Digital Privacy and Who Pays for the Internet?

I missed this great piece on the tension between digital privacy and firms on Madison Avenue from Brian Chen of the New York Times when it was published late last month.

Chen summarizes the recent privacy changes implemented by FANG companies and the impact on the effectiveness of digital marketing for big and small businesses.

In April Apple implemented the ability to turn off tracking for particular apps on iOS devices. Google announced plans to block cookies to its Chrome web browser in June. And Facebook announced last month plans to target ads to users without knowing any user specific information.

These changes have come about through a willingness of governments to regulate big tech more, the most well-known example being Europe's GDPR legislation, and through shifting consumer preferences toward privacy.

However Chen rightly points out that this change impacts the effectiveness of digital marketing spend, providing the example of Georgia pastry shop Seven Sister Scones whose Facebook advertising became significantly less effective after Apple's iOS changes, resulting in a drop of monthly revenue from $40,000 to $16,000 in May.

Naturally the implications here are that if digital marketing becomes less effective, then naturally more spend is required to sustain the same conversions and revenue, and thus cost of acquisition increases.  For businesses with tight margins, this may mean switching to more traditional forms of marketing in preference to digital, or if that is untenable, price increases.  Indeed, Seven Sister Scones raised prices 25%.

In this respect, these privacy changes couldn't come at a worse time for the economy, as treasury bond yields begin to increase and inflation fears begin to take hold. 

Advertising revenue sustains a great deal of the internet, so the question becomes - if digital marketing becomes too expensive, who pays for advertising-supported digital products and services?

Native Advertising Projected for Large Growth

Emarketer, a leading market research firm, released its most recent projections for native advertising spending in 2015.  According to the firm, marketers will spend nearly $4.3 billion on native advertising alone in 2015, which is a 34% increase over the comparable 2014 figure.  This value is expected to grow all the way to $8.8 billion by 2018, which would represent a near 27% compound annual growth rate.

Major marketers including Ford, GE and HP all conveyed to Emarketer their enthusiasm for native advertising and their intent to significantly increase their ad spend devoted to this format.  In particular, marketers said that this shift of resources is driven by a growing feeling that traditional banner and search ads are not particularly effective tools, and that customers have grown accustomed to looking past those ads.  As a frequent consumer of digital marketing, I tend to agree that the old forms of display advertising are not very effective.  I see 100's of those ads per day, but it is near impossible for me to tell you who are the advertisers "reaching" me via that medium.  Where I differ with the brands is on the effectiveness of native advertising. Personally, I am not a large consumer of native content, but I believe that it can be a much more natural and seamless integration of brand messaging to consumers.  What is uncertain is whether or not it represents a good investment.  Clearly the marketers are of the mind that is an effective marketing tool, and thus the shift of ad dollars.

One last piece that is particularly interesting around this issue is that native advertising is no longer exclusively the domain of new media outlets.  Venerable publications like The New York Times and Wall Street Journal have begun to create departments that are focused on native advertising, which represents a meaningful departure from their traditional policies of keeping content separate from publication economics.  It will be interesting to see if this blurring of the lines of content and advertising is handled effectively by these publications, or if there is some hit to the legitimacy of their traditional content.  In many ways publishers are forced to adapt themselves in order to meet the demands of the marketplace, and in this case it is clear that the market is demanding native advertising.  In the next few years it will be interesting to see if old publishers are able to effectively integrate this new format into their businesses.

Advertorials - Following Up

A few weeks ago I opined that content websites, which only make their money through advertising, should be selling Advertorials, as long as they don't alienate their readers tooooo much.

To remind you, BuzzFeed Ben was called a right winger by a "hater" b/c he sold an advertorial on immigration to the Koch Institute.

In the last few weeks, almost every news organization now agrees with me.  The latest, is NBC breaking news.

Now, these articles have to be done right! You can't screw with your readers as The Atlantic did with its Scientology love fest a few weeks ago.

Not all advertorials have to be controversial.  I heard, that slate published an article that was on its front page, an advertiser liked it, and a week later, the same article was sponsored content and was at the top of the page.  Nothing controversial there.

I think, as they become more and more mainstream, readers will get more and more used to looking for the "sponsored content" indication at the top of any page. 

As a NYT reader, I'll be interested to see how advertorials impact their business.

While BuzzFeed is still the leader, there isn't as big a difference between their decisions and the big news organizations anymore. 

"Tweeting" the News

Online newspapers already have enough trouble developing successful marketing models for their webpages. Now, with the current demand for up-to-the-minute news, the same newspapers are scrambling to keep up with the reporting of social networking sites. As more and more social networking sites penetrate society, many are finding that the sites are developing a speed and reach that rivals some of the best news outlets. PaidContent.org's Brian Solis even referred to Twitter as TNN, the "Twitter News Network," because it is continuing to break news and trends faster than more traditional media outlets.

While better access to news may be good, it also poses some problems. Social networking webpages may have the latest news, but is the "reporting" always accurate? Can a website edited by any individual with an online account really rival the quality of a true staple of the news world like The New York Times?

Interestingly enough, many reporters are now turning to social media sites in their reporting. 55% of journalists sited social media as being either "important" or "somewhat important" in developing their stories, with blogs coming in as the #1 social media info source for reporters and Twitter coming in at #3. Does this mean that the social media users are actually reporting to the reporters? And when putting together their advertising campaigns, where will advertisers choose to put their money--in the struggling online newspapers, or in the blossoming social media industry?


Check out "The Information Divide Between Traditional and New Media" here:

http://paidcontent.org/article/419-the-information-divide-between-traditional-and-new-media/