the organisation’s structure and model could well be just what WPP needs to stay on course.

    Thumbnail image: Shutterstock.com

  8. The march of the tech titans on live sport

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    Facebook, Amazon, Google, Twitter and others are leveraging the power of live sports to help them grow.

    People are watching sport online

    The FIFA World Cup earlier this summer and other major sporting events have confirmed what everyone has long suspected: that an increasing number of fans are streaming matches online instead of watching them the more traditional way, on television. This is very good news for tech companies such as Amazon, Twitter, Google and Facebook who are looking to leverage the passion of live sport viewers and its appointment-to-view nature as a way of reaching new users and increasing ROI on existing ones.

    Facebook has been looking for ways to super charge its growth

    Facebook in particular has upped its live sports game, aggressively pursuing the rights to air football and other sports across the world. At the end of June, the social network announced disappointing results for the second quarter: this was in part down to issues surrounding GDPR in Europe and the Cambridge Analytica scandal, but also, ironically, due to Facebook’s huge success – it has reached near-saturation point in mature markets in North America and Europe. Its future growth strategy therefore relies on two things: increasing revenue on each existing user in these mature markets, and attracting more users in countries where Facebook is less ubiquitous, particularly Asia and Latin America.

    The answer: live football

    The latter part of the strategy is already well underway, with live sports playing a key role – this was evident when they hired Eurosports CEO Peter Hutton to lead the push. Last week, it was announced that La Liga had signed an exclusive three-year deal with Facebook to live stream all its 380 matches for free to Facebook users in India, Pakistan, Bangladesh, Sri Lanka, Afghanistan, Bhutan, Nepal and the Maldives. The platform has 348 million users across these markets, with 270 million of those in India. India is a key growth market for Facebook: it already has the largest Facebook user base in the world (270 million versus the US’s 210 million) but, with a population of around 1.3 billion and a projected 500 million internet users by the end of this year, there is huge room for growth for Facebook. Increasing smartphone penetration, relatively affordable mobile data and a passionate football fanbase means that the La Liga deal is a smart move from the platform. This move is in addition to Facebook’s plans to roll out its video platform, Watch, into India – it’s currently only available in the US.

    La Liga isn’t Facebook’s only move into live football streaming: just a few days after the La Liga announcement, UEFA confirmed that Facebook had bought the media rights for certain Champions League live matches in Spanish-speaking Latin America for the

    2018-2021 cycle. The matches they have the rights to include the final and Super Cup games, and the number of top international players involved in the tournament means that it is a huge deal across the continent.

    Other tech companies are also snapping up live sports rights

    Facebook’s activities in the live sports space are matched by its competitors’: Amazon in particular has been signing deals to attract more customers to its Prime platform, including a five-year deal for the exclusive broadcast rights of the US Open tennis tournament in the UK, the rights to screen 20 Premier League football games each season, also in the UK, from 2019 to 2022 and streaming rights for Thursday night NFL games in the US. Meanwhile, Twitter works closely with the NBA, partnering with them to help people keep up with the latest news and developments and watch the games, no matter where they are. YouTube has the rights to Major League Soccer games, including the Seattle Sounders and Los Angeles FC, for which it has both streaming and broadcast rights.

    The future of live sport and entertainment looks dramatically different

    There are concerns amongst consumers, particularly in India, that slow broadband speeds will affect their enjoyment of games, and that it will take something away from the camaraderie of watching games as a group on television. This is perhaps mitigated somewhat by the fact that the games will be free to view. From an industry perspective the arrival of tech platforms on the live sports scene is a seismic shift. For advertisers, concern about TV live sports strategies being adversely affected will surely be offset by the huge opportunities presented by delivering targeted ads to passionate sports fans in real-time. For the major players in broadcasting space, it is the fear of the existential threat that this precise situation causes that has led them to rethink and overhaul how they operate; this has led to some of the huge mergers we have seen recently, including the AT&T takeover of Time Warner and Disney’s deal to purchase 21st century Fox’s film and television assets, which was recently approved by shareholders.

    There can be no denying that the media and technology industries are converging at breath-taking speed, and that the landscape will look very different, very soon. Agility and a willingness to innovate and take calculated risks will be the ways to succeed as this transformation takes place.

    Thumbnail image: Shutterstock.com

  9. Why can Google do no wrong?

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    While fellow tech companies showed signs of wear and tear in second quarter reports, Google is going from strength to strength. Why?

    A sector under scrutiny

    As technology becomes more and more integral to our everyday lives, and we rely on it for everything from keeping in touch with friends and consuming news to running our businesses and monitoring our health, so we have started to question the tech companies more – as consumers and as brands. How they handle data has become of particular concern, leading the European Union to implement the infamous GDPR legislation. Many have come under fire, both in the courts of law and in the court of public opinion: the financial ramifications were evident in Facebook’s second quarter reports, and Snapchat and Twitter suffered too. All three social networks lost users in the wake of GDPR, while the Cambridge Analytica scandal was particularly painful for Facebook.

    Google is thriving

    So where’s Google in all of this? More than 86% of internet searches are carried out on Google and it handles a vast quantity of consumer data, so it would be unsurprising if they too had been affected by negative sentiment and distrust. However, if parent company Alphabet’s second quarter reports are anything to go by, they have not just weathered the storm, they are positively thriving. Thanks to better-than-expected earnings ($11.75 per share versus the $9.59 projected by analysts) and revenue ($32.66 billion versus the $32.17 billion estimate), Alphabet’s share price soared by 5% in after-hours trading, settling at an increase of 3.2%.

    A bleak future for TV?

    Indeed, you could be forgiven for believing that the growth of mobile means a bleak future for linear TV. The young, mobile generation are increasingly tending to stream video content instead of watching traditional linear TV, and often do so on a mobile device. Many tech companies have noted this and are acting upon it: in June, CBS announced that it will be streaming NFL games on mobile devices from this autumn, while, shortly after closing their acquisition of Time Warner, AT&T announced the launch of their new mobile streaming service, Watch TV. These services will no doubt be popular, thanks in part to the smaller ad load for content streamed on a mobile.

    This remarkable success was in spite of the issues surrounding GDPR in the European Union, YouTube’s brand safety scandals, a $5 billion fine from the EU for competition abuses and condemnation following reports that Google will in effect be supporting state sponsorship by launching a mobile search app in China that will allow blacklisted content to be blocked. So how is Google doing it?

    Resilience lies in diversity

    Resilience often lies in diversity and, as we mentioned in our blog about Facebook’s woes a few weeks ago, Alphabet’s revenue is less heavily reliant on advertising

    than its competitors’. While a massive $28 billion of its second quarter revenue was from Google’s advertising business, that wasn’t the only revenue source. Google’s other revenues, such as its cloud services, hardware and app sales grew by 37% to $4.4 billion. By contrast, 98% of Facebook’s Q2 revenue was from advertising, and this will become increasingly difficult to grow as it reaches saturation in many mature markets in North America and Europe. Furthermore, Google has an impressive seven billion-user products – Search, Gmail, Chrome, Maps, YouTube, Google Play Store and Android; YouTube in particular has enjoyed strong growth recently, meaning that Google doesn’t rely solely on Search for ad revenues. That said, it should be noted that YouTube (and other video ads) are still under scrutiny for shortcomings in terms of measurement – a mere just one second of viewing is defined as ‘seen’ – and in terms of the quality of material the ads are shown in. What’s more, brands and agencies still need to work out a creative format for video success: currently, many video ads are simply replicas of TV ads and not optimised for the channel, meaning they are not as efficient as they could be. The search business, by contrast, is much more stable, comparable as it is to the telephone books of yesteryear: if your business isn’t there, it may as well not exist.

    Looking towards the future with ‘Other Bets’

    While Google will without doubt remain a highly profitable business for Alphabet, Alphabet isn’t putting all its eggs in one basket. The new corporate structure has separated the core Google business from the more experimental companies, known collectively as ‘Other Bets’, which collectively brought in $145 million in revenue in quarter 2. These include healthcare projects, venture capital, internet providers, a think tank, driverless cars and an AI research lab, among others. While they represent a small percentage of Alphabet’s huge turnover and are currently loss-making, only one or two need to make it big to make Alphabet’s success even more stratospheric. The favourite for huge potential is Waymo, a self-driving car business which plans to launch a commercial ride-hailing service by the end of this year. In June Morgan Stanley estimated that Waymo could be worth $175 billion in the next few decades.

    The very existence of this ‘Other Bets’ strategy is a demonstration of Alphabet’s commitment to diversifying their offering and their investment in the future – and we believe that it is this approach, this mindset, that will continue to make them an attractive partner for brands and a safe bet for investors for years to come. And that is why they’re rapidly approaching the trillion dollar mark.

    Thumbnail image: MariaX/Shutterstock.com