Setting The Record Straight: The Battle For Ad Dollars Is Fierce—Consumers Are The Winners
Recent commentary on the digital ad space ignores the robust competition between advertising platforms, online and offline. The facts are clear: The competition for ad spend is heating up, driving down costs and benefiting consumers.
—Ad tech is a burgeoning sector—so much so that publishers are getting in on the action.
—Digital advertising and ad tech prices are declining in a competitive market, saving advertisers—and ultimately, consumers—money.
—Digital advertising is just one piece of the larger advertising landscape, and competition between ad channels is fierce.
Check out the research below.
Ad tech is a burgeoning sector—so much so that publishers are getting in on the action.
Ad tech platforms are seeing great success, including:
—The Rubicon Project, which reported second-quarter revenue up 32% year over year; and
—Demand-side and data-management platform operator MediaMath, which raised more than $500 million at a valuation of over $1 billion; and
—Indian ad tech firm InMobi, valued at $1 billion, which seeks to rival larger digital ad players in the U.S. and internationally.
Publishers are entering the targeted advertising space for themselves.
Advertisers aren’t locked into any particular ad tech provider. In a November 2018 Advertiser Perceptions report, U.S. advertisers reported using an average of 2.8 demand-side platforms each over the past year. Publishers used an average of six sell-side platforms each, according to a 2019 Advertiser Perceptions survey.
Fees are dropping in this competitive market. Ad tech fees paid by advertisers as a percentage of programmatic display ad spend are down, and are projected to continue to fall into 2021.
Digital advertising prices are declining in a competitive market, saving advertisers—and ultimately, consumers—money, argues the Progressive Policy Institute’s Michael Mandel.
Source: Progressive Policy Institute
Advertisers and consumers are the beneficiaries of “more productive” digital advertising, notes Mandel. “We calculate, based on several assumptions, that for every $3 that an advertiser spends on digital advertising, they would have to spend $5 on print advertising to get the same impact. In the economic sense, digital advertising is more productive than print advertising. The benefits of these lower prices flow directly to advertisers and consumers.”
Digital advertising is just one piece of the larger advertising landscape, and competition between ad channels is fierce.
Advertising purchasers are buying access to the consumer’s attention through competing channels, not merely advertising space, argues the International Center for Law & Economics’ Geoffrey Manne. “It is inaccurate to think of advertising as a traditional, linear market in which a set of buyers (advertisers) purchase a product (advertising space) from a set of sellers (advertising platforms). Instead, advertisers seek to influence consumers, and platforms enable and intermediate the interaction between them. That interaction, of course, typically requires that consumers pay attention to the intermediary’s platform. Much of what advertising intermediaries sell to advertisers is the promise of access to consumers’ attention. And while there is no dearth of advertising space, consumers’ attention is finite and limited.”
Online and offline channels can substitute for each other, competing for dollars in advertising budgets. The University of Toronto’s Avi Goldfarb and MIT’s Catherine Tucker find that advertisers “should be able to substitute relatively easily” between online and offline advertising channels. “These results suggest that the online advertising channel does substitute for the offline channel. From the advertisers’ point of view, they get more value from online display advertising when the potential customers do not see any offline billboard advertising. While we do not measure the exact strength of substitution between online display advertising and offline display (billboard) advertising, our evidence strongly suggests that advertisers should be able to substitute relatively easily between the two channels.”