The world of digital advertising is in a state of constant evolution. Rob Thomas, Head of Digital and Data at Spark Foundry NZ, looks to the next big disruptors in the industry and drops a few pointers on how brands can keep up.
During the acceleration of digital platforms over the last 10 years, advertisers have become dependent on Google and Meta to deliver business results. This is represented by 74 percent of global digital ad-spend going to those two businesses alone. This looks set to change.
There were significant industry announcements from Netflix, Uber and Disney in July, causing a stir when they separately announced their intention to create advertising solutions for brands. At the time of writing, Apple has also joined, the latest to open up what has historically been a closed-off environment to advertisers.
This will fundamentally alter how we approach media planning going forward. Audiences, particularly of a younger demographic, have become harder and more expensive to target because of the fragmentation of platforms. Netflix, for example, has 222 million engaged subscribers globally. These have, until now, been untouchable. Opening the door to advertisers unlocks huge potential in how we can advertise to those consumers.
The next big shift in the media industry
The advertising industry has seen continuous evolution throughout the digital age. Television was, and still is, a fundamental layer on most of our clients’ media plans because of its ability to deliver nationwide and generate audience attention.
In recent years, TV networks have faced challenges in their ability to drive
penetration amongst younger audiences. Subscription services such as Netflix and non-traditional content providers including YouTube, Meta, Snapchat and TikTok have challenged the AV model, tapping into a more social and snackable behaviour to absorbing media.
It is naïve to now consider these channels ‘digital’ or ‘social’. These platforms are the epicentre of where audiences spend their time. This relates to the content they watch, the news they read and the purchases they make:
- YouTube reaches more 18–49-year-olds in an average week than all cable TV networks combined in the US
- 71 percent of 18–29-year-olds in the US get their news updates from digital sources, with television being the next highest source at 16 percent
- 28 percent of Australians convince a friend or family member to buy a product they have seen on TikTok which is 1.8x higher than any other form of media
However, it’ s not all smooth sailing – the boom experienced by tech partners during Covid has plateaued. With a global recession looming, stock markets tanking and inflation rising, advertisers are carefully monitoring every dollar they spend to maximise effectiveness and efficiency. This will be made even more complicated by the eradication of the cookie in 2023, as marketers will need to overcome the changes in targeting and measurement.
With all this in mind, it has never been more important to target the right people, in the right place, at the right time.
And that is where Netflix, Disney, Apple and Uber entered stage left, promising endless benefits to brands whilst hoping to solve their own challenges in the process.
Why are they opening the door to advertisers?
The stock market has taken a big hit in 2022, fueled by macro factors like the war in Ukraine, rapid inflation and growing economic uncertainty. Tech stocks have felt the brunt of this because of their perceived risky nature, with NASDAQ posting its worst first-half loss on record.
No business publicly felt the brunt of this more than Netflix. Following its announcement of losing subscribers for the first time ever in Q1 2022, the company saw $50 billion of value wiped from the business, in a day.
The knock-on effect amongst other tech companies was huge. They have all subsequently looked for solutions to reverse the downward trend most notably by generating revenue through advertising. Doing this reduces the heavy requirement of subscriptions, by introducing ad-funded models which in turn, reduce subscription costs.
Research indicates that this will be welcomed by audiences. In the cost-of-living crisis that we face, people are looking to cut costs where they can. Subscriptions are an easy target – with so many options available now across audio, content and news, it is easy to rack up a high monthly bill. The average individual now has 3.65 subscriptions per month, whilst 59 percent of consumers want to reduce that amount to under $30 per month. The trade-off of subscription cost vs. being served ads is therefore likely to end up in favour of the ad-funded model.
It would be remiss to overlook Amazon
Whilst recent noise has come from other tech businesses, we must keep an eye out for Amazon. Its advertising capabilities, driven by the e-Commerce boom and smart ownership of platforms such as Twitch and Prime Video, are starting to ramp up across the globe. It is only a matter of time before they land in New Zealand.
Amazon’s strength is the unparalleled amount of data that they can use across multiple touchpoints in the shopper journey, which is no longer defined by what happens online or offline. This means that Amazon can predict your behaviour based on a TV show you’ve watched on Prime Video or a game you’ve streamed on Twitch, blended against the produce you added to cart in Amazon Fresh or the products you viewed in Marketplace. Making a purchase of any sort is an emotional decision – what Amazon can do is drive a consumer to the closest point to that purchase.
Ultimately, Amazon understand that its USP is its data, not its platforms. That is why Amazon make Prime Video free to Prime members as it knows the strength of being able to re-engage consumers through the purchase funnel.
How will this affect our approach to media?
At Spark Foundry, we strongly believe that for brands to be effective they must tap into the concept of cultural fluency. This involves being part of the cultural fabric of our audiences, moving in alignment with the changes that happen across the industry and adapting accordingly.
It goes without saying that content is right at the heart of culture. It always has been since the dawn of advertising. The method in which we consume that content is ever-changing, but the richness of the concept is still the same.
To maintain cultural fluency, we must adapt the way that we approach our audiences. If we are to truly be audience first, we must focus on identifying consumers based on what they do rather than who they are. When it comes to AV, for most of our audiences this will involve reaching them on the platforms where they commonly engage. The news from Disney, Netflix and Uber opens the doors to us to find those audiences and engage with them in a lean-in environment.
AV media consumption can be a proxy for mood. What people watch is often a reflection of how they are feeling. What the Netflix and Disney deals do is open up the opportunities into those media moments, allowing us to target audiences in relevant contextual environments with products they are likely to be receptive to.
There will always be a role for TV, much like there will need to be a role for VOD and Connected TV; What matters is the strategy behind your approach, how you use insight to identify your audience and the opportunity that exists to cut through to them. That is where the true strength in media planning will be in the future.
What should the next step for brands be?
The market is continuously evolving and there is more to come. With that in mind, our recommendations are:
- Keep abreast of the changes
- Understand the mindset of your audience and how you can play in the space that they occupy
- Challenge your planning to ensure that you are not delineating between ‘online’ and ‘offline’
- Test and learn, as that is the only way to evolve with cultural fluency
Rob Thomas is Head of Digital and Data at Spark Foundry NZ.
This article was originally published in the September/October 2022 issue of NZ Marketing. Click here to subscribe.