Where the $240B Digital Ad Market is Going

Early in my career, one of my mentors told me, “Ads are lazy marketing.” It stuck with me this long because it was a reminder to exhaust all other options before resorting to the simple solution. But really, it was meant to reinforce the point that advertising isn’t a scalable marketing strategy.

Advertising doesn’t scale because ads rarely get shared. You can only get out what you spend with an ad platform.

I’m not saying I’m above ads. I understand why US digital ad spending is expected to hit $239.89 billion in 2022. Self-service ad platforms (Facebook, Google, and Amazon) got really good at targeting consumers. The specificity with which you could launch a Facebook campaign was scary. It almost felt illegal… Ironically, now it is.

Privacy At An All-Time High

Five states (CA, CO, CT, UT, and VA) have passed consumer privacy laws in the last two years, and a federal bill is in the works. Furthermore, privacy-first software is being integrated into our browsers and phones at an alarming rate.

In early 2021, Apple started prompting users to decide if they wanted to allow each app to track their behaviors across other apps and websites. An astounding 96% of US iPhone users opted out of app tracking.

Starting in 2023, Google Chrome will begin phasing out 3rd-party cookie support with a complete ban on them by the end of 2024.

All of this culminates into an advertiser’s worst nightmare. Rising ad costs with worse performance:

• The cost to reach 1,000 consumers on Facebook has tripled in the last 24 months
• Targeting and attribution performance has deteriorated by 30-50%

We’re quickly approaching the end of an era where digital advertising was cheap and effective. Browser and phone-based advertising will never be the same. The smart thing is to find a new home for your ad dollars.

Where Digital Ad Dollars Should Go

When we talk about digital ads, there are three primary platforms we’re talking about: Google, Facebook, and Amazon. Other the last few years, their market share has consistently hovered around 63-65%. Interestingly, in just four years, Amazon will have nearly doubled its share of ad revenue.

But what other angles are there to take? What ad opportunities lie outside of Google, Facebook, and Amazon?

OTT (Over-the-Top) and CTV (Connected TV) are the front-running ad platforms of the next decade because they collectively provide the reach of Facebook/Google without sacrificing the programmatic capabilities that traditional TV lacks. OTT includes streaming services that offer ads like Hulu and soon Netflix. CTV includes media players like Roku and Amazon FireTV.

Localized marketing will see a resurgence. Because location-based tracking and geofencing campaigns can provide targeted marketing while still obfuscating personally identifiable information, this form of tracking may be able to survive.

Grassroots community marketing will take precedence over influencer marketing. The key to community marketing is finding people with a certain amount of gravity to their actions. I caution against calling them local influencers because they don’t act like influencers in the proverbial sense. Rather, these are trusted and respected local leaders and professionals who can get swaths of their communities to show up at an event or download an app.

Build where no one is building. Now is also a great time to start testing in places that have either gone forgotten or haven’t reached a critical mass of ad buyers yet.

• Roblox is paving the way for metaverse ads and has already proven immensely successful in brand discovery campaigns. The first brands to figure out how to convert customers in Roblox will have a clear advantage for months, maybe even years.
• Shopify is another platform that I would focus my efforts on. There’s a Shopify extension for everything. Getting good at using plug-ins for capturing first-party data and also for retaining customers (such as review plug-ins) is an overlooked art. (I still think there could be more innovation on Shopify and believe that ad tech will get savvier at building on this platform.)

Overall, I speak with many business owners and CMOs who have been decimated by the rising costs of digital advertising over the last couple of years. Many of them feel lost because they over-indexed on using the Facebook Ads platform. They relied too heavily on the tool instead of the strategy.

That’s why in addition to finding new places to park digital ad money, it’s imperative to reinforce the need for consistent creative production. Ad platforms made it possible to thrive with a couple of ad variations. But as targeting gets more difficult, those with the larger archives of creative will win because they have the optionality to dial in their messaging. Now is the time to double down on creative and content production.