The Secrets Behind Digital Advertising Works
You may not have noticed but in June 2019 shares in Facebook and Google started to tumble downwards on the tech-heavy Nasdaq exchange. Facebook shares alone lost about $41bn or 5.7%.
Why?
Fears around increased government scrutiny, or as Nancy Pelosi put it up on Twitter: “The era of self-regulation is over.”
The US House Judiciary Committee has opened an investigation into competition in digital markets, while the Department of Justice (DOJ) and Federal Trade Commission (FTC) dividing up authority between themselves over Alphabet (Google), Amazon, Apple, and Facebook. The DOJ will oversee any antitrust investigation of Google and Apple, leaving Facebook and Amazon to the FTC.
This is big news, with an impact far beyond share prices. It is also a move by the US government that has been coming for a while.
Although we all love the internet for free it still comes at a cost, and that cost increasingly appears to be our privacy.
The US Congress recently investigated Russia’s use of Facebook advertising in how it may have influenced the US 2016 presidential election. The concerns around who controls what on the net are no longer the preserve of conspiracy theorists. We need to pay attention, not just from a personal point of view, but, also, because of the implications for digital advertising.
You see it’s not only in search and social networking that Google and Facebook have dominant positions. They make almost all their revenues selling advertising (Google 86%; Facebook 99%). And in this regard they have crushed the competition along the way, becoming a veritable duopoly in the digital advertising market.
Take a look at some of the figures on this:
In 2019 alone G & F controls around 60% of the $129 billion that will be spent on digital advertising in the U.S. – according to a study by industry publication eMarketer.
And coupled with the fact that the online ad market as a whole is growing – year on year growth of around 20% – the fact is that this growth is concentrated almost exclusively in the hands of G&F.
Advertising campaigns used to be planned and managed by what were known as media buyers. Advertising used to be something placed in a magazine or by buying a radio or television spot. In contrast, digital advertising is automated, data-driven, with some degree of occult science working in the background. The computer has changed our lives in terms of advertising. It has ushered in a revolution, and a new language too: statistics, calculus, and linear algebra, optimize, micro targeting and algorithms.
As never before the internet and our use of it has given advertiser a deluge of information about us.
The simple fact is that when you go on line you are being auctioned. Auctioned to the advertisers who have seen your profile and now want to “speak” to you directly. That targeting began the moment you visited any website. Typically, your IP address, your location, and the URL of the page are swiped from your browser without your knowledge. This information is then shared with advertising companies that run these “auctions”. The goal, of course, is to build as specific a portrait of you as possible. This is where the dreaded cookies come in – tell me, when was the last time you could view a page and not enable cookies?
A “cookie” is a text file any site can install on your computer when you visit it. You get a unique identifier, or “cookie ID.” If the website knows your real identity then the company has the distinct advantage of linking the real you to your cookie. They then know which ads may interest you. The closer they get to the ads that do interest you then all-the better for them, edging ever closer towards the advertising equivalent of “jackpot!” As you can imagine, this stuff is dynamite for advertisers and believe me they know it.
So the G&Fs make their money by the precision of the information they provide to the buying advertisers. Simply put: can they identify you, and then your interests? Once these two things are known, it is really quite straightforward.
We all know that the days of anonymity on line are long since over. We also know that user data is the new gold for advertisers. They want to know all about you! So they track you on the web, from site to site, device to device, and so on.
And guess what, nobody does this better than F&G.
Google, for example, tracks users on over 705 of the top one million sites. Because Google has become the default search engine for so many around the world its ability to track you across the internet is mind-blowing and a distinct advantage in advertising markets.
Likewise, it is a similar scenario with Facebook acting as a social platform with billions of users.
The Big Tech duopoly can track billions of users across millions of sites and mobile apps, creating terrifying accurate profiles of users. There is just no one else who can compete with this.
It’s big business too. Google made almost $20 billion last year from selling other companies’ ads. Google today is the largest seller of advertising in the world by far. The competition doesn’t even come near.
This is why the concerns in the US Congress and elsewhere across the States and globally. F&G are just too big, and there is no sign of them about to share their ever-growing market share with anyone else soon. Thus the anti-trust remedies being looked at in the hope that it will –somehow – stimulate competition for and with the big two.
This forthcoming war will be fought over the real prize: digital advertising markets, who has access to them and how.
The issue of privacy started to raise concerns about F&G. It may end up being the thing that starts to unravel the duopoly.
Once you really start to explore and understand how Google and Facebook work, and how that makes them a lot of money, then you not only understand this phenomenon of our times but better understand how digital advertising markets work too.
G&F may be broken up and others may appear alongside them, all well and good, but for you as a business owner with a product to market and sell, then in the 21st century you need to know how digital advertising works – period.
At Mount Bonnell we have some experience in this field. Okay, I’m being modest; we have a lot of experience and a lot to say about the benefits of digital marketing. Just you taking the time to read this post is testament to that.
Marketing in Europe, or elsewhere is one thing, but marketing in the United States of America is a whole different ball game. And if you are going to make a success of your business there, and to grow it then you need professional help from people who know and work in that market already.
Our trusted team of marketers across America can help with this.
So don’t delay reach out and find out what Mt. Bonnell can do for you.
Book a consultation today.
