The tradition of sitting through a barrage of ads in exchange for being entertained began with radio, flourished with the arrival of television and followed the mass migration online.
As the massive $35 billion in advertising revenue captured by YouTube and Instagram in 2019 indicated, online advertising around social media, influencers and streamers already represents roughly half of the total amount spent on television advertising at its 2018 peak of $72.4 billion.
Entertainment businesses are under enormous pressure to create new revenue models as linear advertising becomes less relevant to consumers, a potential harbinger for another boom in advertising technology as companies try to keep audiences engaged.
Instagram’s $20 billion advertising haul, first reported by Bloomberg, comes as Alphabet, Google’s parent company, disclosed advertising revenue of $15.1 billion at its YouTube subsidiary for the first time.
Taken together, those figures mean that the market share of advertising commanded by television may shrink to a quarter of all advertising spending sooner than the 2022 prediction from eMarketer, as reported in MarketingLand. While search on Google and Amazon are clear winners — as is Facebook — other technology companies are likely to see a windfall as advertisers chase consumers to new places.
In-game advertising is seeing a boost, with marketers spending up to $3.2 billion on ads in video games in 2019, versus earlier projections that the sector wouldn’t see those kinds of dollars until at least 2020.
Brands also have new tools to advertise in streaming videos that can put them directly in scenes without a commercial break that interrupts the program. These are services from companies like Ryff, the Los Angeles-based advertising tech developer founded by former special effects wizards. That company has developed technology that can place branded props digitally into scenes of scripted and unscripted television shows.
Beyond social media, user-generated streaming videos and the influencer economies they’ve created, cord cutters are also presenting marketers with linear ad opportunities that look similar to spots on broadcast television. That’s thanks to companies like Tubi, Vudu, Plex, the Roku Channel and ad-supported offerings from Hulu and Peacock.
Early last year, Viacom bought streaming media service PlutoTV for $340 million and now it seems like NBC/Comcast Universal has its eye on the Walmart streaming service Vudu, while Fox may get back into the distribution game with the potential $500 million acquisition of Tubi.
All this activity will bring new targeting and ad embedding opportunities to the market thanks to the potential digital offerings and identifiers provided. It’s a way that old-line media companies can potentially regain some of the ad dollars they’ve lost to the social media and search giants.
As TechCrunch reported earlier this year, the venture community’s relationship with advertising has been a rocky one lately. In fact, data from Crunchbase indicates that adtech deal flow has fallen at a roughly 10% compounded annual rate over the last five years.
While subsectors like privacy and automation still manage to pull in funding, with an estimated 90%-plus of digital ad spend growth going to incumbent behemoths like Facebook and Google, the amount of high-growth opportunities in the adtech space seems to grow narrower by the week.
However, innovation in advertising isn’t dead, it’s just increasingly being captured by the digital platforms themselves.
Take Pandora, which announced in late December that it has begun developing interactive voice ads for its streaming service. The company thinks these ads will force listeners to pay attention, and provide more direct ways to measure an ad’s engagement.
And Pandora isn’t the only service that’s integrating advertising — and the potential electronic commerce that can come off of the back end of those promotions — into its entertainment offerings.
Last June, YouTube introduced an augmented reality-based try-on feature for makeup, which is being introduced by Google’s in-house-branded content program, FameBit. Through the program, Google connects brands with YouTube influencers who market their products through paid sponsorships.
The feature, which was very early in its development last year, had already attracted the attention of M·A·C Cosmetics at launch.
Meanwhile, this January, Hulu announced four new forms of advertising that it would bring to its platform. The new ad formats include one that will allow viewers to have more say in the ads that play, and another that lets the viewer engage with the brand in question, either by getting information sent directly to their mobile phone or by using QR codes. Later this year, Hulu is also considering digital product insertion to enhance the ad opportunities within its own original programming.
That’s where companies like Ryff or last year’s European Disrupt Battlefield competitor Clideo can play a potential role. Including the opportunity for e-commerce or digitizing media assets to insert programmable advertising in-stream tackle the problem of potentially reduced ad buys in novel ways.
Other new opportunities will emerge as consumers flip their viewing habits over to the digital streamers for increasingly more of their entertainment. As Bain Capital Ventures investor Scott Friend told us:
What’s new in today’s world, though, is the sophistication, maturity and rapid advancement of the tools to enable true one-to-one personalization. Specifically, there are three capabilities that allow modern marketers to reach consumers in a highly-personalized way.
First, a secure, compliant and mobile-first data store for all sources of first-party data (the Customer Data Platform, or ‘CDP’). Second, advanced machine-learning capabilities to optimize messaging (the actual words) so that recipients are most likely to react and respond positively. And third, two-way communication channels (predominantly SMS today, but there will likely many other two-way channels over time) to ensure a given message reaches the recipient in a personalized way versus getting lost in the clutter of email or the noise of digital ads.