by Martin MacGregor (@MartMacG) From inception, I’ve been drawn to the opinionated world of Twitter, which allows me to curate news from opinion leaders who I respect. As a news junkie, I’m much more interested in the comments of the well-informed than what feels like the uninformed and arbitrary dinner-table commentary that appears on Facebook. But, on all levels, Facebook has been tighter and smarter, and is winning the user and revenue war.
Circle of trust
Why? Most importantly, people ultimately want their content and opinion coming from people they know. The intimacy of the Facebook circle of trust is a much more comfortable and safe environment than the open Twitter universe.
Facebook has understood this and the algorithm that drives the News Feed delivers. Whether it’s healthy to be limited only to the opinions of those you know is highly debateable, and keeps people firmly in their camps (Brexit, Trump, Zuma, etc.). That, however, is a debate for another day. Facebook doesn’t mind as long as its users continue to grow, and they do: Daily Active Users were an astonishing 1.13bn in the second quarter of 2016.
But the slam dunk has been the success in the advertising model that has come with it. And the big number is that 84% of Q2 revenue came from mobile advertising.
Advertisers are flocking
Forget about banner ads, programmatic and laptops — the money is clearly and obviously being spent in impactfully reaching consumers where they spend most of their time. Facebook has unlocked its data and advertisers are flocking.
Next step? It’s happened already: the Facebook Audience Network. The know-how and success that it has achieved so far on mobile is used by letting brands extend their ad campaigns beyond Facebook, using the same targeting techniques.
This means a Facebook-powered way to make money for app and mobile web publishers. And users will start to see Facebook-style ads elsewhere. As Facebook growth eventually slows, it means that your News Feed won’t be overwhelmed with ads — and Facebook’s revenue potential will become exponential.
Crack the digital advertising code
All of this is a big threat to Google, which is the only other player to have managed to crack the digital advertising code — ever.
In 2015, 64% of all digital advertising spend went to these two companies — and 75% of all new digital spend. Expect that number to grow. And, by next year, digital spend will be bigger than TV spend in the US, especially as video content shifts quickly into the digital space.
The result is two companies which own deeper and wider consumer data than anyone else, effectively controlling digital advertising and, therefore, increasingly the advertising landscape.
Evolution is a harsh process
This is the bottom line: no media agency is going to come close to the targeting ability of Facebook and the efficiency of Google Search. Measuring ad effectiveness at this depth of data and level of analytics means investing elsewhere starts to become highly risky.
This really is the final endgame for the 1950s ad model. Anything to fear? No. It’s a hugely exciting evolution that will open up a raft of new opportunities.
But it is important to be conscious of this macro-shift. Evolution is a harsh process, as Twitter has found out. Media agencies in their present form may still be alive, but they are Neanderthals living in isolated valleys and should start to face the reality of their own extinction.
Martin MacGregor (@MartMacG) is managing director of Connect, an M&C Saatchi Company, with offices in Johannesburg and Cape Town. Martin has spent 18 years in the industry, and has previously worked at Ogilvy and was MD of MEC Nota Bene in Cape Town. He contributes the monthly “Media Redefined” column, in which he challenges norms in the media space, to MarkLives.com.
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