Tag Archive: social media

  1. 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.

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  2. Facebook’s woes show no sign of abating

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    A massive security breach is just the latest chapter in a bad year for the tech giant.

    After a bad year, Facebook needed to regain its users’ trust

    The fourth quarter of 2018 started at the beginning of this week, and there are probably few people who are looking forward to turning their backs on 2018 more than Mark Zuckerberg. This year has been something of an ‘annus horribilis’ for the Facebook CEO. Having perhaps thought that the worst was behind him with Russian interference in the US presidential campaign, the social media platform was hit with accusations that it had allowed Cambridge Analytica, a political consulting firm, to harvest data from up to 87 million Facebook users. Cambridge Analytica then used that data in the campaign that helped elect Donald Trump to the US presidency. This, along with the introduction of GDPR in the European Union, was blamed for Facebook losing daily active users in Europe, flatlining in North America and the resultant slow-down in revenue growth in Q2 of this year. The conclusion? Facebook needed to work on regaining its users’ trust in order to guarantee its future prosperity.

    And then, 50 million user accounts are hacked

    Unfortunately, things sometimes don’t go according to plan. Last week, Facebook discovered its most severe security breach to date, impacting 50 million user accounts. The ‘view as’ tool lets users understand their privacy settings: a bug allowed hackers to use this functionality to take over user accounts, meaning they could see everything in the user’s profile and, potentially, in any third party sites that users logged into with their Facebook accounts, for example Tinder, Airbnb and Spotify. Facebook acted to secure these accounts but the damage has been done: Zuckerberg said ‘I’m glad that we found this and were able to fix the vulnerability, but it is definitely an issue that it happened in the first place.’ What’s more, this is the second serious security breach for Facebook in recent months – in June, a bug made 14 million people’s private posts publicly viewable to anyone.

    A test of the EU’s GDPR

    While it is estimated that only 10% of users affected by this month’s breach were in the European Union, it is the EU that is the biggest headache for Facebook in this saga. GDPR requires companies that store the data of European citizens to declare any security breaches of this nature within 72 hours: Facebook notified the Irish Data Protection Commission which is now assessing whether it needs to carry out an enquiry. If it does, and Facebook is found to have been negligent in its duty of care for customer data, it could face a maximum fine of 4% of its annual global turnover – $1.63 billion. This is the first major test of GDPR, but the EU does have form for implementing large penalties to tech companies. It fined Google $2.8bn in 2017 for violating antitrust rules with its online shopping practices, and earlier this year slapped the tech giant with a $5 billion fine for abusing its power to force smartphone operators to pre-install Google search apps on any phone using the Android operating system.

    A battle on many fronts

    Facebook is under fire from many fronts – federal investigations into its privacy and data-sharing practices, the possibility of increased regulation from the US congress following high-profile hearings on the privacy practices of the big tech companies – and now this latest fiasco.

    Regain trust to keep advertisers

    The priority for Zuckerberg as he looks to 2019 and beyond must be to regain the trust of users around the world. Consumers are increasingly wary of the big tech companies and how they use their data, and if they start to log off in their droves, advertising dollars will follow them.

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  3. In the news this week: Comcast wins Sky bid, and Instagram founders resign

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    There’s never a quiet moment in the media industry, and this week was no exception, with two major pieces of news that could have major ramifications for advertisers, albeit in very different ways.

    Comcast gains full control of Sky

    On 22ndSeptember, it was announced that Comcast, the American telecommunications giant that offers digital cable TV, internet and telephony services, had won the bidding for Sky, at a cost of $38.8 billion, beating 21stCentury Fox. Four days later it emerged that Fox would also be ceding its pre-existing 39% ownership to Comcast for $15 billion, giving full control of Sky to Comcast.

    A year of mega-deals

    This is the latest in a series of ‘mega deals’ over the last 12 months, where content distributors and creators are merging in an attempt to confront the existential threat posed by the rapidly growing streaming companies such as Netflix, and the tech giants who are ‘scope creeping’ into TV; in June, AT&T acquired Time Warner for $85 billion, and the following month Disney beat Comcast to buy 21stCentury Fox for $71 billion. In an industry quirk, it was then Comcast who effectively beat Disney, as 21stCentury Fox’s new owners, to the purchase of Sky; Sky was originally going to be part of the deal that sold 21stCentury Fox to Disney.

    A global footprint and more original content for Comcast

    Comcast’s purchase of Sky will be a major boost to their global footprint: Sky has 23 million subscribers in the UK, Ireland, Germany, Austria and Italy, and has launched an over-the-top service in Spain and Switzerland, meaning Comcast will be better equipped to fend off the likes of Netflix and other tech giants. The acquisition also bolsters Comcast’s original content capabilities: Ovum’s chief entertainment analyst, Ed Barton, said ‘they could look at licensing content on a combined basis, which would lower the cost on a per-subscriber basis, if you have something you can show to a European and US audience.’ This merging of content would also mean a larger library to leverage as they roll out into other markets globally.

    Combining technical know-how

    The cultural affinity between Sky and Comcast could also be important for advertisers; it is likely, even inevitable, that they will combine their technical and data assets to forge ahead with an addressable advertising offering which will make TV as targeted as online.

    Instagram founders announce their resignation

    The other big news for the media and tech industries this week was the departure of Instagram’s co-founders from the company, which they announced on Tuesday and which sent Facebook’s share price tumbling. Kevin Systrom and Mike Krieger founded Instagram in 2010, before selling it two years later to Facebook for $1 billion – an almost unprecedented amount for a two-year-old start-up. It has since become the jewel in Facebook’s crown and its fastest growing revenue generator.

    A snub to Zuckerberg?

    Sysrom and Krieger said that they were leaving the company to explore their ‘curiosity and creativity again’.  That is being seen by many as a veiled snub to Facebook and its founder Mark Zuckerberg, who have made a raft of unpopular changes to Instagram, in many cases in an attempt to boost traffic to the core Facebook platform. Sysrom and Krieger wouldn’t be the only ones to leave following differences with the Facebook CEO – last year, WhatsApp founder Jan Joum quit over privacy disagreements with his bosses, who were keen to monetise the service.

    Monetising the jewel in Facebook’s crown

    As discussed at length in the press and in previous ECI Thinks posts, Facebook has in recent years been battered by criticism of its approach to data privacy, fake news allegations and for allowing foreign interference into national election campaigns – and its user base is showing signs of disengagement as a result. Instagram has largely escaped these problems: it has more than a billion active monthly users and successful updates such as its stories feature, messaging and IGTV have seen off competitors from the likes of Snapchat. In this context, it’s unsurprising that Zuckerberg and his team are so keen to squeeze as many ad dollars as possible out of Instagram; Lynette Luna, a principal analyst at GlobalData, said “Facebook’s strategy has been to allow companies it has purchased to operate independently to garner growth, and then monetise. When they start monetising that’s when there’s a little conflict with the founders.” Systrom and Krieger may well have wanted to retain the independence to run Instagram as they wanted.

    It is not yet known who will replace Systrom and Krieger, but it will be interesting to see if changes to Instagram, particularly to its revenue model and integration with Facebook, accelerate in the wake of their departure

    Thumbnail image: Shutterstock

  4. What’s Facebook’s problem?

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    For years, Facebook has been the darling of the tech and media worlds. Is the inevitable conclusion of its latest quarterly report that its star is fading?

    The unstoppable rise of Facebook – until now

    For many years, Facebook seemed unstoppable, unbeatable. Since its beginnings in Mark Zuckerberg’s dorm room in Harvard University, it has grown into a technology behemoth with 1.47 billion daily active users and 2.23 billion monthly active users. Facebook has very efficiently monetised these users’ data, with advertisers flocking to Facebook and contributing to a company value of over $500 billion, and to Zuckerberg’s personal fortune of around $70 billion. But it is Facebook’s handling of its users’ data that seems to be at the root of its recent reversal in fortune.

    What went wrong?

    Facebook’s sheen started dimming two years ago, when it was first implicated in fake news and political meddling. This didn’t seem to have any impact financially until its second quarter 2018 report last week, which made for painful reading for its investors. The report disclosed that the number of users in Europe dropped by 3 million, ending its nine-year streak of quarter-on-quarter growth in numbers of European users (note that this was for Facebook only, and not its other owned properties such as Instagram, WhatsApp and Oculus), and user growth in North America flattened. It gained just 22 million users worldwide in quarter 2 (largely in Asia), less than half of the quarter 1 figure. Worse, in the eyes of investors, was that it missed revenue forecasts for the quarter, bringing in $13.2 billion versus the $13.4 billion that analysts had projected. All this led to $120 billion being drained from Facebook’s value and a 20% decrease in stock price in after-hours trading on Wall Street, as investors were spooked further by Facebook’s predictions that its revenue growth would continue to decelerate.

    Scandals, data, addiction and saturation

    With the problems that have beset Facebook over the last few years, it was perhaps inevitable that this point would come. The first and perhaps most serious headaches for its leadership have been the twin issues of political interference – notably in the US presidential election and the UK’s Brexit referendum – and fake news. This culminated in the Cambridge Analytica scandal of earlier this year. Facebook was fined $656,000 – the maximum possible – for breaching UK data protection act, but has had to spend much more to offset the negative press. It exacerbated Facebook’s increasingly toxic reputation as a company that interferes in and affects society and politics, and it is likely that many users deleted their accounts in disgust, particularly in the UK where Cambridge Analytica was based.

    Another challenge for Facebook this year has been the implementation of GDPR in the EU, which set guidelines for the collection and processing of the personal information of individuals within the European Union. It is believed that GDPR was directly responsible for the loss of 1 million of Facebook’s monthly active users in the EU, with many possibly choosing to opt out instead of confirming assent to Facebook’s new data collection practices.

    Facebook, as with all media largely consumed via mobile phones, has of course been affected by the growing concern among consumers of the effect that spending a lot of time on smartphones and social media is having on their mental health and concentration. Across the world people are choosing to cut down on the amount of time they spend on their phones.

    Scandals, data protection and switching off aside, it may be that saturation is Facebook’s most serious long-term issue. Of the 3.5 billion internet users globally, 2.5 billion use at least on Facebook app, which means that user growth in many places, especially in mature markets, has naturally stagnated – there simply aren’t many people who don’t use Facebook, at least occasionally. This means that the business model must focus on increasing revenue per user, which Facebook has struggled with – newer initiatives such as Stories (Facebook’s answer to Snapchat) have proven difficult to monetise compared to the Newsfeed. And compared to Google’s parent company Alphabet, Facebook appears to be over-reliant on ad revenue: $13 billion – over 98% of its overall second quarter revenue of $13.2 billion – was from advertising, compared to 86% of Alphabet’s. This is thanks to Alphabet’s more diversified product offering, which includes hardware, the Google Play Store and Cloud services that are non-ad revenue. This discrepancy could be part of the reason that Google appears more resilient than Facebook, despite the fact that its record isn’t squeaky clean either.

    All is not as gloomy as it seems

    Despite the recent doom and gloom around Facebook’s latest financial reporting, the future isn’t too bleak for the social network. While the financial and user growth figures didn’t meet investors’ expectations, they’re still extremely healthy, particularly considering the storms that it has had to weather. The furore around its Q2 report is rooted in the fact that its growth has slowed, rather than in any actual crisis. Facebook has announced that it is investing billions into safety and security initiatives; these will future-proof the company but do eat into profit margins in the shorter term. Perhaps Facebook’s real problem is that it has been the subject of – and purveyor of – too much optimism and exuberance in recent years: it’s now time for it to settle down and accept its responsibilities as one of the world’s major technology companies.

    Thumbnail image: Wachiwit/Shutterstock.com 

  5. Media audits: the big four or specialists?

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    In an increasingly complex media landscape, media audits are becoming ever more important; should advertisers choose one of the ‘big four’ firms or a smaller media specialist to carry out their audits?

    The media audit – understanding efficiency and transparency in media activity

    In an increasingly digital and competitive world, where brands are concerned about transparency and about the effectiveness of every single dollar invested in advertising, the media audit is a very important tool in the CMO’s toolbox. Not only does it help advertisers to ensure that their agency partner(s) are delivering on their marketing and business objectives in the most efficient and transparent way possible, but it also enables them to identify errors and troubleshoot effectively: particularly crucial in an age of automated buying.

    Choosing a media auditor

    Once an advertiser has decided that they are going to carry out a media audit with their media agency partner or partners and established the KPIs of the audit, the next step is to select the auditor themselves. The options here are not myriad – this is not a huge industry – but they can be more or less divided into two camps – big generalists, or smaller specialists. The former, comprising the ‘big four’ audit firms – KPMG, EY, PwC and Deloitte – carry out audits across many industries for blue chip clients across the world, and are often chosen by clients for their undoubted auditing and accountancy experience, or because they have successfully audited another part of the company. The other camp comprises the smaller specialists, among whom we at ECI count ourselves. While these specialists do not boast the vast scale of the Big Four, there is huge value in having media specialists audit media activity.

    The big four versus the specialists

    In 2016, Sir Martin Sorrell urged advertisers to choose one of the Big Four to carry out their media audit, largely because they are chartered accountancy firms and are therefore subject to regulation. Sorrell said that he was concerned about giving specialist media auditors access to his group’s privileged information, given that they ‘lack professional rules and regulations’. This is a view

    commonly held by media agencies, an unkind interpretation of which is that they are nervous of having their activity audited by media specialists – some of whom may have even worked agency-side and know which stones to turn. In any case, we are convinced that, in an industry renowned for complexity that increases by the day, it can only be to an advertiser’s advantage to have experienced media practitioners examining and analysing agency practices – because they do indeed know what they are looking for.

    Impartiality issues

    In the wider business world, the big four are having to answer big questions about their work, having been involved in the auditing of failing or failed businesses such as Carillion in the UK, which went into liquidation earlier this year. Their impartiality has also on many occasions been called into question; PwC and Deloitte’s creative offerings (PwC Digital Services and Deloitte Digital respectively) are among the largest creative agencies in the world, putting them directly into competition with the holding companies that own the very agencies they are being hired to audit. Meanwhile, Accenture – not one of the Big Four but similar in offering and scale – has recently launched its programmatic offering, negating, in our view, impartiality for its audit function: this is indicative of a wider industry trend.

    In the end, the choice is of course up to the advertiser themselves, who should make their decision based on their specific needs and preferences. The key is to ensure you study the media agency contract carefully and agree on the scope of the audit with both the agency and the chosen auditor. Ultimately, it is about ensuring that every media dollar is used as effectively and efficiently as possible in order to drive higher media value.

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  6. The Digital World Cup

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    There are few events that unite audiences like the FIFA World Cup. The passion, excitement and anguish evoked by the beautiful game crescendos for one month every four years, and this year fans from Poland to Peru and Saudi Arabia to Senegal have turned their attention to Russia, pinning their hopes on their national team and praying that this will be their year: the fans of all but one country will have those dreams dashed. Even Americans, whose national team failed to qualify and who are traditionally less interested in soccer, are still gripped by the drama that unfolds daily.

    Sports audiences are turning their attention towards digital channels

    Of course, such focus and emotion makes the World Cup fertile ground for brands who are looking to coherently engage a global audience. Once, TV was the obvious choice of channel for these brands, who would plough millions upon millions of dollars into sponsorship, premium TV spots and experiential activity. However, the increased adoption of digital and social media in recent years has forced advertisers to take a step back and consider how to best to reach those who have migrated away from TV: while 62% of the 3.2bn-strong audience still plan to watch the games on TV, 30% will stream them online – a figure that increases in developing countries and likely in countries with a dramatic time difference to Russia. Over half of the TV viewers will use social media while they are watching. Some had feared that the all-important millennials were drifting away from sport in general but, as this McKinsey study found, they are in fact simply fragmenting their viewing habits, streaming games and using social media to check highlights, scores and news. This is backed up by a Google study which shows that there has been a 90% increase in searches for highlights videos in the last year. This is compounded by the fact that many social platforms are becoming increasingly video-heavy – see Instagram’s recent announcement that it will allow users to post videos of up to 60 minutes.

    TV is losing broadcasting rights as well as audiences to tech giants

    All this is happening against a backdrop of an equally seismic shift in the live sports landscape: the buying up of broadcast rights for sporting events by non-traditional entities such as telco companies and even tech giants such as Amazon, is having a profound effect on traditional broadcasters and, by extension, on advertisers. Not only do the broadcasters lose viewership during the sporting events, but also afterwards as they lose the opportunity to market for future programming to the large sporting audience: smaller viewership means fewer eyeballs on ads. At the same time, the new players like Amazon finance the purchase of their rights through means other than ads, for example subscription fees, thereby removing a huge message distribution opportunity for advertisers. This means that the pricing of what remains increases, particularly around high-value programming.

     

    So, what does this all mean for marketers who might previously have relied on international sporting events like the World Cup and the Olympic Games to reach the often elusive younger male audience, as well as the others who only engage with sport every few years?

    Advertisers must respond by adapting and innovating

    The answer is, as so often, to follow the consumer and to innovate. It goes without saying that advertisers need to look at allocating a large proportion of their budget to digital channels; however, they should also be looking for ways to enhance the enjoyment of the event for consumers and give them what they want by creating exciting new products for added value. We know that millennials have short attention spans thanks to the huge range of options available to them, so products such as fun contests, easily shareable gossip and opinions and ‘whip-around’ highlights could be great ways to engage with them and hold their attention.

    Sporting influencers are a huge opportunity

    Sport by its very nature creates influencers with huge followings: Portugal’s Cristiano Ronaldo drove 570m social engagements between January and May this year, while Neymar drove nearly 300m (both figures from Nielsen). Savvy brands are capitalising on these figures: McDonald’s in Brazil incorporated Neymar and his Twitter activity into their #prepara World Cup campaign, while Vodafone has not only featured Egyptian Mohamed Salah in their World Cup activity, but harnessed his social following as well. Visa’s global campaign features six influencers, most notably Sweden’s Zlatan Ibrahimović and makes the most of his innate charm and popularity.

    TV is still important – but it no longer monopolises audiences

    TV is by no means dead and still commands the lion’s share of audiences for live sporting events, including for major ones such as the World Cup and the Olympics. However, advertisers need to be mindful that the trend of audience migration to more digital viewing behaviour shows no sign of abating, and should respond accordingly.

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