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Why It’s Time to Diversify Online Ad Spending – Here’s Why #177

Are you gambling all your ad spend on the big players in online advertising? Maybe it’s time to hedge your bets and diversify your spending.
In this episode of our popular Here’s Why digital marketing video series, Mark Traphagen reveals that the long-standing hegemony of Google and Facebook for online advertising may be coming to an end, and what smart marketers will do about it.

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Eric: So Mark, you were telling me the other day that there are signs of disruption in the online advertising landscape. Share with our viewers what’s up.
Mark: I’d be happy to, Eric. For a long time now, the online advertising world has been dominated by just two players, Facebook and Google, but we’re seeing the first signs that their hegemony may have a termination date.
Eric: And what are those signs?
Mark: According to data from eMarketer, the combined advertising market share of Google and Facebook has been slowly declining since 2016.
Graph shows Facebook vs Google Share of Total US Digital Ad Spending from 2016-2020
But while Facebook’s share showed some growth since then, it appears to have leveled off, while Google’s share has declined slightly for each of the past two years. Now they project that Facebook has peaked while Google will probably continue a gradual decline over the next few years.
Eric: But they still represent the lion’s share of the market, right?
Mark: Oh, for sure. Together they’re projected to hold about 57% of the market for 2018, but that’s down from almost 59% last year. And digital advertising spend is up, so they’re still quite profitable.
But, the bigger shocker is the even steeper decline in new ad spend for those two giants. According to eMarketer, the two networks will get just 48% of the new ad spend this year, and that’s down from nearly 73% last year.
[Tweet “Facebook’s and Google’s share of new ad spend is declining. Find out the implications for advertisers.”]
The other big story here is who is making a dent in that spend. News isn’t all bad for Facebook Corp. as their Instagram subsidiary is projected to pull in about $5.48 billion this year. That’s just 5% of the U.S. digital ad market but it’s growing while Facebook’s share is stagnating.
Eric: What do you think lies behind all this?
Mark: Probably a number of reasons, but one of the most probable is ad inventory. The demand for Facebook’s advertising was so high that by last year Facebook admitted they’ve started running out of available inventory.
Eric: Wait, how can a digital platform run out of ad inventory?
Mark: They know they can only put so many ads into users’ feeds before those users become unhappy and stop using Facebook, so they have to limit the number of available ad slots, and that means the cost per 1000 impressions, the cost per result, all those things have been going up for advertisers.
Now, at the same time, Instagram’s user base is growing by leaps and bounds, so there is still plenty of inventory over there, plus some advertisers report better results from their paid Instagram efforts.
Eric: So who else is taking a bite out of Facebook’s and Google’s market share?
Mark: Well, one player few suspected to be a player is Amazon. Now, we usually think of Amazon as an online retailer, which of course is what they primarily are, but they are also showing interesting gains from advertising revenue as independent sellers clamor to get access to Amazon’s huge ready-to-purchase audience.
While it’s currently number five in online revenue, Monica Peart of eMarketer believes they’re poised to be number three by 2020, surpassing Microsoft at that point. And despite all of Snapchat’s growth and stock price woes, they’re projected to break a billion dollars in ad sales this year.

What Does Disruption in Online Advertising Mean for Marketers?

Eric: So what does all that shifting around mean for marketers?
Mark: First off, I don’t think it’s even close to being time to dump whatever Facebook or Google advertising you’re doing. Though they may have peaked, both of them will continue to be the market leaders with the biggest potential audiences for many years to come.
But I also think it’s an excellent time to explore other options where costs are still low but growth is expected. It could pay big dividends in increased ROI to be more involved on those networks.
Eric: So are you saying you should spread out your advertising budget across all the social networks?
Mark: Well, not necessarily. I mean, you do have to use some discernment about which networks make the most sense for your brand.
For example, while Snapchat is continuing to grow its audience, it’s probably heavily weighted towards certain demographics, so it may not be the best reach for your company. But if you have the budget, it’s worth at least testing almost any market to see if your assumptions are right or wrong.
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Thoughts on “Why It’s Time to Diversify Online Ad Spending – Here’s Why #177”

  1. It’s hard to find the right balance of cheap ads, but ones your target audience will actually see. If you have just the right niche and find just the right niche advertising, I think the ROI could be huge.
    Also, I never thought of Amazon for advertising, but I will have to keep them in mind.

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Mark Traphagen

Mark Traphagen was our Content Strategy Director for Perficient Digital until February of 2019. He has been named one of the most influential content and social media authors in numerous industry listings.

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