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Digital ad spend is up 20% but the benefit is in the hands of the few and makes marketers' jobs a lot harder

Separate studies from the IAB and Nielsen this week suggest that while digital advertising is in the rudest of health, the number of media owners benefiting from the spend are few, with the industry’s West Coast behemoths seemingly the biggest winners.

The latest IAB quarterly spending figures were published this week with the trade body claiming this year was the biggest Q3 ever for digital ad spend, with the numbers hitting $17.6bn during the period.

Representing a 20% increase from the same period in 2015, and a 4.3% sequential increase from Q2, David Doty, IAB chief marketing officer, claimed the numbers show the “momentum” of mobile, digital video and other digital ad formats is undeniable (see chart below).

“These record-setting third quarter revenue figures reflect marketers’ trust in the internet’s power to connect with today’s audiences,” he added.

Global auditing firm PwC conducted the research by compiling the responses of a sample of surveyed respondents that work for outfits that sell media online with David Silverman, a partner at PwC, claiming the results show how crucial digital is to contemporary marketing.

“Increasing media consumption on interactive screens will surely lead to even more investment in the digital landscape,” he added.

However, separate numbers released today by Nielsen indicate that while the top-line figures look good upon first inspection, digital media consumption is concentrated in few hands, namely: Amazon; Apple; Facebook; and Google (see chart below).

And if we presume that spending patterns follow consumption, then the news is certainly not good for premium publishers, and raises questions the whole media industry must ask itself.

The dangers of concentrating media spend

Facebook and Google quite infamously don’t participate in the IAB’s ad spend study, albeit their publicly disclosed numbers are often factored into the equation – I'm told this by reliable sources. Also, Brian Wieser, an influential Wall Street analyst who specializes in at adtech for Pivotal Research, estimates that both Facebook and Google collectively accounted for approximately 75% of all media spend in 2015.

Predictably, Jason Kint, CEO of DCN, a trade body that promotes premium publishers’ digital interests, backs this view, and is quick to highlight the dangers this fosters (for instance their role in the spread of ‘fake news’, etc). In fact, conducting a similar study to Wieser's recently, he actually concluded that outside of Facebook and Google, digital media spend actually shrunk. An examination of his social media activity reflects the angst expressed in traditional media owners’ boardrooms across the country.

Given their combined domination of Nielsen’s above list, this is understandable. But those involved in the media buying end of the landscape must ask the question over whether a marketplace dominated by so few players is a good thing?

For instance, one of the biggest controversies of the digital media sector in 2016 has been the furor over Facebook overestimating the measurement of engagement on its platform – something that has reportedly led it to backtrack from its earlier zealous stance on user privacy.

The fight back is on

The rest of the industry, both adtech players and traditional media players, are attempting to mount a comeback — a theme that was palpable at The Drum’s Programmatic Punch series of events. Arguably, the biggest marker of this was the announcement of GroupM’s [m]Platform in November which involved the entire reorganization of its adtech offering.

A key part of this announcement was the revelation that GroupM was attempting to establish a means of identifying users across all media environments (the aforementioned digital giants are notoriously loath to do so, hence the accusation of being ‘walled gardens’).

Speaking with The Drum at the time of the launch, Brian Gleason, [m]Platform chief executive, said that at the core of the offering is helping clients solve the problems of media fragmentation (a problem exacerbated by the privacy policies of the industry's 'walled gardens") and that this "M-ID" would be “the driving force behind the platform.”

Market plurality is in everyone's interest

Earlier this year WPP chief Sir Martin Sorrell (the man who ultimately could have given [m]Platform the green light) spoke with The Drum on his views on ‘walled gardens’, his conclusion being “the more the merrier”, the assumption being that it would improve his negotiating position with such players when it comes to bartering over their privacy policies.

Although, we need only look at this year’s controversies which followed the publication of the ANA K2 report into transparency over kickbacks between media owners and agencies to raise question marks as to just how transparent a unique agency-backed means of measuring media effectiveness may be.

The advertiser's view

Indeed, the biggest advertiser in the game – Procter & Gamble – told The Drum earlier this year that the measurement of the effectiveness of advertising (ergo the ROI of their media spend) was going to be the key challenge facing herself and her peers in the immediate future (see video at top of the page).

Surely, having power vested in such few hands (ie, walled gardens) with their own unique methods of measurement will make this difficult, and the resulting concentration of media spend will only help sound the death-knell for traditional publishers. A more open source approach to calculating the effectiveness of online media spend is crucial for every tier of the industry to survive.

Ronan Shields

I cover digital media trading and martech for The Drum magazine, plus I write my own opinion pieces, I don't really commission them.

All by Ronan