Commentary

Ad Tech Doesn't Get Schmoozed

by John Motavalli , Columnist, April 19, 2016

With Rupert Murdoch suing Google in Europe for unfair competition, Google and Facebook increasing their domination of programmatic advertising, and continued woes being reported daily by online publishers, the future of online advertising-supported publishing is looking questionable. Especially if you’re not Google or Facebook.

Let’s examine a key component here. Brian Nowak, an analyst at Morgan Stanley, told the New York Times Sunday that 85% of “every new dollar spent in online advertising” will go to Facebook or Google. “Dollars are increasingly moving to the large search players, and to large social players,” he opines in an online video. “The importance of scale and reach for large advertisers continues to be most important.”

Think about it. With Verizon likely acquiring Yahoo, and combining it with its AOL unit, online publishers will be forced to compete with three huge online powerhouses, all of which have many capabilities and strengths simply unobtainable to any of their lesser lights, no matter how much money they pump in. In the history of advertising, you have to return to the early days of CBS and NBC, before cable, when ABC was a distant third, to find anything remotely comparable.

Sure, you can call this unfair, but it’s the reality of the current situation, and it’s likely to get worse. Frankly, most of what online publishers are offering today, especially news and entertainment sites, is not what Millennials are looking for, as they increasingly migrate to mobile only, and use mobile apps and search exclusively. The whole idea of a Web site and bookmarked home pages is beginning to sound quaint.

One of the charges leveled by Rupert Murdoch is characteristic of the rueful tone we hear today from so many media properties, that Google’s creation of Google News was designed to keep visitors from exiting Google and visiting news sites. But so what? Of course that’s true, and every new app announced by both Google and Facebook is also designed to do that, to keep users from going elsewhere.

Suddenly, the quixotic quest of companies like Time Inc., vainly arguing that they, too, will be bidders for Yahoo! and competitive buyers of YouTube channels, looks, well, quixotic.

We’re reminded of what was eating Time Inc. back in 1990, when it decided to merge with Warner Communications. According to a 1992 book by former Time Inc. journalist Richard Clurman, the company was urged to merge by fear of the electronic media. At a Time Inc. summit before the merger, an editor produced an interesting statistic: “The television screen provides in excess of 65% of the words consumed from all media forms by the American public.” To a company then totally almost dominated by print, this was scary. But the odds are much longer today. Video assets were obtainable, and by buying Warner, Time obtained them.

But today, the assets driving online advertising success are not available to media companies. You can’t buy the kind of algorithms that drive Google. If you even understand what they are. From the start of the online boom, media properties have vainly tried to compete with what they know how to do: Produce “content.” But “content,” no matter how flashy, is increasingly irrelevant in today’s mobile-driven, programmatic-advertising world.

Ad Tech does not care about the “prestige” and backstories of fabled media properties. Ad Tech doesn’t take lunch at the Four Seasons or “21,” it doesn’t get schmoozed or take home goodie bags. It cares only about scale and reach, and that’s why 85% of every “new dollar spent” in online advertising is going to Facebook and Google. Rupert Murdoch may squawk, but this trend is going to continue.

facebook, google, media, mobile programmatic, programmatic

4 comments about "Ad Tech Doesn't Get Schmoozed".

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Mike Parise from dent, April 19, 2016 at 1:13 p.m.
It's hard to see it this way seemingly so soon in the life of the Internet, but this is a clear sign of a mature category. When you get to where there is a strong #1 and #2, and a #3 "player," the category has been sorted out, consumers/customers have firmly implanted the leading brands in their brains, and the future is set. Smaller brands will now need to completely disrupt things (good luck with that!) or create new categories for them to dominate. It goes back to Trout & Ries and their explain-it-all book, Positioning.
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John Motavalli from Freelance, April 20, 2016 at 10:42 a.m.

What's interesting about this, Mike, is that the machines in question that are flocking to buy ads on Google and Facebook don't have human brains that can have categories implanted in them. They just choose the most efficient online media, and that's going to be Google and Facebook 85 percent of the time. What new categories could they create? The dismal fact is that no one could name a single mega-popular app ever invented by a mainstream media company. They don't employ engineers who could create apps. And Apps are what todays mobile users want. John

Ed Papazian from Media Dynamics Inc, April 20, 2016 at 11:27 a.m.

John raises an interesting point. If the programmatic buys are primarily driven by CPMs and the big guys are offering the lowest---hence "best"--CPMs is this a good thing for the medium? I would also add that it's misleading to talk about all spending when the bulk of it is non-branding advertising. If digital sellers are hoping to attract more TV-style branding dollars, many of these will be oriented towards content compatibility and actual ad exposure, mainly to video or TV ads. In such cases advertisers may be willing to pay CPM premiums, but how do you input such "qualitative" factors into the computerized buying systems?

One last point. In days of yore, when NBC and CBS dominated national TV and their affiliates were top dogs locally, they were the high CPM buys, not the low ballers. To get any business, ABC and independent stations had to offer much lower CPMs, but even so, many advertisers weren't interested. They wanted mass exposure in "quality" content. Is this where we are headed for in digital?

John Motavalli from Freelance, April 20, 2016 at 3:02 p.m.

Yes, Ed, I think even if competing media cut their CPMs to ridiculously low levels, that wouldn't help either. Because, as you say, advertisers want mass exposure in "quality content" and Facebook and Google deliver that most efficiently. I see it this way, but that doesn't mean I applaud it. Having any industry so dominated by two companies is dangerous. Not to mention bad for the economy. What happens to all those jobs in the news and entertainment sector when all these guys give up? We already see it with big layoffs and cutbacks almost across the board at places like BuzzFeed. I note the controversy over articles saying BuzzFeed is in trouble. But they're hardly alone.