In May, Mary Meeker presented her 2017 Internet Trends report at Code Conference. Today, we’ll explore the Online Advertising section of the report.
Ad Growth is Driven by Mobile
Digital advertising is growing at faster and faster rates. While desktop and mobile advertising do contribute to the growth at similar rates, mobile is accelerating more quickly, approximately doubling its 2015 contribution in 2016.
Mobile is one of the few media platforms and channels seeing increased time from consumers (28 percent). Mobile advertising spend is not increasing as quickly as user time, and comes in at only 21 percent.
Digital advertising spend is on course to outpace television advertising spend in 2017, and is quickly approaching $200 billion.
Most of that growth can be attributed to advertising on Google and Facebook, which has an 85 percent (and rising) share in internet advertising growth.
Ad Measurability Improves Targeting and Reveals Inefficiencies
Advertisers like metrics that measure engagement, and use them at a rate of 56 percent. However, they find it more difficult to measure return on investment (ROI), and more than 60 percent name it as a top challenge.
Users aren’t always thrilled about the data advertisers are collecting. Ad blocker use is on the rise for both mobile and desktop (especially in developing markets), and at accelerating rates.
The leading platform ad offerings are improving rapidly with data collection, measurement, targeting and delivery of the ads that users actually want to see. Namely, Facebook has Delivery Insights, Google has AdWords and Snapchat has Snap Ads.
Pinterest has Targeted Pins, which are boosting both browsing and buying by more than 10 percentage points.
Of Facebook users, 26 percent who click on ads go on to make a purchase. Only 7 percent of those who don’t click on ads make a purchase.
Clever approaches go beyond the ads themselves. Snap Ads and Gatorade partnered on a campaign in which users swipe through ads to get to a web game. Geo-targeted local ads on Google drive foot traffic to stores, and store visits have increased five-fold.
Apps like Uber and Foursquare use data on locations, routes, destinations and times of day to make recommendations, as well as special offers. Hyperlocal targeting can even predict where and when people will make purchases on their commute between home and work, for example.
Incentive-based and skippable video ads are driving positive interactions. More than half of respondents have a positive attitude toward these types of advertisements.
In-app ads using dynamic creative with video and images from the Vungle platform installation performance.
Of course, data can also expose ad inefficiencies, and highlight how ads aren’t in the right place at the right time. Companies have learned through data that user-typed input (words) and user-uploaded input (images) can boost business. Google and Snapchat use algorithms to capitalize on connecting both types of user input with relevant ads. The future of search is expected to be more about pictures than words.
Ads are Rapidly Evolving
Emerging retailers and crafty big brands are finding ways to make collaborative ad creation (using social media and user-generated content) work for them.
Effective user-generated content can generate almost seven times as much engagement as brand-generated content on Facebook. Several brands use user-generated content on Instagram too, and are seeing a great deal of engagement. Influencers and celebrities can also drive engagement and impact follower counts.
Retailers and brands are also making use of images, video, data, algorithms and voice in advertising. For example, on the front-end of image-based platforms, tapping, augmenting and taking pictures can replace typing. At the back-end, algorithms infer user context from those images, providing relevance for advertisers.
On the front-end of voice-based platforms, voice can replace typing. As of spring 2016, 20 percent of mobile queries were made via voice. In May of 2017, 70 percent of Google assistant requests were in conversational language. For the in-home versions, these trends are broadening the skill level of such devices.
At the back-end of the voice-based platforms, voice recognition continues to improve and reach human-like levels of accuracy.
Ads as Targeted Storefronts
The lines between ads, content, products and transactions are blurring quickly. Whether we’re talking browsable content in a Facebook feed or curated content in an email, content is the new storefront. On some ads you can tap to book or swipe up to buy, turning the ads themselves into transactions.
Social media is raising the bar for product quality, customer support and transparency in a time when consumers have decreasing tolerance of bad experiences with brands and want to know how things work behind the scenes. In fact, easier access to online support channels is the top-rated way to improve customer service.
Real time online conversations between brands and consumers are on the rise, jumping by hundreds of millions between 2013 and 2017.
The report highlights a few specific brands and how they’re creating effective ad strategies. Strong user communities, online-offline synergy, innovative products, selections limited for simplicity and relationship-driven experiences are just some of the tactics driving revenue, customer growth and more.
E-commerce is Changing Consumers’ Lives
We see e-commerce booming in and around consumers’ lives as it grows 15 percent year over year. Parcel volume in the United States is up 9 percent year over year. Apartment building lobbies look like warehouses, and we see videos of people opening packages as a form of entertainment online.
Home meal delivery is replacing going out to restaurants, and data and algorithms can recommend favorite products or anticipate what customers might like to buy.
In the stores themselves, augmented reality might help shoppers find items, yet physical stores close at record rates while Amazon and other digitally native brands expand physical footprints and subscriptions. In fact, Amazon is now a leading supplier of its own brand of diapers and batteries.
At the same time, offline retailers like Walmart (which has a store within 10 miles of 90 percent of people in the US) are starting to get aggressive with their online presences.
Online advertising and commerce are changing rapidly, and products and consumers are finding each other more easily. Are you ready to keep pace for the remainder of 2017?