How Ad Companies Have Responded To A Changing Media Landscape

Traditional media such as print have become a dying breed and so have advertising agencies, which once thrived through providing a host of services — from media buying, script writing, shooting ads, editing, etc. — required to run a successful ad campaign.

Traditional media have now given way to new media, which uses digital technologies such as the internet, usually allowing for two-way communication. Social media such as Facebook Inc FB, WhatsApp, Twitter Inc TWTR, Snap Inc SNAP's Snapchat, blogs, video games and online news outlets are among those counted as new media.

New media are highly interactive, allow two-way communication and involve some form of computing.

Google, Facebook Pitted Against Each Other

A Wall Street Journal report, quoting eMarketer, said total digital ad spending is expected to increase 16 percent year-over-year to $83 billion in 2017, thanks to Alphabet Inc GOOG GOOGL's dominance of the search ad market and Facebook's deep inroads into the display and mobile ads.

Between them, Google and Facebook rule the roost in the digital ad market, with the former's market share in the United States expected to dwindle slightly to 40.7 percent in 2017, while the latter's is expected to edge up slightly to 19.7 percent as compared to the previous year.

When it comes to search ads, Google is the undisputed king, with eMarketer predicting U.S. ad revenue growth of 16 percent in the $28.55 billion range — or 78 percent of the overall market. The search giant is expected to gain at the expense of Yahoo! Inc. YHOO and Microsoft Corporation MSFT's Bing.

If Google lords over the search ad market, it's Facebook that makes waves in display and mobile advertising. This is understandable, given the growth of Facebook's usage and engagement.

The mobile ad market is dominated by Google, with eMarketer estimating one-third share for the company compared to Facebook's one-fourth.

Ad Agencies Have Their Task Cut Out

In an era where, while watching TV, viewers mute commercials played during breaks and instead stay engrossed in social media or checking email, ad agencies cannot stay immune to this change in consumer habits. They have to adapt or risk going out of business.

Even consumer companies are tapping into the potential social media offer. The Coca-Cola Co KO created #sharecoke-named cans, realizing how valuable social logo presence is. This Coke campaign resulted in 550,000 Instagram posts by late 2014, an article in Mashable said.

To appeal to those in the 18–35 age group, individuals gravitating more toward digital and mobile, traditional ad agencies must embrace a radical makeover. They need to tap into the vast volume of data available to them to gauge where customers consume content and what their requirements are and how to target them accordingly.

Opportunities Are Not Risk Free

As recently seen in Google's YouTube ad controversy, new age advertising agencies have to contend with a new set of problems. Google was pulled up by both the advertising industry and the U.K. government for advertisements being displayed alongside extremists' content.

Extremists may have pocketed close to 250,000 pounds, as every 1,000 clicks pays 6 pounds, according to an estimate published in article by the Guardian.

The development set activity abuzz among several ad companies, including WPP, Publicis Groupe SA (ADR) PUBGY and HAVAS EUR0.40 HAVSF, which either pulled their advertisements or stated that they are reviewing their relationship with Google.

Commenting on the YouTube fiasco, Trip Chowdhry of Global Equities Research recently said there are issues with YouTube, and Google needs to fix the targeting and content problem immediately.

The analyst noted that many advertisers, including Verizon Communications Inc. VZ, GlaxoSmithKline plc (ADR) GSK, AT&T Inc. T, General Motors Company GM, Havas and others have pulled out of advertising on YouTube.

"YouTube has screwed up big time on its Ad-Algorithms — these advertisers are very upset, that their ads were shown alongside ISIS, and other hate/terrorist content," Chowdhry said.

Meanwhile, Breitbart, a far-right American news, opinion and commentary website, was also accused of displaying company ads alongside stories that put their weight behind nationalism, misogyny and homophobia, according to the Washington Post.

Software company Klipfolio, which was irked by the development, reportedly pulled out its ad from the website. Earlier, the firm used to buy the ad through Google's Display Network, which displays ads on over 2 million websites depending on keywords and demographics.

With the websites now carrying polarizing content, companies cannot remain passive in their ad buying decisions. The Washington Post article, quoting activist group Sleeping Giants, said more than 1,250 companies have withdrawn ads from Breitbart's website.

New world advertising requires a radically different approach, with data being front and center of decision-making. That said, companies may also have to proactively follow up on whether their ads are finding the right audience and are displayed at the right place, etc. Advertising agencies have a tall order to fulfill if they are to survive and make a name for themselves.

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