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The advertising landscape is dominated by a few huge players. 2018 saw publishers reappraising the role advertising can play in their overall revenue model.
This is an extract from our annual report Media Moments 2018. Download the full report here.
It’s easy to forget that the first banner ads only went live on HotWired in 1994, when publishers jerry-rigged makeshift measurements of the ads’ success, even to the point of taking raw counts from the server log file to figure out how many times it had been viewed. Despite a huge increase in the sophistication of measurement tools since then, it’s fair to say that digital advertising has never truly delivered on its promise.
So if 2017 was the year in which the absolute dominance of the Duopoly of Facebook and Google really began to bite into publisher revenue models, 2018 was the year in which it became apparent that ads alone cannot sustain most digital publishers. In print, as circulations for most mass-market titles continue to decline, their ad revenue potential has been similarly stunted.
Consequently this year has seen a transformation in publishers’ philosophy with respect to what advertising can offer to their businesses. This rapid shift has seen advertising become less central to digital publishers’ strategies. Despite that, there has also been the realisation that advertising can still offer publishers a significant source of cash — if they get creative in execution and delivery.
What happened in 2018
2018 saw the escalation of a number of long-term trends around how ads are sold and created.
While digital advertising alliances have been around for a number of years — long enough for some high-profile retreats, as with Project Juno — this year proved that they can be viable, provided a number of criteria are reached. For some alliances, like KPEX in Australia or buymedia.be in Belgium, it requires that a critical mass of the largest publishers in a protected region sign up, providing ease of use at scale. For others, including Pangaea or the Premium Video Alliance, it requires that the members set aside their premium inventory to ensure a quality market.
It is all, in part, an attempt to differentiate publishers’ inventory from that which makes up the majority of Google and Facebook’s stock-in-trade. TrustX’s co-founder David Kohl described its purpose as the route to a new, premium buying behaviour among advertisers in addition to the established Google and Facebook buying behaviours.
But there are publishers who feel they are large enough to benefit from those indiscriminate buying behaviours. BuzzFeed, for example, had long eschewed programmatic advertising in favour of the more bespoke native advertising, that had served as the key tenet of its marketing. But in July, after having spent a few months transitioning away from direct-sold advertising, the digital pureplay decided to go programmatic only on its BuzzFeed News property.
It was in part motivated by BuzzFeed’s own priorities, and partly to counter the fact that native and branded advertising was stumbling somewhat in the middle of the year, with both the New York Times’ and Guardian’s in-house branded content studios having a wobble. Also in July, Hearst UK launched a new metric specifically to prove that branded content works, with Clare Gorman, its chief operations director, noting that it had to be an industry-wide endeavour.
As has been demonstrated by the closure of ad-based sites like Little Things and even The Outline, which took a bespoke approach to digital ads, advertising alone is extremely unlikely to sustain any publisher of a significant scale.
The year also saw further proof that digital advertising as a whole is fighting to shake off the problems that have plagued it since inception. The grim realities of the incentives to create enough video content to satisfy advertiser desires became apparent in 2017 as a scandal broke around ads placed against bizarre algorithmically- generated videos and extremist content. However, with depressing inevitability, very little appears to have changed in 2018, as a CNN report in April found that such practices were ongoing.
Similarly, while a survey published in April from the Chief Marketing Officer Council and Viralgains found that 24 percent of marketers were pulling spend from Google and Facebook, it doesn’t appear to have had any tangible impact on those companies’ success for the year.
However, for areas where there is significant room for advertising growth, some media companies are refocusing to take advantage of the potential. With the advent of connected cars and audio devices, for instance, podcast advertising is set to have its day in the limelight. Consequently Panoply — the audio-focused Slate spinoff — announced it was getting out of the content game in September to focus on its Megaphone marketing platform.
Where are we now?
Unsurprisingly most of those new publisher ad priorities mentioned above were largely in response to the Google-Facebook duopoly’s continued dominance of the market. In 2018 total digital adspend was forecast to reach $273 billion, according to eMarketer’s May predictions – and there is still a way to go until digital adspend is commensurate with the amount of time people spend on digital platforms. According to Mary Meeker’s 2018 Internet Trends Report, there is still a $7bn+ opportunity surrounding mobile digital advertising, for instance.
However, 2018 was also the year in which predictions that the Duopoly would not be able to sustain their rate of growth would be proven accurate. Amazon and Snap (mainly the former) have made inroads into their dominance, with eMarketer finding that search advertising’s market share declined to 46.2 percent from 47.7 percent in 2016, with expectations that this trend will continue over the next few years. Despite that, Google reported its ad business was up 23.8 percent year over year for the second quarter of the year, so it’s not a zero sum game.
All this has left publishers in the position where, squeezed by everything from overstuffed adtech systems to the overwhelming dominance of the Duopoly, they are considering advertising as an increasingly marginal part of the mix and simply one of many revenue strands. In April, even Mark Zuckerberg hinted at the possibility of an ad-free, subscription-based version of Facebook. Even with the coming-of-age of alliances and potential decimation of the Lumascape due to GDPR, advertising has decreased in priority for publishers over 2018.
Despite that, it is still a large part of that revenue mix, and only those publishers with incredibly strong subscription propositions can even consider divesting themselves of digital advertising entirely. For the others, efforts are underway to find a way to escape the cesspool of low-quality, low CPM advertising, whether that’s through investment in new formats, premium alliances, or investment in in-house branded content studios.
What can we expect in the future?
Find out what we can expect the future of advertising to look like by reading the full chapter on key moments in advertising this year in our report, Media Moments 2018. Download it here.
