The start of the year is always the time when we see surveys and reports summarizing what happened in the previous year. These help us understand where we are now and often identify trends that help us plan ahead. This January saw the publication of Econsultancy's "Online Advertising Survey for 2013." Econsultancy carried out similar, but not identical, surveys in 2009 and 2011, enabling it to examine some trends over a four-year time period.
A commercial research and training organization headquartered in London, Econsultancy advises many top-line international brands on digital marketing and ecommerce. The survey was sponsored by Rubicon Project, a real-time bidding (RTB) ad exchange for online display advertising headquartered in Los Angeles. The survey had more than 1,000 respondents, mainly from the U.S., U.K., and other European countries. The companies from which the respondents came were an equal mix of publishers, advertisers, sales houses, and advertising agencies. A quarter of these companies had turnovers under $1 million, while 20 percent had turnovers exceeding $150 million, with the rest scattered evenly in between.
Advertiser business sectors represented in survey.
In this article, we'll examine some of the key trends that emerged in this latest report -- as well as areas where trends seem to be staying the course from previous years. But first, let's discuss the survey itself in more detail.
About the survey
It's important to bear in mind who ran this survey when you read it. Econsultancy is a general digital consultancy, so it's not wedded to a particular channel or approach. The main sponsor, Rubicon Project, on the other hand, bases its unique selling propositions on data mining and cloud technology to drive automated ad placement and pricing. It competes with search advertising and performance-based and social media marketing. In my view, this has seriously compromised the scope of a once-great survey. This year's survey contained many questions that basically boil down to asking which of Rubicon's sales pitches you like the most. In my view, this year's survey is less the general assessment of the industry it purports to be and more like market research for Rubicon's sales department.
The report was authored by Econsultancy's Amy Rogers, who defended this approach when I asked her about it. "The aim was to form a picture of the online advertising industry as a whole, with a focus on real time bidding." Rogers said. "RTB is one of the most interesting and discussed current trends in online advertising, so the survey was tailored to gain insight into the use of, and options surrounding RTB in 2013."
With this background in mind, let's move on to examine the major findings.
The overall picture presented by the survey confirms what most of us already know: Things have stopped getting worse, but it's still tough out there. It looks like things have picked up a little, but not much. The percentage of advertisers who reported rising spend rose from 57 percent in 2009 to 64 percent by 2013. It's an improvement, but it's hardly sign of rampant growth. In fact, it could be nothing more than the continuing movement of ad spend from traditional outlets into digital, a trend that has been evident for over a decade.
There's no real consensus on whether prices are rising or falling, with roughly equal numbers of advertisers reporting rises, falls, and no change. This suggests that whether an advertiser is seeing an overall rise or fall in the prices they pay is more about factors specific to them, such as location or industry, rather than general economic circumstances. The lesson here is that general economic trends have very little to do with your own particular prospects.
The survey devoted a lot of space to channel mix, comparing social, search, display, and video. In most of the channels surveyed, roughly 10 percent of advertisers have decreased spending while two-thirds of advertisers have increased spending. The exception is search advertising, where only half have increased spend. While these patterns are not absolutely identical to those of 2011, there's not that much change. What we're seeing is signs of increasing stability in the channel mix advertisers deploy, with less companies moving money from one channel to another as more people develop a mix that works for them.
Response to the question: Has your spending on any of the following channels gone up or down in 2013?
The report does highlight that 24 percent of companies moved spend from search to Facebook in 2013, which it claims indicates a continuing move from search into social. However, it didn't ask how many had moved spend the other way, from Facebook to search, so we've no way of knowing whether there really has been a change.
Response to the question: In the last year, have you implemented any of the following channel shifts?
Every advertiser's channel mix will vary to some degree each year, as campaigns and targets come and go. 2013 certainly saw signs of rising discontent with Facebook advertising, so it's likely some people moved spend the other way. We also need to bear in mind that the overall spend on search is still rising. Kenshoo's survey of U.S. search advertising shows annual growth of 10 percent in search spend at the moment. Some of this is coming from increased budgets, but some of it is being sucked out of other channels. In my view, the Econsultancy survey does nothing to prove that search is declining in favor of social.
The survey does ask about both sides of the picture when looking at search vs. display advertising. It asked how many people had moved spend from search to display advertising and how many people had gone the other way, moving spend out of display and into search. Roughly one-quarter had moved money from display to search while roughly one-eighth had moved money the other way, increasing display at the cost of search. So for every person who's dropping search in favor of display advertising, there are two moving in favor of search.
I think the fairest conclusion is that the report lacks enough data to draw really strong conclusions about trends in channel mix or whether people really are leaving one channel for another. Often confusing pictures simply mean there are no clear trends, and that might be what's happening at the moment. What is clear is that there's more money in the system, and people don't always spend it in the same way every year. It's also clear from other surveys published recently that mobile is the biggest growth area right now. I suspect most advertisers are more focused now on how to get all their channels to perform better on mobile and less concerned about whether their channel mix is the best possible. Right now the focus is more about device mix than channel mix.
Much of the survey is devoted to display advertising, which just happens to be what the survey's sponsor, Rubicon, sells. There are no detailed questions about search, social, or any other channel. According to Econsultancy's research director, Linus Gregoriadis, Econsultancy "included suggestions" from Rubicon in this section of the survey. This might explain why it asks what you like about display -- but doesn't ask what you dislike. I tried to determine just what, if anything, this section of the survey contained that had not been "suggested" by Rubicon, but Gregoriadis declined to provide more specific information. We'll never know the degree to which the sponsor dictated the questions Econsultancy asked, but it's important to note this uncertainty if you're thinking of spending the considerable amount required to buy the full report. That being said, display is an important channel, and so the information it does provide is worth reviewing.
Response to the question: Has the price of display advertising gone up or down in the last year?
There's no real trend in display pricing. Roughly equal numbers reported rising or falling prices. The U.S. had the most even mix of prices rising, falling, and holding steady, with roughly one-third in each. France had the largest number of companies reporting rising prices, at 50 percent, but even here one-quarter said prices had dropped.
One the other hand, while there's no trend in pricing, there's a clear trend in overall budgets -- which are rising. The percentage of companies seeing a decline in spend on display advertising has dropped from one-quarter to one-eighth, while the percentage of those seeing growth in display ad spend has risen from just over half to just under two-thirds.
The greatest levels of growth have been seen in France, with almost 90 percent of companies experiencing growth, followed by the U.S. (77 percent), while Germany is the most flat at 55 percent. Germany certainly seems like the toughest market, with one-third of companies seeing a decline in spend. By contrast, no U.S. respondent reported a decline. Given the previous data, this suggests most companies are spending more on display because they have larger overall budgets, not because they're pulling money from other channels. In fact, the overall evidence in the survey shows that while display is getting some of the extra money, other channels are getting more.
Here publisher behavior appears out of sync with advertiser circumstances. While advertisers in the U.S. have growing budgets, publisher prices are mainly static or in decline -- perhaps a missed opportunity for publishers. The lesson for publishers (advertisers, look away now): Go out there and raise prices; there's money for the taking.
With sponsors Rubicon being big on data mining and RTB systems, it was perhaps inevitable there would be some questions about the use of data mining in ad placement. That being said, there's a great deal of talk about data mining at the moment, so it's worth looking at what the report has to say. Generally, most people use some data from somewhere, frequently a mixture of their own data and that of others, but around one-third of ads are placed without data services. The report states that the use of data mining is increasing, but it doesn't provide any figures from previous years to support this claim. That being said, there's plenty of evidence from other sources to support this.
Things are looking better for publishers than for advertisers, with three-quarters of publishers reporting a rise in ad revenue and only one-eighth a decline. No doubt very disappointing to Rubicon, three-quarters of publishers still sell their inventory directly rather than through networks like theirs. Rubicon might also have been disappointed to find only one-fifth of publishers use data mining for ad targeting. Those who do use it say they are doing so primarily to segment and sell more precise audience bundles for which they can charge higher prices.
It's not all positive though. Almost half of publishers report problems with their data not matching that of their clients, while another quarter have problems providing accurate or timely reports to advertisers. Arguments over data are well established as the most common complaint in RTB systems, either regarding discrepancies between buyer and seller data or simply problems either side experience getting the exact data they need.
Publishers response to the question: Do you sell audience extension packages?
The aspect of digital advertising that received the most public awareness in 2013 was audience extension packages, in which publishers gather data from, and place advertising in, third-party outlets. It's this activity that consistently attracts the most negative press, which has been increasing as privacy concerns have risen among consumers. Yet the survey reveals there has been no growth in this area at all for the last three years. One in five publishers surveyed do it, which is the same as it was in 2011. More people say they intend to than previously, but the signs are this is more due to increased awareness of the option than genuine intent.
The overall picture conveyed is cautiously optimistic. There's certainly more money being spent on digital advertising this year, but it's not causing a general rise in prices. In fact, it looks more like a buyer's market, with publishers competing for advertisers. Channel mix is still fluid, but we're seeing early signs that people are settling down into reasonably stable patterns that work for them. Both social and search are still growing, but at lower rates, while display advertising continues to decline. Within display, RTB is taking a growing share of a shrinking pie, which might be helping to keep prices down.
The press loves exciting news -- disruptive events, changes, new opportunities or threats. I am therefore a little disappointed that I must finish with quiet reassurance rather than dire warnings. My reading of this survey is that there has been no real change in the trends of the last few years. There are no game changers around, no disruptive channels bursting onto the scene. The environment we've been in for a while looks likely to operate as it has been for the year ahead. What the Econsultancy survey shows is that the trends we've been aware of for the last few years are the only ones we need to worry about in 2014.
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