Question
Digital ad market set to eclipse traditional media for first time Alex Barker in London JUNE 23 2020 The shift towards online advertising accelerated during
Digital ad market set to eclipse traditional media for first time
Alex Barker in London JUNE 23 2020
The shift towards online advertising accelerated during the pandemic as companies sought cheaper alternatives and ecommerce became more dominant.
Digital advertising on platforms such as Google, Facebook and Alibaba is set this year to overtake spending on traditional media for the first time, a historic shift in market share that has been accelerated by the coronavirus pandemic. Excluding online ads sold by old media outlets such as news publishers or broadcasters, digital marketing is predicted to account for more than half the $530bn global advertising industry in 2020, according to GroupM, the media buying agency owned by WPP. Separate forecasts released last week by Magna, part of IPG Mediabrands, also expect 2020 to be the year traditional media is upstaged.
The digital revolution in marketing under way since the millennium, when the internet accounted for under 2 per cent of spending, has transformed the ad market at a pace and scale that far outstrips the advent of television in the 20th century. That trend has only gathered momentum during the economic shock of the pandemic.
Overall ad spending is predicted to fall by about 11.8 per cent worldwide, according to GroupM's estimates, but the pain will be unevenly spread across old and new forms of advertising. While pure digital advertising spending is expected to dip by only 2.4 per cent this year bolstered by the shift to ecommerce that on traditional media such as television, newspapers and outdoor advertising will fall by 20.7 per cent, even after including revenue from their own digital advertising products. "In the last three months we have seen three years' worth of digital acceleration take place," said Johnny Hornby, founder of The&Partnership, a WPP-backed agency. "That has manifested itself in massive increases in people being online [and] massive increases in online shopping, most of which will not reverse."
Spending by small businesses is an increasingly important part of the ad market and is "primarily responsible for driving digital advertising above the 50 per cent [spending] threshold", said Brian Wieser, head of business intelligence at GroupM. "Small local businesses embraced digital marketing and advertising for the first time during the lockdown just to keep the business alive." Christine Removille, an expert partner at Bain and former global president of Carat agency, said coronavirus differed from previous shocks because it would change not just purchasing power but consumer behaviour. "Digital commerce is huge and many industries that previously had low penetration, like consumer product companies, will see that as an opportunity to not only sell directly but to capture consumer data," she said.
Since the lockdowns began, companies have tried to slash costs and move to cheaper marketing online that is more targeted towards purchases rather than promoting brands. This disproportionately hit broadcasters and publishers, even though audiences rose sharply in April and May. Television advertising is expected to fall 17.6 per cent in 2020 and rise 6 per cent in 2021, according to GroupM, while newspapers will endure annual declines of 26 per cent and 2.5 per cent. One senior executive at a big advertising holding company said there were "fundamental shifts" in the market, particularly for television. "This shock may do for free-to-air broadcast television what the financial crisis did for newspaper advertising," they said. "It never recovered for newspapers. The question is how can broadcasters stop that from happening to them."
Source: https://www.ft.com/content/d8aaf886-d1f0-40fb-abff-2945629b68c0
UK competition watchdog seeks to curb Google and Facebook's dominance of online advertising
Published Wed, Jul 1 2020 7:58 am EDT, Ryan Browne
Britain's competition watchdog Competition and Markets Authority (CMA) has set out recommendations for new regulations to tackle the dominance of Google and Facebook in the online advertising market.
CMA found that around 80% of the 14 billion ($17 billion) of U.K. spending on digital ads in 2019 went to Google and Facebook. Google has a more than 90% share of the search advertising market in the U.K., the CMA said, while Facebook controls more than 50% of the display advertising sector, raking in over 2 billion.
The regulator further warned of Google and Facebook's market power restraining the revenues of newspapers and other publishers, which have complained of unexpected drops in traffic due to changes to the platforms' algorithms.
"Through our examination of this market, we have discovered how major online platforms like Google and Facebook operate and how they use digital advertising to fuel their business models," Andrea Coscelli, chief executive of the CMA. "What we have found is concerning - if the market power of these firms goes unchecked, people and businesses will lose out."
"People will carry on handing over more of their personal data than necessary, a lack of competition could mean higher prices for goods and services bought online and we could all miss out on the benefits of the next innovative digital platform," Coscelli said.
CMA said Wednesday that it had proposed the creation of a "Digital Markets Unit" designed to rein in platforms with "a position of market power" when it comes to digital ads. The new unit would enforce a code of conduct on Google, Facebook and other major players in the industry to make sure they don't "engage in exploitative or exclusionary practices." It would have the power to impose fines on the companies if necessary.
Under newly proposed rules, the CMA is asking for the ability to order Google to share click and query data with rival search engines, force Facebook to give consumers a choice over whether to accept targeted advertising and to impose a "separation of platforms where necessary."
The U.K. isn't the only country where regulators are questioning the command Google and Facebook have over online advertising. In the U.S., 50 state attorneys general joined an investigation into Google over possible anti-competitive practices in its ads business. Meanwhile, Facebook has also been the subject of antitrust scrutiny in the country.
Source: https://www.cnbc.com/2020/07/01/uk-cma-seeks-to-curb-google-and-facebook- online-advertising-dominance.html
- 1. In the first article, why did the digital advertising on platforms such as Google, Facebook and Alibaba is set this year to overtake spending on traditional media for the first time? (Tips: Consider what type of 'related goods & services' are the two types of media platforms, that of the "Digital" and the other, the "Traditional" media.)
- Identify the related goods
- Compare their cost structure and price
.Cost of Traditional media?
.Cost of Digital media?
- 2. In the second article, there is an emphasis of the term "market power". What type of market structure can Facebook and Google be considered to be in? Explain your answer and justify using a minimum of three reasons.
- Identify the market of your interest
- Justify using the criteria:
+ E.g., to justify for an oligopoly / a monopoly
+ High market share
+ Relatively high entry barrier (customer base? huge investment? others?)
+ Do not compete based on price - use Kinked demand curve to explain the ad prices in both platforms are similar.
- 3. Do you agree that the British Competition and Markets Authority (CMA)'s concerns about Facebook and Google having "too much market power"? Justify your answer.
- Analyze the impact on traditional media
- Compare the difference between monopoly/oligopoly and perfect competition
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