If you take the headlines at face value, Google and Facebook are killing it – dwarfing all others in terms of revenue and scale – and there’s not much reason for other publishers to get out of bed in the morning. But there’s a more nuanced story going on.
Certainly, Facebook and Google have become the barometer by which new online advertising channels are measured.
“Whenever there’s a new technology that claims to be the next hot thing, I always challenge my internal media buying team to answer one question: Is it better than Facebook and Google?” said Scott Symonds, managing director of media and data at AKQA. “The best and most effective media ever is Google search. The second best right now is Facebook. Effectively, they’re must-buys.”
But just because Google and Facebook will continue to grow doesn’t mean everyone else is automatically beat, said Jay Friedman, chief operating officer at Goodway Group.
“Size is not the end-all, be-all in this case,” Friedman said. “If you’re a top-10 agency or holding company, you’re most likely going to put a lot of effort toward Google and Facebook, but you’re clearly not going to spend all of your time on them.”
Down The Garden Path (But Size Isn’t Everything)
And that’s because an ecosystem can’t thrive as a collection of segregated walled gardens, no matter how big they are.
As Drawbridge CEO and founder Kamakshi Sivaramakrishnan noted at AdExchanger’s Industry Preview conference in January: “Even the walled gardens don’t have a perfect understanding of identity across screens and channels.”
Google and Facebook might each be packed to their respective gills with first-party data, but that can actually make media buying through DoubleClick and Atlas more complicated, Symonds said.
The goal is have a single view of the customer, but in a world dominated by two walled gardens, it’s difficult to connect the deterministic identity that lives within Facebook to the one trapped within Google.
“The fact that Google and DoubleClick make up about 80% of every buy has held us back on the agency side,” Symonds said. “I have to rethink everything I’m doing with DoubleClick because it’s not speaking with Atlas at nicely as I would want it. When walled gardens are fighting each other, it becomes pretty annoying.”
Marketers are also “too smart” to put all of their budget into two baskets and irritated at the lack of insights they get back from walled platforms, said independent consultant Matthew Goldstein, who in a past life founded online-to-offline marketing company Korrelate and served as COO of Peer39, which was later acquired by Sizmek.
“When you use Facebook and Google, your advertising works ridiculously well, but there’s no transparency,” he said. “Marketers have to give them money, but they can’t give them too much because then they’re beholden.”
Winners Take Most
Which is why we’re going to see marketers shift some of their money to other publishers and vendors – if they can differentiate themselves by bringing something unique to the table. This differentiation can include a unique audience, content or an algorithm and does something interesting that the Big Two can’t.
BuzzFeed for branded content, for example, Edmunds if you’re an auto manufacturer or WebMD to reach the pharma crowd. Twitter naturally makes sense if a target audience is comprised of Twitter power users.
It’s all about reaching a qualified audience, said IDC vet and App Annie SVP of research and marcom Danielle Levitas, “even if that audience is smaller” than it is on other platforms.
While Facebook has already done well with app-install ads (Google is just gaining traction, as noted during its fourth-quarter earnings report), this is due to its size and segmentation capabilities, Levitas said.
“[Smaller publishers] might be smaller, but they can have a good concentration of specific groups of people that can be quite lucrative, like overindexing for males under 35 or for females with kids,” she said. “With certain demographics, you know there’s going to be an opportunity around user acquisition and then, ultimately, monetization.”
Additionally, other partners may work better than Facebook or Google in a certain geo. As Levitas pointed out, “Google and Facebook aren’t even in China, for example, and China is massive.”
Good News, Bad News
In the interim, though, it’s going to get pretty cold out there for publishers and ad platforms that don’t have anything unique to contribute. It’ll lead to a culling of the herd. Facebook and Google show no signs of slowing down, and neither does the market. That’s Goldstein’s hypothesis, at least.
“Based on my calculations, by 2017 Facebook and Google will control 65% to 70% of digital media dollars – they have to be sucking that out of somewhere,” Goldstein said. “2016 is going to be okay for other publishers because we have the Olympics and the elections, but Q1 and Q2 of 2017 is going to be really hard, and I’m not sure how many people realize this yet.”
But one top-level agency exec AdExchanger spoke with was actually encouraged by what he sees as a “vibrant marketplace.” Just because Google and Facebook have seen their overall growth and margins explode “doesn’t mean these guys have everything there is to have,” he said, “In fact, the market has opened up in a funny way over the last couple of years, and programmatic is helping to make that happen.”
The exec pointed out that advertisers used to have to go to Google to buy Facebook. Now, that can be done separately. “You also have all of these other companies, whether that’s ad networks or DSPs. There are more places to find inventory in the marketplace … than there has ever been.”
So, which is it – a thriving ecosystem or a walled-off world in which Facebook and Google suck up spend with a straw?
Perhaps both can be true. Google and Facebook will undoubtedly eat large helpings of the pie – but it’s a big pie. The most recent forecast from IPG’s MAGNA Global pegs digital media at around $160 billion worldwide by 2017.
Marketers are attracted to scale, but they’re also attracted to choice and they’re attracted to what works. If a publisher or vendor can demonstrate a unique value prop, they’ll earn a slice. It may not be as hefty a slice as what Facebook and Google are enjoying – and it’s certainly not going to unseat the giants – but it’s a slice of the market all the same.
The Other Guys
A company doesn’t have to reach the heights of a Facebook or Google to be considered a respectable business, although it’s often the yardstick used for everyone from AOL/Verizon to Twitter.
In fact, take Twitter. It’s a niche platform with 320 million monthly active users that Wall Street insists has to go mainstream or bust.
“Last quarter, Twitter saw advertising revenue grow 60%, but to read the press about it, it’s like Twitter is already dead and buried,” BMO Capital Markets managing director Dan Salmon told AdExchanger in a previous interview. Twitter is slated to post its Q4 2015 earnings on Wednesday.
LinkedIn is another example of a struggling digital platform. Following LinkedIn’s fourth-quarter earnings call, during which the company said it would shut down its B2B display ad platform, its stock dipped a precipitous 44%. LinkedIn is clearly losing out to Facebook and Google. But it’s also a very different sort of business, one whose revenue is more subscription-based than ad-based.
“I don’t see it as a problem for companies that are not Facebook or Google to be successful,” said Friedman. “But trying to say that they need to be as successful is setting an unfair stage.”
