In recent years, the digital advertising landscape has been dominated by two major players: Google and Meta Platforms (formerly Facebook Inc). Together, they form an influential duopoly, commanding significant shares of ad spend worldwide.
According to a report by the Australian Financial Review, Google and Facebook sold a combined $8.3 billion worth of digital advertising in Australia last year, and the vast majority of this amount ($7.26 billion) was attributed to their parent companies. This indicates that Google and Facebook control around 87.5% of the digital ad spend market in Australia.
However, rising costs, increased competition, and shifting consumer attitudes towards online ads are pushing marketers to explore alternative channels. This shift, coupled with emerging privacy regulations, presents a new frontier in digital advertising.
How might the landscape evolve, and can companies reach their audiences as effectively without relying solely on these behemoths? Let’s dive deeper.
Rising Costs and Competition
Google and Meta, with their vast user base and sophisticated targeting tools, have become attractive platforms for marketers. But with popularity comes saturation. As more businesses compete for visibility, the cost of advertising on these platforms has skyrocketed.
As reported by AdAge, Google’s cost-per-click (CPC) has witnessed a substantial uptick over the past few years. In 2020, the average CPC across all industries was $2.69, marking a significant increase from $1.79 in 2019. This escalating trend has continued into recent years, with the average CPC projected to rise even further.
Furthermore, the cost of advertising on Google varies greatly by industry. For instance, according to Measured’s data, industries like legal, insurance, and real estate face particularly high CPCs, often exceeding $6.
Meta (formerly Facebook), another major player in the digital advertising space, has also seen a steep rise in advertising costs. MarketingWeek reports that the average cost-per-thousand (CPM) impressions on Meta rose by a staggering 30% in 2020.
Additionally, Mi3 highlighted that the price inflation has accelerated in recent times. In the first quarter of 2023, the cost of advertising on Meta surged by an additional 20%. This continuous rise in ad costs on Meta has had a profound impact on businesses, especially small and medium enterprises, as they struggle to keep up with the increasing ad spend.
This has led to a scenario where small and mid-sized businesses often struggle to compete with larger corporations with more substantial marketing budgets.
As of May 2023, social media ad spend is reportedly decreasing globally, with a three percent decrease in the first quarter of 2023 compared to the same period in 2022.
Diversifying Digital Advertising Channels
Given these challenges, it’s crucial for marketers to diversify their ad spend and leverage other digital channels.
One such promising area is programmatic advertising. By automating the buying, placement, and optimisation of media inventory, programmatic advertising allows businesses to scale their efforts more effectively. Moreover, programmatic ad platforms are typically more fragmented than Google or Meta, providing a broader selection of targeting options.
According to research from Measured, businesses using programmatic advertising have seen lower cost-per-acquisition (CPA) rates compared to traditional digital ad campaigns on platforms like Google and Meta. This is largely due to the increased precision and real-time adjustability that programmatic advertising offers, allowing businesses to optimize their ad spend and reduce wasted impressions.
However, it’s worth noting that the cost-effectiveness of programmatic advertising can vary based on several factors, including the quality of the audience data, the competitiveness of the bidding environment, and the ad format and placement. Therefore, while programmatic advertising can potentially offer lower costs, it’s not guaranteed in every situation.
In addition, marketers should consider investing more in content marketing and SEO. While this requires more time and effort than paid advertising, it often yields more organic and sustainable results. Influencer marketing, particularly on emerging social media platforms, is another strategy gaining traction. Influencers can offer niche targeting, often resulting in higher engagement rates than traditional advertising.
Lastly, marketers should not overlook the potential of advertising on streaming platforms and digital radio. With the rise of cord-cutting and the popularity of podcasts, these channels offer an excellent opportunity to reach highly engaged audiences.
Data and Targeting in a Post-Google and Meta World
The major draw of Google and Meta has been the extensive data they collect, which enables highly targeted advertising.
However, alternative channels are developing sophisticated data analysis tools. For instance, programmatic advertising platforms provide real-time bidding (RTB) systems, which analyse user behaviour to optimise ad placements. Additionally, content platforms and influencer networks often offer analytics tools to help brands understand their audience better.
However, brands should expect a shift towards first-party data usage due to tightening privacy regulations. By collecting and managing their own data, brands can gain better insights about their customers while maintaining compliance with privacy laws.
The Cookie-less Future and Privacy Regulations
Privacy concerns have led to significant changes in the way digital advertising operates. Google’s decision to phase out third-party cookies by 2023 and Meta’s adjustment to the same effect due to Apple’s App Tracking Transparency feature have created a seismic shift in the industry.
In a cookie-less world, contextual advertising will likely play a more significant role. This involves targeting ads based on the content of the page a user is viewing, rather than their past behaviour. While this may seem like a step back, it can actually lead to more relevant advertising if done correctly.
Additionally, brands may have to rely more heavily on their owned channels, like email and apps, where they can directly engage with their customers. This would necessitate a greater focus on customer relationship management and personalised communication.
The future of digital advertising will certainly be more decentralised. While Google and Meta will continue to play significant roles, their dominance will likely lessen as marketers explore alternative channels and strategies. Though the road ahead may seem challenging, it’s also ripe with opportunities.