Posted On Oct 29, 2022

Is there anywhere you won’t soon be assaulted by digital advertising?

Uber this week revealed that it is about to serve up “journey ads” when you hail a ride — commercial messages linked to your destination that appear on your phone, and maybe in future on a screen in the back of the car. About to take an international flight? A duty-free store can sponsor your entire trip to the airport.

Meanwhile, Netflix has just set early November for the launch of its new advertising tier, a reduced-price streaming service in 12 countries for people willing to sit through an average of five adverts an hour. True, this is an optional new service, so no one will be forced to watch advertising — but as the economic downturn bites, it might be the only realistic way for many people to keep streaming.

Uber and Netflix are far from the only ones to latch on to advertising as a new source of revenue. Delivery apps, ecommerce marketplaces, mass market retailers, gaming services: it seems nowhere these days is commercial-free.

There are obvious reasons for this stampede into the digital ads business. When audience attention shifts wholesale to new services and channels, advertising dollars inevitably follow. The rise of streaming represents a serious threat to the linear TV model that still accounts for almost all of the $170bn in global TV advertising each year.

High-margin advertising dollars, euros and pounds are also gravy for companies in industries where profit margins are thin or non-existent. For a lossmaking delivery app like DoorDash, which handled $13bn worth of orders in the latest quarter, channelling so much buying power creates an obvious opportunity. Apps like this are in a perfect position to step in front of retailers and restaurants to suggest things their users might want to buy.

Retail media networks are also starting to take off, as merchants like Walmart and Target collect valuable data about shoppers’ habits that advertisers can use to hone their campaigns, either on the retailers’ own sites or on other networks. Walmart disclosed the size of its advertising business for the first time earlier this year, with 2021 revenue of $2.1bn. 

But if there are good reasons for these and other companies to turn to advertising, there is one overriding factor that is driving the shift: the unmet demands of advertisers. Some of the targeting methods that have shaped the digital advertising industry for its entire history are breaking down.

Apple’s decision to let its users choose if they want to be tracked has been a seismic event, robbing advertisers of valuable data. The second shoe to drop will be Google’s long-delayed plan to end support for cookies in its Chrome browser, pulling away the main support for behavioural targeting.

This is starting to shake the duopoly that has dominated the digital advertising world for the past 15 years. Google and Meta generated a combined $325bn of advertising revenue last year, a huge slice of a total market that Zenith media put at $405bn.

The search for new forms of targeting means any business with a significant reserve of first party data — information about its own customers that can be freely used for honing advertising — could be well-placed. As advertising analyst Eric Seufert puts it: these days, everything’s an ad network.

Netflix, for one, has relatively little insight into its users, and will only require people signing up or its ad-supported tier to provide some basic personal information. But there will still be ways to enhance this, according to Chad Engelgau, CEO of data broking company Acxiom: Advertisers will be able to bring their own data to bear as well, refining their understanding of viewers.

In this new world, the companies with the best data and the biggest audiences and user bases should win. Apple, which is taking advantage of the shifting demand for mobile advertising created by its privacy changes to expand its own advertising business, has more than 1bn iPhone users. Amazon’s insight into the buying histories and intentions of its users has already enabled it to build an advertising business that pulled in $31.2bn last year.

These giants will be in the strongest position to take on Google and Facebook. But there are many behind them for whom advertising is about to become a serious revenue stream. Whatever the next 15 years in the advertising business looks like, it won’t be like the last 15.

Original Post: Ad infinitum: companies to unleash a deluge of digital marketing