“Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Terri Walter, chief marketing officer at PubMatic.
If you hang out with publishers and others in the media business long enough, you’re going to hear one question come up for discussion again and again: Is company X a tech company, a media company or both?
I’ve had this debate about Yahoo, Facebook and Google. While this debate raged on, a few corporate behemoths ate the publishing industry’s lunch. If you want to see why so many publishers are gasping for air, look no further than Silicon Valley and the very smart and powerful techies who’ve turned their sights on competing directly with publishers for the same ad budgets eyed by publishers.
Instead of using content like long-form articles and reportage, recipes and how-to guides to build consumer relationships, these companies use Internet-based services to rapidly grow consumer relationships. But at the end of the day, their business models are as dependent on the buying and selling of advertising as they are on their technology. They’ve entered the publishing game head-on and they’re playing to win.
To understand this process, look at one of its key drivers: Facebook. The company’s recent earnings report speaks for itself, but just how did it become an emerging advertising juggernaut? Earlier this summer, the social network announced that it will incorporate the anonymous browsing data that it collects on its 1.28 billion users around the globe into its ad-targeting system. This is the advertising system that generated $7 billion in revenue last year, growing 70% year over year in the first quarter of 2014.
This looks promising and sounds like a great strategy until you pause to consider where all of this tremendously lucrative anonymous browsing data comes from. I won’t keep you guessing: It comes from the very same publishers who lost $7 billion in advertising revenue last year to Facebook.
To put it bluntly, then, Facebook sells targeted digital advertising to the world’s major advertisers, just as the leading publishers do, except that it’s much better at it.
How did Facebook get so good at targeted digital advertising? That’s another painful story. Facebook recently announced it will take the browsing data from Facebook login and “like” button integrations on publishers’ mobile apps, collect and analyze that data, and then augment user profiles to better deliver targeted advertising. These are the same Facebook plug-ins that publishers, never suspecting the possibility of a giant digital Trojan horse, gladly welcomed onto their pages over the last five years. And why would they be suspicious? If you visited Facebook’s Help Center page just three years ago, you would have seen the following statement:
“We do not share or sell the information we see when you visit a website with a Facebook social plugin to third parties and we do not use it to deliver ads to you. In addition, we will delete the data (i.e., data we receive when you see social plugins) associated with users in 90 days.”
So much for all of that.
It’s not just Facebook. Google also uses the technology side of its business to gather the data that drives its media and advertising revenue to compete directly with publishers. For example, Google collects data through myriad means, including Internet infrastructure (Chrome operating system, Chrome browser, Chrome PCs, cell phones), mobile apps (Google Maps, YouTube, Gmail, etc.), its third-party ad server and its growing host of owned and operated web properties (YouTube, Maps, Gmail, Zagat, ITA Software, etc.).
Then, the search giant uses this data to build user profiles and sell enhanced inventory, competing directly with publishers for digital ad budgets. And here’s the truly incredible part: Publishers seem to be doing very little about any of this. You don’t see anyone removing those Facebook buttons from their sites or choosing to shut out Google.
Nor do you see anyone raising the question of whether a third party, like Facebook or Google in this context, should profit from data collected on a first-party publisher site without first garnering permission from the publisher. Even media companies that are suing Google in one arena still choose to give their data to Google for advertising. Take the curious example of Yelp, which famously assisted the FTC in an antitrust lawsuit against Google several years ago and is actively engaged in a similar activity in Europe now. Yet by my own estimate, Yelp is one of Google AdX’s largest local advertising partners, turning over inventory and user data to help Google build richer profiles of Internet users that then compete for advertising dollars away from Yelp. And the dance goes on.
Sadly, none of this is exactly the publishers’ fault. Most of them, even the very big ones, are trying to be as smart as they can, and reckon that there’s little they can do to counter the tech heavyweights’ iron grip on their landscape. But resistance is not futile: Just as Meredith would never dream of turning its audience data over to Condé Nast or NBC sharing its info with Fox, we would do very well if more publishers took notice and realized that tech companies are using their technological advantage to push forward their own media businesses at the expense of their partners.
Are the tech-based publishers from Silicon Valley technology companies, media companies or both? It is really fascinating to see their innovation and hybrid business models emerging in our space, but with that should come more responsibility. We must be careful that our friends one minute are not also our competitors at the same time, or worse, our overlords, due to their breadth of access within the Internet ecosystem that we all share.