The market for eyeballs is getting hotter: News Corp. is readying a new advertising service which it promises will serve advertisers better than rivals Google and Facebook. News Corp. is reportedly planning a “programmatic advertising” service, meaning advertisers can target particular audience demographics and regions, across different advertising platforms, independently of the underlying content being advertised upon.
As News Corp. prepares to enter the field, CEO Robert Thomson has exhorted publishers to assemble against a “digital duopoly” of Google and Facebook, while trying to link its entry to recent debates over “fake news” and so-called “brand safety” – debates that News Corp. media properties conveniently like to inflame. The last time Thomson fired such public shots at Google in 2014, he was championing an EU antitrust case even as his organization was editorializing against such enforcement. Now he’s launching an ad service, while claiming the very market News Corp. is entering isn’t competitive. Reality has a funny habit of getting in the way of News Corp. talking points.
News Corp. and the competitors that Thomson attacks may be big fish in the digital pond, but even the most successful digital advertisers are surprisingly small fish in the half-trillion-plus global advertising ocean. Of this larger advertising market, digital advertising is but a fraction. According to Pew’s annual State of the Media report, 2015 U.S. digital advertising represented only a third of the $183 billion spent on ad platforms. Because advertising is a competition for scarce attention, regardless of medium, the fight for eyes (and ears) occurs both online and offline. Digital players are in direct competition with ad dollars spent on TV, broadcast, print, and billboards. While digital advertising has unquestionably disrupted the traditional advertising model, evidence suggests that some marketers are prioritizing reach over targeting. This means traditional television advertising continues to be a compelling competitor, particularly when coupled with ever more detailed, granular set-top box data. In an environment where advertiser sentiment can change overnight, News Corp. and other digital ad services will be competing daily with TV, broadcasters, and offline publishers for advertisers’ dollars.
And even within just the digital segment, competition is heavy. News Corp. joins platforms like Google and Facebook dueling with a host of digitally-delivered services for user attention, and therefore the opportunity to display relevant advertising. This includes messaging, mobile gaming, streaming music, news, various search engines, social media, and video, on both desktop and mobile, with new arrivals appearing regularly. Blink and you’ll miss entrants like Snapchat (alone accounting for $90M in ad spending last year, not to mention a $30B IPO), Amazon, and Verizon’s Oath. Google and Facebook spent years developing ad businesses, but these new entrants can become serious players overnight – and markets notice. Oath isn’t the only possible telecom competitor: a combined AT&T-DirecTV-TimeWarner would be a serious ad network player as well - a fact that TimeWarner has touted to analysts.
The winners in this fierce competition are the publishers on whose sites advertisements are displayed. While it is sometimes stated that Google and Facebook earn 85% of new digital revenues, this is misleading, since the majority of the revenues for ad placement is passed on to the sites where the ads are placed. Google, for instance, transfers 68% of display revenues to publishers. The growth of digital advertising thus tracks publishers’ growth. Increased digital advertising means more publishers are monetizing content displayed to more visitors.
Whether News Corp.’s entry into this dynamic market will succeed remains to be seen. What’s clear, however, is that their actions speak louder than words, and the advertising market is vastly more competitive than News Corp. is letting on.