Greeting as usual from London.
A topic that crops up all the time and something I am asked about frequently by members is the area of ad tech.
As we become more data focused in terms of our offerings to advertisers, we are all becoming more and more involved in ad tech. How do we choose the right partners? What should we be looking for? Do we understand the world of ad tech and what the companies in that space are thinking?
And what areas of advertising are now trending that should help us choose where to focus our efforts?
I am covering two areas in this latest newsletter: one looking at those latest trends and then a glimpse inside the world of ad tech companies to get an “under the hood” view on what to look out for.
I begin with trends.
Ad tech trends
Technology in just about every industry is all evolving at a faster rate than anyone thought possible. That is especially true for the advertising industry.
The global advertising industry hit nearly US$400 billion in ad spend last year. And whilst in 2022 we may well be heading to a global recession and a consequential downturn in ad spend, there is still a huge amount of money on the table we can’t afford to ignore.
Below, I highlight some of the major advertising areas trending, which are influencing focus of our resource and expertise, and which show where the media is industry is currently with some insights into where the overall advertising industry is heading.
1. Social media advertising
Businesses in every vertical are recognising and responding more than ever to the value exchange proposition between customer and media company. Particular interest lies in and around social media channels.
Many media businesses are somewhat shifting their focus on automation and technology tools to better engage with (social media using) customers, improve response rates online, as well as gain valuable insights into how effective their daily operations are … and possibly could be.
2. Extended Reality
Extended Reality (XR) is a combination of Augmented Reality (AR), Virtual Reality (VR), as well as Mixed Reality (MR).
Extended Reality has huge potential to assist media businesses (and their advertisers) in engaging audiences, hone customer perceptions (especially of products and services), as well as provide interactive, consumer/data-driven advertising solutions that could transform advertising overall.
3. Machine Learning (ML)/Artificial Intelligence (AI)
ML and AI are helping advertisers gain deep insights into things such as prediction of risk, pay-per-click (PPC) campaigns, and helping advertisers shape finely targeted e-mail campaigns.
Chatbot-generated content is, for example, a tool that is much more than a trend now, helping media businesses guide their customers through the sales funnels and enabling them to carry out impactful, direct response marketing as part of the company’s advertising strategy.
4. Virtual tech
The global pandemic forced most advertisers to make dramatic pivots in operational procedures. Many employers found in the challenging COVID era that workers are just as effective and inspired to work at home as they are in the office.
Many media companies, advertisers, and associated bodies (such as INMA) chose (and some are now continuing to choose) virtual meetings and conferences, which help cut down on the overhead costs of running an event without losing any required communication/impact/customer experience.
5. Digital advertising
Digital advertising resources generally suggest that media businesses and advertisers can get many more leads by having an online presence via a simple blog.
Marketing and advertising companies have been focused on “boss-ing” the online advertising world and now, consumer behaviours online will continue to shape and influence the media advertising industry as a whole.
Building a Web site and developing an online presence can be tedious, but there are some incredible tools and techs that can help you grow your online presence and your media business at the same time. Many tech service providers offer intuitive online visual content services to help build a professional, user-friendly Web site.
In essence, being aware of current and future advertising trends is vital for each media company and advertising brand alike to survive in today’s fast-paced, ever-changing world.
Technology and advertising continue to go hand-in-hand now and into the future.
However, it’s not all rosy in the garden. There are some concerns around developing the above trends, which we need to consider when tasking steps to partner with ad tech companies who can help us.
We need to understand their world, too, and what concerns there are in and amongst the companies in the space before we commit our “eggs to their basket.”
Ad tech companies: concerns news media companies should know about (to make the right choices)
The world of ad tech in some cases will continue to show growth in 2022 and beyond. Nevertheless, many of the companies in the space are showing signs of concern.
There are a number of signals demonstrating why, which publishers should be aware of as it could well affect them down the road when choosing their tech partners. That means it will also affect our advertisers.
It’s wise to know what those concerns are as it will help you know the questions to ask before making partner choices. They are:
1. A coming recession
Many economies around the world are currently shrinking. And while most are not yet officially in a recession, it’s all not a good signal for the advertising market in the short to medium term.
The obvious math is that when customers spend less money, our advertisers spend less, too, to reach their audiences. When advertising spend is lower, ad tech spend is less, and margins are consequently reduced. And ad tech companies now find themselves having pressures around their own profitability.
2. Revenue reductions at main platforms
When the main ad tech platforms have year-on-year revenue reductions, there is widespread concern. Meta is now seeing this (the first time in Facebook’s history). It’s never going to be great news for the rest of the industry. A signal to be cautious?
3. YouTube sees smaller than anticipated revenue growth
Revenue at the largest ad-reliant (video) platform is currently only growing with inflation. However, considering YouTube is in many people’s eyes at the core of the future of Connected TV (CTV) and streaming ad markets, it’s interesting to note that both of these are still booming in many cases in comparison.
4. Programmatic spend is under pressure
Whilst programmatic ad capabilities are good at aiding brands ramp-up ad spend rapidly, the same goes for it easily ramping down their spend, just as quickly.
There is also the fact that some INMA members have suggested to me that, post pandemic, the role of the media sales person has resurrected itself and clients wish to engage face-to-face more, even if programmatic is here to stay.
5. E-commerce slow down
The e-commerce share of total retail spend is currently falling (post pandemic). Customers are back in the high street, buying again in physical stores. That’s exactly why self-service, direct to customer (D2C) e-commerce giant Shopify recently reduced its staffing levels by around 10%.
Again, the simple math is that a reduction in online shopping means fewer ads (that drive online purchases) and further pressures on ad tech companies providing these services.
That’s not to say e-commerce is not important to many publishers right now and to be avoided. But it’s something we need to look at when choosing partners carefully.
What are they offering? What revenue shares? What fees if any? Shop around. Be sure to balance revenue potential/guarantees with as tech capabilities.
6. Mergers and acquisitions under pressure
The final signal is that ad tech companies are typically funded via venture capital. This leads to the fact that there is a need to do one of three things ultimately:
- Sell to a strategic buyer.
- Go public.
- Sell to private equity (to then be managed/sold again).
Most of any buying that happens over the next couple of years is likely to be more about buying value (cheaply) as opposed to paying a strategic premium.
We’ve all seen this scenario before: the dot-com bubble burst, the ad tech public market collapse in the early ‘00s, even 9/11. The ad tech industry and the well-managed companies within will all be fine. But many are not well managed — and will suffer.
Hence, when choosing ad tech partners, we need to be cautious and beware of the pressures the companies in that space are under.
Further reading on ad tech
- 12 tech trends to tatch in 2022. Free report.
- Tech giants dominate the adtech industry.
- Digital ad tech: the complete guide.
- Could ad tech drive net advertising industry to $1 trillion by 2030?
About this newsletter
Today’s newsletter is written by Mark Challinor, based in London and lead for the INMA Advertising Initiative. Mark will share research, case studies, and thought leadership on the topic of global news media advertising. Sign up for the newsletter here.
This newsletter is a public face of the Advertising Initiative by INMA, outlined here.