Influencer marketing is changing social graphs and Programmatic ads are changing our TV. Added Bonus section – Impact of removing 3rd party cookies on ads.
Extended focus on privacy, adoption of OTT and Streaming, and online shopping are changing the advertisement landscape. Traditional ads in magazines, on TV, or on billboards reach anyone who sees them. Whereas, digital ads allow the advertiser to precisely targeted the audience who are more likely to be interested in that ad.
Digital ads also allow advertisers to reach audiences at multiple places or during all kinds of activities. The audience can be reached while they are browsing products online, streaming tv, visiting their favorite website, or even on social media. This helps advertisers create cognizance in users’ minds about their brand.
There is a lot to be talked about regarding advertisements. In today’s blog, I will write about Meta and TikTok, 3 important trends in digital ads including influencer ads, programmatic ads, and the role of CTV (Connected TV). In the end, I have added a bonus section around 3rd party cookies and what will be the impact of them going away and how will they be replaced. So let us get started.
Meta (F.K.A. FB) vs TikTok
Meta reported its Q2 2022 earnings and its first-ever YoY quarterly revenue decline since it went public in 2012. Meta in Q1 had reported a decline in its YoY users as well. However, it is still way ahead of its closest rival TikTok in terms of both ad spend (revenue from ads) and monthly active users. For example, Influencer ad-spend on Instagram ($2.23B) is still 3x that of TikTok ($770M). But TikTok is growing fast. At this rate, TikTok will overtake Facebook and become the No2 platform by 2024, behind YouTube. This is not good news for Meta (parent FB and Insta)
How will TikTok do it?
The answer lies in its algorithm. If you look at Facebook the idea behind the app was to connect you with friends and family. Facebook’s social algorithm worked assiduously to find more family and friends that you can connect with. Their feeds would show up and you see what is happening in their life. Then you started liking businesses and events on Facebook, your feeds now have more news, games, etc items than your friends’ feeds. This means advertisement has taken over your social media feeds on Facebook. The ads that show up are for the content that you have shown interest in. The pages or people you follow.
In short, FB and Twitter provide you with content that you expect based on who you follow and like.
TikTok is different. It’s a dopamine powder, where every swipe provides you the promise of a hit. I want to be honest here, I got indulged in that too. I did not have TikTok, to write about this article I downloaded and just got hooked. TikTok is all about reels (almost the same as Insta but a better version). Once you are in the system, you keep watching for hours. It’s free entertainment at best.
Reels have nothing to do with what your friends are doing vs what you want to see. It’s all about the guilty pleasure of escapism and they do a heck of a job. Meta knows this, and they have noticed this trend with Insta reels themselves. Hence recently, Meta announced that the Facebook app will transform into a TikTok-like selection of algorithmically chosen videos and shunt of content posted by family, friends, and groups.
This leads to the next section of the essay, why are these changes necessary and what are the trends in digital advertising.
Trends in Digital Advertising
We are living in the age of digital advertising. Compared to traditional ad channels, digital ads offer both flexibility and precision. Flexible in terms of the medium of publishing and budget. Precise in terms of the use of analytics to identify users with specific needs and then target users with ads that will fulfill those needs.
Trend 1 – Social media – Influencer-driven ads
With almost 4B social media users around the world, brands are investing more and more into social media advertising.
Brand building has moved to influencers to build more personal connections with consumers. The reason influencers play a huge role in building connections, is people seek other people’s advice before purchasing. Nielsen report found that 42% of Americans seek advice from others for purchase decisions. Also from Nielsen’s report in 2021, 71% of consumers stated that they trusted products/ads from influencers.
Selecting the right medium and right influencers to promote your brands is key to getting to the right audience. Time spent on social media sites chart below shows why YouTube and TikTok are winning this battle.
Trend 2 – Programmatic Ads
The global digital ad market is about to reach $900B by 2026. Programmatic ads make up a large and growing share of ad spending. In the US alone, more than 91% of ads by 2023 will be programmatic. Walled gardens will drive gains in CTV (Connected TV), social media, and e-commerce. As we start dividing our time and attention across multiple sources, there is a growing need to target ads across all streams and devices. See below the chart from Nielsen’s report as to how we are spending our time.
Trend 3 – CTV ad market
AVOD (Ad-based Video On Demand) which includes likes of YouTube and Twitch has become a primary source of content consumption. AVOD also includes free channels from CTV devices and smart TV makers like Amazon, Roku, Samsung, etc.
AVOD is different from SVOD (Subscription Video on Demand) which includes paid subscriptions like Netflix, Disney+, or Hulu. Earnings reports from Netflix and Disney have shown that the subscription market for such services has stagnated. High prices and multiple options have increased OTT pruning.
We have seen multiple services already offer less expensive ad-based subscription models. Recently Netflix partnered with Microsoft to create an ad-based offering. Now it’s for sure Netflix will never become AVOD (where users do not pay subscription fees) but it creates a strong case for the CTV ad market.
Influencers, in fact, act as major inspirations for brand campaigns. They are powerful tools to increase brand awareness when you hit the right combination of persona, content, and engagement. Digital video is a driving force for buyers and CTV leads the substantial growth of digital video ad spending. As people start to spend more time on CTV and brands start to get more value out of the CTVads, this trend will continue to rise. Remember there are 24 hours in a day and brands want maximum time out of it.
Bonus: Moving away from third-party cookies on Ads
When we talk about digital advertising we talk about Google. When we talk about Google we talk about cookies. Cookies are nothing but programs that collect users’ personal data, IP addresses, and browsing history. This information is then used to provide a better experience and targeted ads. There are two types of cookies, the first party, and the third party. The first part is directly stored by the website you visit, while the third-party cookies are created by domains (websites) outside of the website you are visiting.
Another model which is picking up steam in digital advertising is using avoiding third-party cookies due to a multitude of reasons. Primary being privacy laws (remember Cambridge Analytica) and the ineffectiveness of third-party cookies. Another main reason is third party cookies only work on browsers, which only represent 19% of the digital ad spend. As consumers start to spend more time on OTT, video platforms, and other mediums.
An alternate solution is required, Google itself has admitted multiple times that it is phasing out third-party cookies. As per the plan Google was supposed to create an alternative by end of 2023. This plan is now on hold. Another alternative is what has been created by Trade Desk called “Unified ID”. Trade Desk is running Unified ID 2.0 (UID 2.0).
This is not the only alternative solution, Multiple parties are creating such solutions. My intent is to show the change that is coming in web-based advertising which has been dominated by 3rd party cookies for almost 3 decades.