Welcome to the Ad Duopoly: Google and Facebook

Unless you’ve been living under a rock, it’s pretty obvious that the advertising marketplace in America has changed radically in the past few years.

In short order, we’ve seen the largest concentration of digital advertising converge on just two players:  Google and Facebook.  In fact, according to digital advertising research firm eMarketer, those two firms alone are attracting two-thirds of all digital ad dollars in the United States.

But this development isn’t all that surprising.  The vast bulk of Google’s ad market share results from its search engine marketing platform (paid search). As for Facebook, it dominates digital display advertising not just in America, but in many other countries all over the world as well.

And both companies are the “big kahuna” players in the mobile advertising sector, too.

What’s interesting is that, despite the shortcomings that many people recognize in both types of digital advertising – banner blindness and often ill-targeted paid search results — healthy growth in both forms of advertising continues apace.

Google’s ad revenue growth has average around 20% for more than 30 straight quarters. Its growth in the third quarter of 2017 is right on pace at 22%.

For Facebook, the growth dynamics are particularly lucrative; its year-over-year ad revenue growth is pushing 50%.

Mobile ad revenues are growing even faster; they accounted for “only” $9 billion in revenues for Facebook in just the third quarter.  And just as paid search advertising revenues represent more than 90% of Google’s total company revenues, mobile advertising accounts for nearly 90% of Facebook’s overall revenues.

With so much advertising activity, one might wonder from where it’s emanating.

One answer to that question is that the “universe” of advertisers is exponentially higher than we’ve ever encountered before. With low barriers to entry and “anyone can do it” ad development tools, “Jane and John Doe” are far more likely to be advertisers in today’s world of digital marketing than was ever contemplated just a few decades ago.

To wit: Facebook estimates that its social platform has more than 6 million active advertisers participating on it at any given moment in time.  That’s the equivalent of 2% of the entire population of America.

It’s kinda true:  “We’re all advertisers now.”

Putting the best face forward at Twitter.

tdWhen business results look disappointing, one can certainly sympathize with the efforts of company management to explain it away in the most innocuous of terms.

This may be what’s behind Twitter CEO Jack Dorsey’s description of his company’s 2016 performance as “transformative” – whatever that means.

Falling short of industry analysts’ forecasts yet again, Twitter experienced a revenue increase of only about 1% year-over-year during 2016.

Monthly active users didn’t look much better either, with the total number barely budging.

While I have no actual proof, one explanation of tepid active user growth may be that Twitter became the de facto “place for politics” in the 2016 U.S. Presidential election — which didn’t actually end in November and continues apace even today.

Simply put, for many people, politics isn’t their cup of tea — certainly not on a 24/7/365 diet, ad nauseum.

Quite telling, too, was the fact that advertising revenue showed an absolute decline during the 4th Quarter, dropping below $640 million for the period.

Even more disturbing for investors, the company’s explanation about the steps Twitter is taking to address its performance shortfalls smacks of vacuousness, to wit this statement from CEO Dorsey:

“While revenue growth continues to lag audience growth, we are applying the same focused approach that drove audience growth to our revenue product portfolio, focusing on our strengths and the real-time nature of our service.”

“This will take time, but we’re moving fast to show results,” Dorsey continued, rather unconvincingly.

One bright spot in the otherwise disappointing company results is that revenues from international operations – about 39% of total overall revenues – climbed ~12% during the year, as compared to a ~5% revenue drop domestically.

Overall however, industry watchers are predicting more in the way of bad rather than good news in 2017. Principal analyst Debra Aho Williamson at digital media market research firm eMarketer put it this way:

“Twitter is losing traction fast. It is starting to shed once-promising products such as Vine, and [to] sell off parts of its business such as its Fabric app development platform.  At the same time, some surveys indicate that Twitter is becoming less integral to advertisers’ spending plans.  That doesn’t bode well for future ad revenue growth.”

With a prognosis like that, can the next big drop in Twitter’s share price be far behind?

What do you think?

The ad blocking phenomenon: It’s all about human nature.

noadThe rapid rise in consumer adoption of ad blocking software is threatening the traditional advertising model for publishers. For some, it seems like a topsy-turvy world where none of the old assumptions or the old rules apply.

But author and MarComm über-thought leader Gord Hotchkiss reminds us that the consumer behaviors we are witnesses are as old as the hills.

In a recent MediaPost column titled “Why Our Brains Are Blocking Ads,” Hotchkiss points out that the environment for online ads is vastly different from the environment where traditional advertising flourished for decades – primarily in magazines, newspapers and television.

Gord Hotchkiss
Gord Hotchkiss

He notes that in the past, the majority of people’s interaction with advertising was done while our brains were in “idling” mode – meaning that they had no specific task at hand. Instead, people were looking for something to capture their attention within a TV program, a newspaper or magazine article.

Hotchkiss contends that in such an environment, the brain is in an “accepting” state and thus is more open to advertising messages:

“We were looking for something interesting, we were primed to be in a positive frame of mind, and our brains could easily handle the contextual switches required to consider an ad and its message.”

Contrast this to the delivery of most digital advertising in today’s world, which is happening when people are in more of a “foraging” mode – involved in a task to find information and answers with our attention focused on that task.

In such an environment, advertising isn’t only a distraction; often, it’s a source of frustration. As Hotchkiss notes:

“The reason we’re blocking [digital] ads is that in the context those ads are being delivered, irrelevant ads are – quite literally – painful. Even relevant ads have a very high threshold to get over.”

Hotchkiss concludes that the rapid rise of ad blocking adoption isn’t about the technology per se.  It has to do with the hardwiring of our brains.  New technologies haven’t caused fundamental changes in human behavior – they’ve simply enabled new behaviors that weren’t an option before.

adbAs is becoming increasingly obvious, the implications for the advertising business are huge:  Ad blocking software is projected to lower digital ad revenues by more than $40 billion in 2016 alone, according to estimates by digital data research firm eMarketer.

Looking back on it, actually it seems like it was all so inevitable.

Twitter is looking more and more like the old, hidebound player in social platforms.

tWe’ve been hearing for a while now that Twitter’s go-go-days might be in the rear-view mirror.

But even so, the latest growth forecast for the company still seems pretty shocking for a “new media” participant.

In its most recent forecast of Twitter usage in the United States, eMarketer has lowered its projections of Twitter growth in usage to essentially “treading water” status.

More specifically, digital data research company eMarketer forecasts that by the end of the year, ~52 million U.S. consumers will be accessing their Twitter accounts at least once per month.

That will represent just a 2% increase for the year.

Long-term growth prospects for Twitter don’t look any better. At one point, eMarketer was forecasting growth estimates of nearly 14 million new Twitter users by 2020.  But today, that forecast has been downgraded significantly to only about 3.5 million new users.

In the world of social media platforms, such paltry growth expectations mean that Twitter’s share of domestic social network users will continue to decline. (It’s at around 28% now, which is already a bit of a drop from last year.)

What’s making Twitter seem like such a “passé player” in the go-go world of social media? Oscar Orozco, an analyst at eMarketer, sums up its challenges succinctly:

“Twitter continues to struggle with growing its user base because new users often find the product unwieldy and difficult to navigate, which makes it challenging to find long-term value in being an active user. Also, [Twitter’s] new product initiatives have had little impact in attracting new users.”

Who’s eating into Twitter’s market presence? How about Snapchat and Instagram, for starters.  A host of other messaging apps are also hurting Twitter’s growth prospects.

It hasn’t helped that Twitter has been struggling mightily to monetize its service offering. While it has made valiant efforts to do so, Facebook and LinkedIn have done a more effective job of leveraging their massive user data into attracting advertising dollars.

Facebook is a cash machine … LinkedIn does a respectable job … while Twitter seems almost hopeless by comparison.

After flying high for so long – even to the degree that many companies still speak about social media as one mashup term “Facebook-Twitter-LinkedIn,” Twitter’s decline is all the more surprising.  Poignant, even.

Online ad blocking grows ever-more popular.

abThe ad blocking phenomenon on the Internet shows no signs of abating.

Underscoring this, marketing research and forecasting firm eMarketer has just published its most recent ad blocking stats and forecasts for the United States. It projects that ad blocking adoption will continue to rise by a double digit rate in 2016 to reach nearly 70 million users.

If those projections turn out to be accurate, it will mean that ad blocking will now be used by more than 26% of all Internet users in the United States, up from ~20% just a year earlier.

And for 2017? Those forecasts are looking a whole lot like this year, too; eMarketer forecasts that ad blocker adoption will grow to more than 86 million users by the end of 2017.

[For the record, eMarketer defines a user as an Internet user of any age who accesses the ‘net at least once per month via a desktop or laptop computer, tablet, smartphone or other mobile device that has an ad blocker enabled.]

eab

According to the eMarketer analysis, the incidence of ad blocking is substantially more common on desktops and laptops; ~63 million people will use an ad blocker on these types of devices this year compared to ~21 million who will do so on a smartphone.

One reason for this is that ad blockers typically don’t work on apps, which is where mobile users spend much of their time. Moreover, some of the most irritating aspects of desktop/laptops advertising, such as ads with video and sound, are the kinds of advertising less likely to be served on mobile devices.

eMarketer expects many more people to begin installing ad blockers on their smartphones, however — to the tune of an increase of over 60% this year.

These projections must be alarming to publishers and advertisers. Paul Verna, a senior analyst at eMarketer, notes this:

“They’re seeing immediate revenue losses and [they] would be remiss to downplay what amounts to a large-scale rejection of their main monetization model.”

Separately, an analysis by Juniper Research sees more than $27 billion in advertising revenues lost over the next five years as a result of ad blockers.

Of course, that’s a far cry from the estimated ~$160 billion that digital advertising represents today.  But significant nonetheless.

As if on cue, The New York Times has just announced that it will introduce an ad-free subscription option. Reportedly, the publication will begin to offer subscriptions that cost more than a regular digital subscription, along with giving subscribers the option of opting out of seeing advertising if they wish to do so.

At present, NYT subscribers who use ad blockers are technically violating the publisher’s Terms of Use agreement — although I seriously doubt many people have had their knuckles rapped for doing so.

For now, all the Times does is kindly request that users “white-list” the NYT site so that the ads will appear even though an ad blocker has been installed.  According to news reports, about 40% of the people notified have actually done so.

Presumably, the new subscription option is targeted at people who really do wish to avoid seeing online advertising — and are willing to pay a premium for the benefit.

One wonders how much of a dollar premium subscribers will be asked to shell out for the privilege of keeping their screens from being inundated with advertising. (At present, annual NYT digital subscriptions range from ~$140 to ~$200.)  Will users balk at the higher rates?

Clearly, we’re in the middle of this movie … and it’ll be some time before we see how things shake out in the online media advertising game.  What are your thoughts about spending more for an ad-free subscription … and do you even have any online pay subscriptions at all?  (Many of my friends and business colleagues don’t.)

Checking messages: First, last and always.

cemIf you think your personal and professional life has become consumed with checking messages ad nauseum, you’re not alone.

Recently, Adestra and Flagship Research surveyed Internet-using Americans for eMarketer to find out just how pervasive the practice of checking messages has become.

The results surprise no one — even if they’re a bit depressing to contemplate.

Asked to cite when their first message check of the day is typically done, here’s what the eMarketer survey found:

  • I check messages first thing, before anything else: ~39% reported
  • After coffee/tea but before breakfast: ~22%
  • After breakfast but before departing for work: ~20%
  • On the way to work: ~4%
  • Once at work: ~8%
  • Later in the day: ~3%
  • Other responses: ~4%

[I was a little surprised to find myself in a distinct minority (checking messages upon arriving at work) … but I suppose when one gets to the office at 07:00 hrs. each workday, as I do, that may be when most others are en route to the office or still at home.]

Not surprisingly, the “check messages before anything else” contingent is more heavily represented by younger people, with over 45% of the survey’s respondents under the age of 35 reporting that they check messages first thing in the day.

The type of messages in question run the gamut from e-mail to text, social media and voicemail. But it’s overwhelmingly e-mail and text messaging apps that smartphone users check first thing in the day:

  • Text messaging: ~67% check this mobile app first
  • E-mail: ~63%
  • Facebook: ~48%
  • Weather app: ~44%
  • Calendar app: ~30%
  • News app: ~21%
  • Games: ~19%
  • Instagram: ~16%
  • Pandora: ~16%
  • Other social media: ~9%
  • Other apps: ~7%

More details on the eMarketer survey can be found here.

What are your message checking practices — and how are they different or similar to these survey results?

Bird dropping: Instagram overtakes Twitter in the social media derby.

Instagram logo

It seems like the jockeying for position among social networks is never-ending.

The latest case in point:  Instagram, which is presently the fastest growing social media network in the United States.

According to the latest figures released by digital market research company eMarketer, as of February 2015 Instagram now has over 64 million users in America.

That’s a ~60% increase in just one year, and it puts Instagram in third place among all social networks, surpassing Twitter for the first time.

Not only that, eMarketer forecasts that Instagram will add more than 10 million additional users in the United States this year:

  • Facebook: ~157 million U.S. users forecast in 2015
  • LinkedIn: ~115 million
  • Instagram: ~78 million
  • Twitter: ~53 million
  • Pinterest: ~47 million
  • Tumblr: ~20 million

       (Source:  eMarketer and LinkedIn, February 2015.)

eMarketer also forecasts that Twitter will continue to fall further behind Instagram in the upcoming years, since Twitter’s annual growth is expected to be in only the single digits throughout the rest of the decade.

Based on the overall American population, Instagram has now a market penetration of nearly 25%.  Of course, that’s well behind Facebook, which has nearly 50% penetration.

Untitled-1But Instagram’s user base is skewed heavily towards teens and millennials – people between the ages of 12 and 34.  This makes Instagram a bit more of a threat to LinkedIn and even Facebook than you might think at first.

Facebook’s user base has been skewing older in recent years.  If those trends continue, we could see a measurable drop-off in Facebook’s share of users, with a corresponding rise in Instagram’s penetration.

Of course, we mustn’t forget that Facebook was the social media network of choice for younger people at one time, too.  After all, it got its start on college campuses.  But now that Facebook has solid adoption among older Americans (age 40 and over), no longer does it seem like a “cool” network for some millennials and teens.

So it would be foolish to assume that Instagram is a slam-dunk to continue to be the “network of choice” for younger people in the years hence.  One never knows what new network might suddenly appear on the horizon and capture their hearts.

Still, Instagram’s rise has been noteworthy.  And it certainly puts the lie to the notion that there wasn’t room for a new network to enter the increasingly crowded social media space and make a big splash.

Personally as an “aging boomer,” I don’t have an Instagram account, and neither do most of my acquaintances.  What about your own personal experience or professional experiences with this network?