Massive shift in advertising spending continues as social networks stake their claim
4Mar13

It is hardly breaking news to hear that there has been a massive shift in advertising spending in the last decade. Many traditional media outlets, especially directories, newspapers and magazines were affected early by the rise of online. Others, such as free-to-air TV, subscription TV and radio have seen more gradual erosion of their bases, but erosion nonetheless.

The problem for most traditional media is that the shift is far from over. In fact, its still only early days and the social networks are just getting warmed up in the advertising market.

The following chart is compiled by Borrell Associates and displays the ongoing migration to online advertising in the USA at the expense of many traditional media. There are some sizable falls in ad spend for some media here…and that’s just from last year to this year.

The initial growth of online advertising was in the areas of display (basically replicating magazine and press advertising) and the early online classifieds.

The launch of Google’s Adwords service saw search engines become major players in the advertising market. And they were different, a lot different. Suddenly advertising could be more contextual, more relevant, more cost-effective and much more measurable. And they were self-serve. Anyone could suddenly build and launch their own online advertising campaign in minutes. As a result, Google now owns 44% of the global online adverting market.

But now the social networks are ready to stake their claims.

Last year Facebook had 3.1% of the global online advertising market, despite never having been in a hurry to build their advertising business. Now they’re starting to take it seriously. Anyone who has used the Facebook Ads Manager tool will know it is very easy and intuitive compared to Google Adwords. Facebook’s Promoted Posts feature is even easier and can deliver great micro campaigns in the click of a button. Their new Graph Search feature is a clear signal that Facebook is about to step up even more in the advertising market.

Then there is Linkedin, quietly bubbling along with another easy-to-use advertising product aimed squarely at the employment market. Last year advertising on Linkedin accounted for 25% of their revenue, and that’s before they opened their API to marketers at the end of 2012. That will grow substantially in the next few years.

Now Twitter is muscling in on the action. The new Twitter Advertising API is a way for companies to automate more of their ad spending. The initial list of advertising partners isn’t very long, but is expected to grow quickly. The API, combined with Twitter’s self-serve ad platform, will allow advertisers to promote tweets based on what is trending and where the activity is.

In effect Twitter is heading in a very similar direction to Facebook. Google+ is presumably not far behind.

For social networks, in which the content generated by users is almost indistinguishable from the advertising offering tools that let advertisers automate their spending based on hard data will be far more lucrative than another generic banner ad.

The rapid rise of mobile usage is also another reason the social networks will grab even greater slices of the advertising pie. Their “integrated” advertising solutions are well suited to mobile display, whereas the display advertising of other media are not.

The shift away from traditional to online advertising will only continue to grow in the next few years as the social networks refine their offerings and mobile becomes our main screen.

Posted under Advertising, Media Mix, Online

Written by Craig Wilson

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