TANGIBLE LANDSCAPE COMING INTO FOCUS
As we head into the next phase of digital growth - one that might as well be called the post-Facebook-IPO, NewFront-is-the-new-upfront, smartphones-at-critical-mass world of digital marketing - a tangible landscape is finally coming into focus. Forget “So-Lo-Mo.” With a small but important tweak to that moniker, we now finally have our three emerging categories quickly becoming the new establishment of digital marketing: SOCIAL, VIDEO and MOBILE.
As with all things digital, each of these three areas overlap to both confuse the picture yet create more potent tools for marketers. Let’s start by looking at the world that lives at the intersection of each:
Data could be called out as a fourth major focus area and that wouldn’t be wrong. But, for the purposes of this discussion, we should assume that data is an ever-present, always-on layer that affects the entire landscape. It is a layer that sits beneath Social, Video and Mobile to ensure their success. Data raises all boats.
THE NEXT THREE YEARS WILL FLIP DIGITAL MARKETING ON ITS EAR
Of The Big 3, Social is off to the strongest start. According to eMarketer, $3.6B was spent on social network ad spend in 2011. That’s the largest expenditure of the three categories. Video is second and Mobile is third. But in the three year spending projections made by eMarketer, the categories flip.
Through 2014, significant growth is predicted in all three categories, but pay specific attention to Mobile as its ad spend is predicted to increase 150% for that three year period.
Each of these categories will have a significant affect on the others.
How would Video grow without Social?
How would Mobile grow without Video?
How would Social grow without Mobile?
The answer to all of these questions is: they won’t. They will each have material impact on the others.
Still, to understand why each category is where it is today and to predict where it will go from here, we need to look at the factors unique to each.
SEVEN FACTORS DRIVING GROWTH
There are seven factors that drive growth in each category:
- Content. Is content being created for the category? Is it premium? Do users want to consume it? Is it valuable to them? Is there an abundance of it?
- Back-End Technology. Does the category physically work for both users and marketers? Is there quick load time? Are there industry standard solutions to traffic ads and make things run?
- Data/Targeting. Are there norms in place that enable brands to reach their audience efficiently and effectively the way they have become accustomed to in other channels?
- Standardization. Is there a currency in which brands can buy media? Are there ad units common from publisher to publisher?
- Measurement. How do we measure success? Are those measures accepted by the marketplace? Are those measures driving business outcomes?
- Scale. How many people are active users in the space? Are they truly engaged?
- Dollars. While all of these factors are indicators of whether dollars will be spent in the category, ad spend begets more ad spend. Are dollars flowing into this category?
Each factor helps to make the market and until most of those factors reach critical mass, it is difficult for a big business-model to truly breakout along the lines of traditional display, paid search or television.
In order to determine where each category will go from here, it is instructive to look at how The Big 3 are doing against these 7 factors. To illustrate, I have ranked each factor on a scale of 1-10. When factors are at 3, we still have a way to go. When they reach 5, we’re witnessing a tipping point — essentially the start of critical mass. When they elevate to 7 or beyond, we are looking at a category in maturity.
The goal for each category is to reach 5 across factors in order to make it easier for brands to rationalize the category for their marketing spend and for publishers/providers to monetize it.
5 is a tipping point. Digital display advertising hit that milestone in the late 90s and Search hit it in the early 00s. Each is now a very big business. How will Social, Video and Mobile reach their tipping points?
(**My numbers are subjective, of course. But I would hope that they would generate agreement at least directionally. I welcome thoughts and comments to this post.**)
SOCIAL: LEADING THE PACK
Category score: 5.6
What’s working: Since social networks are essentially made up of user-generated content and third-party professional content being shared friend-to-friend, the Social category has been driven by a close relationship between content and scale. The more people on the platform, the more content is generated. Facebook has over 800 million users and Twitter has over 400 million. All of those social networkers create content every day that drives the ability for this category to prosper. And they aren’t just coming once a month — many Americans are extremely active in their social communities. The result is a huge amount of monetizable inventory that is nowhere close to sold-through.
Data/targeting is also ranked high in social. Mapping the interest graph and harnessing it for ad opportunities has been a business for about to five years now. An ecosystem of networks and third parties companies have been able to harness social data for brand use.
Areas to address: Measurement will have to improve in order for brands to move more dollars into the space. The old adage applies: “nobody ever got fired for buying more television.” Until the industry can demonstrate consistent performance in social channels, this category will continue to be an emerging category instead of the main event. The recent press around lack of performance on Facebook is doing nothing to help this along.
[Note: Social may be off to the biggest start of The Big 3, but it may be an even larger business than the eMarketer number suggests. While the best available figure is $3.6B, that statistic is defined as ad spending on social networks. It is not, apparently, inclusive of the other dollars spent in support of social: listening & monitoring, community management, app builds on Facebook, content creation and the like. With those areas factored in, investment in this space is probably 3x or more. This is important because it’s hard to distill down the entirety of the category to just paid media spend because that entirely misses the point of the Social space.]
VIDEO: ABOUT TO HAVE ITS DAY
Category score: 5.1
What’s working: The number one factor that video has in its favor is scale. Americans are looking for ways to consume video digitally regardless of method: through YouTube, Hulu Plus, Apple TV, Netflix, X-Box and many others. All of that user trial results in user hours and user hours yield inventory opportunity for sellers.
Measurement is also gaining a head of steam as broadcast and digital video buyers look to convert impressions to classic GRPs. While buying against a GRP isn’t the most efficient way to look at the digital video space, it will prove to propel the marketplace forward since it’s the currency favored by the $70B TV industry vs. the nascent $3B digital one.
Areas to address: Standardization is critical because building video units has typically been an expensive proposition for brands. Asset creation doesn’t have to be expensive, but current production norms make it so and this will continue to be the case for the foreseeable future. In order for marketers to make a bigger investment in video content production, standards will have to be put in place (e.g.: the 15 second interactive pre-roll) to enable builds to be streamlined.
Dollars are another issue. While I am making the argument that reaching critical mass against each of the other six factors will help drive ad spend, brands should not be let off-the-hook for moving dollars into a category for testing. Social has seen a solid level of “trial investment.” Video has not been blessed with that kind of pioneering spirit. Given the strength of available measurement capabilities and the results of various metrics themselves (especially compared with broadcast TV), video is woefully and surprisingly under-represented in marketer budgets today.
Finally, while there has definitely been an uptick in content production, more premium content will be needed to truly see dollar shift from broadcast to digital video. This is coming in a big way, but we haven’t reached critical mass for this factor just yet.
MOBILE: THE BIGGEST GAME CHANGER OF THEM ALL
Category score: 3.6
What’s working: U.S. smartphone penetration passed 50% last year. Most of us rarely have our mobile device more than a few feet beyond our reach, so not only do we have critical mass penetration, we also have a highly engaged audience. Therefore, scale is present - audiences are there for the taking.
Beyond scale, there’s not much to laud about mobile…yet.
Areas to address: Where to start? Content creation - relative to Social and even Video - has been abysmal. The greatest success story in Mobile is likely the apps ecosystem fostered by Apple where hundreds of thousands of apps are available for download. This content hasn’t been created from the typical professional producer community, it has instead been made by a network of developers - from amateur to pro - who have taken it upon themselves to build for the space. While there’s nothing wrong with this as a starting (and ending) point, we have only seen the beginning of efforts from digital content producers and we have barely heard at all from movie studios and TV networks regarding their efforts for mobile. But we will.
Standardization has also been holding mobile back. Due to the number of handset makers, carriers and mobile ad networks, we haven’t been able to align on ubiquitous ad units to carry brand messages. And that might just be the point. The current crop of display ad units on mobile devices are intrusions. The coming revolution of location-based marketing will make display look quaint - to both user and marketer alike. Imagine the moment when we will be served messages based on the intersection of our demographic profile, mobile browsing history and current location? Those instances will be ripe with value for both the messager and the messagee.
OUTLOOK FOR THE BIG 3
- The Big 3 will drive the marketing industry for many years to come. So much so that five years from now, we will hardly use terms like “Social” and “Video” and “Mobile.” Why would we when all of it will be seemingly everywhere? Television and digital video will morph into one another. Mobile and the web will be synonymous even if their very definitions change. Social will be a catalyst to even more content production and consumption - and will continue to drive usage of other media as well.
- Brands that understand the interplay between the three will succeed. Those that don’t, will wither. In this new world order, we don’t build Social, Video or Mobile strategies, we build marketing strategies with the knowledge that people consume in these channels in unique and multifaceted ways. Today’s landscape is eerily reminiscent of the early days of digital (circa 1996) when traditional advertising began to lose its crown to the broader approach of marketing. The Big Three are creating another inflection point where we must relearn what we thought we knew.
- Plumbing will drive growth. Some of the less obvious (and perhaps less sexy) factors will be the biggest catalysts for growth. Don’t discount back-end technology, data/targeting, standardization and measurement in pushing each category towards critical mass. These are, after all, the factors that expedite decisions by marketers because they provide a rational safe haven for budget shift.