Google and Facebook remain strong, according to WPP’s media agency network GroupM, but some cracks are appearing in their dominance as events in the broader industry shape it in a number of ways.
The methodology for GroupM’s Media Landscape report is explained as “an analysis of the spending of GroupM’s clients in our top 15 markets during 2018 to dig deeper into where the money is going, and isolate the unique challenges of large advertisers”.
Taking into account both legacy and digital-native companies, the report takes its clients’ experience – given their large participation in the industry – as a proxy for the total industry. The agency adds that it adjusted according to some of the merger activity in the latter part of 2018, including the movements surrounding The Walt Disney Company, 21st Century Fox, Comcast, and AT&T.
It contains some things that the industry already knew – Google and Facebook’s collective share of client adspend comes in at just under a fifth (19%) – along with some surprises: in the audio space, iHeartMedia is 1.5x the size of Spotify; what’s more, Bell Media in Canada alone is larger than both those companies’ billings, and far smaller than JCDecaux.
Legacy media remains popular. “When considered by media type, 43% of billings in our top 15 markets are TV, including the digital delivery of legacy TV companies; 37% of billings are digital, which includes search, social, video and display for all sources, excluding legacy TV; 7% are print; 6% are out-of-home; and 4% are cinema,” GroupM states.
Though the digital space is heavily controlled by a search company and a social media firm, video as a format remains dominant with full-length programming the first-choice context. Here, there is still space to compete: “single-market players (especially in video) remain extraordinarily important to advertisers.”
User behaviour: “Google and Facebook on the one hand and Netflix on the other have structurally undermined a century-old economic model”
They have done so, the report contends, through the duopoly’s “advertising-led monetizing of intent and social interaction in the absence of content,” and in Netflix’s case (though this goes for a host of new subscription-based services) “the monetization of content in the absence of advertising.”
One side gutted the publishing model while the other threatens to similarly bulldoze ad-supported TV, but despite growth that “seemed impregnable only two years ago,” vulnerabilities are emerging.
“In the case of Google and Facebook, the data assets that laid the golden egg of targeted advertising are now questioned.” And these questions are coming from multiple angles: policymakers, regulators, clients, and users are all beginning to ask. In Facebook’s case, GroupM suggests it could be its own worst enemy in drawing in regulatory scrutiny: not least with the backend unification of its main three apps alongside the development of a Libra currency, all of which represent a “radically evolved model”, and more aggressive than before.
Google, meanwhile, is far larger and faces three main regulatory threats:
- Its ownership of Android (and the Google Play Store)
- YouTube and its social consequences
- Dominance of search and ad tech.
But the biggest question surrounds Amazon’s oncoming advertising potency, compounded in the question: “Is purchase data the highest fidelity signal of all?” Discounting regulatory burdens (themselves not insignificant), Amazon could soon become Google’s long-term rival. Whatever happens, the walled gardens only grow stronger.
Convergence is king
The report highlights that the much-discussed idea of convergence has made a return from its previous high-point in the 1990s. It’s the idea that telcos, media, and software firms and capabilities would converge. Initially, it was based on the dream of efficiencies in distribution, but has more recently taken the form of “pairing data from mobile services with content to produce more valuable advertising inventory”.
Such expansions, especially given that most of them have come from telco acquisitions, are more likely to have come from a desire for revenue diversification in order to service long-standing pension commitments alongside yield-hungry investors. What they have seen, however, is that highly-regulated product-based telecoms leaders can make uneasy bedfellows with people-based media companies whose chief export is creativity.
Netflix has indeed affected the advertising industry in various ways. “Its heavy content investments allow the company to capture audience attention, thus causing incumbent TV networks to respond by investing more heavily themselves. Netflix is also forcing incumbents and competing streaming services to think twice about ad loads – or about including them in the first place.
“If there is an advertiser benefit tied to the rise of Netflix, it’s likely to be higher quality content and less clutter on ad-supported media,” the report notes. “But the downside to date is declining viewership with the incumbents, especially with younger audiences, constrained advertiser reach to consumers and, at the same time, scarcity-driven price inflation.”
Unsurprisingly, GroupM argues for the ongoing relevance of media agencies, specifically in the areas of allocation and attribution. “On the one hand, the walls of the walled gardens are rising; on the other, the ability to create ‘data clean rooms’ within those walls is increasing.” Effectively, because sellers are partial and they hold the data, media agencies’ expertise and ability to build custom models for clients – whose levels of data literacy and capability vary widely – puts them in a strong position amid a fast-changing market.
“It would be naive to dismiss in-housing; it is real, and for many marketers it has increased the speed and accuracy of decision-making. It is our view that in the environment described, in-housing is at best a partial solution, as most often it is restricted to channels that allow automation.” Media, the report argues, operates through the entirety of its touchpoints, and must therefore be optimised as such.
In a climate of in-housing, media agencies find themselves in something of a “learning moment” for the sector, which the report frames, hopefully, as one where “scope and reward rise with collaboration and proof of expertise rather than by right”.
Sourced from GroupM via WARC