What do popular TV channels, newspapers and magazines have in common with social networking Web sites like Google and Facebook? The answer is advertisements. Revenue from advertisements pays the bills and keeps the content and services running for all the media mentioned above.
On an average, television advertising spend is thrice the amount spent on internet advertising. Similarly, ad-spend on newspapers is higher than that on the internet. However, internet companies making inroads into the highly-competitive advertisements space are posing a big problem to TV and print media.
Companies like Google and Facebook have been grabbing increasingly bigger chunks of ad-spend over the last few years. Worse yet, online players are in better financial shape to compete on new-age platforms such as tablets and smartphones. Google and Facebook earned 96 and 87 per cent respectively of their revenue from ads.
QUICK DIFFERENCES
Although the two types of media are vastly different, their strategies can be strikingly similar. Google's popular AdWord's text ads are akin to the classifieds appearing in newspapers and magazines. These text ads flank your Google search results, Gmail inbox and several other Web sites as you browse through them. They are popular, cheap and reach a huge audience. But these text ads aren't terribly captivating ways to stand out in a crowd.
Enter display ads. More colourful and engaging, these ads are the new battle turf for reigning ‘numero uno' Google and the relatively new kid on the block, Facebook. Display ads aspire to be the web equivalent of sizeable print or TV ads.
Think about which ad for a glue brand sticks to your mind. Would you remember a 50-word ad on the corner of a Web site or an entertaining TV ad set in a rural milieu? Advertisers looking to stand out online and willing to spend a little more moolah would choose display advertising to capture the viewer's attention.
In a growing economy such as China or India, growth in ad revenue could keep both groups happy. But in a developed market, growth for one medium is likely to come at the expense of another. Increasing competition in the domestic online retail space has also spawned more aggressive online ad campaigns. Flipkart, Myntra, Jabong are a few Web sites which have been relentlessly campaigning through online ads to lure users. These ads are cheaper, reach a focused audience and attract a more relevant buyer segment than a more generic print or TV campaign.
KNOWLEDGE IS MORE ADS
Traditional ad spend is generic by build. Let's consider the case of a company that chooses to advertise with Newspaper X in City Y. Its target audience is restricted to the reader base, which maybe a million strong and range in the 20-50 year age group. What the advertiser might lack in precision, he will hope to make up with sheer volume. This is the case with telly ads too. When a car or a soft drink company plonks down big money for 30 seconds of air-time between snatches of an IPL match, it hopes that enough aspiring car buyers and soft drink guzzlers watch the spot and rush off to buy a car or a bottle of soda! At a minimum, when you pass by the showroom or grocery store the next time, those brands you saw on TV evoke some sense of “I saw that...I liked that... I want that”. It's an abstract concept with a little bit of science thrown in to justify the big bucks spent.
So how do Google and Facebook make it work?
The latter has 840 million users who spend seven hours a month willingly submitting personal details, clocking in their likes and sharing articles on the site. The estimated seven hours a month spent on the site gives advertisers a higher chance of striking potential buyers with engaging content than on a ‘need-to-search basis ad suggestions' a la Google.
Armed with vast amounts of consumer data, companies with a significant online presence seek to apply these insights to produce more relevant and immersive advertising. Amazon has over 15 years of accumulated data about people buying and selling books, electronics or personal items. Google has its Search, Mail, Chrome and other services to funnel data into Adwords, AdSense and AdMob platforms.
Similarly, Apple has the iOS range of devices registering user data for the iAd platform. Microsoft hopes its Windows 8 platform can give it a foothold in the mobile space, which will eventually bring in users and their data through Bing, Internet Explorer and other apps.
Ironically, for all these players, striking gold would require something more than just their current treasure trove of personal information. They need to increase the time spent by users on engaging content offered by old-school televisions. Case in point, Apple's rumoured efforts to manufacture a television set, which will offer users their iOS software and a platform to spend much more time on than they do on a tablet or a smartphone.
The challenge that remains, for most, is to figure out a way to get even more users on board than they already have and get them to use their devices for longer than they ever did.