Faced with a difficult digital ad market that's becoming increasingly dominated by Facebook and Alphabet's Google, some bigger publishing companies are making moves they hope will start to even the playing field for content providers.
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Their plan, at its simplest, is to try to be a little more like Facebook and Google. Companies like News Corp., whose publications include America's biggest newspaper in The Wall Street Journaland the U.K.'s biggest paper in The Sun, are beginning to work with third-party agencies to make the data they've been collecting from their readers available to advertisers.
This would allow advertisers to target their ads at specific user groups. Granted, these probably won't be as specific as Facebook or Google can offer, since those platforms collect vast amounts of data on a vast amount of users. (Each platform can boast well more than 1 billion users.After all, people have come to rely on those two services as near utilities in everyday life.)
But by offering up the data they do have, these publications would be far better off in their ability to deliver more relevant ads to the right readers. It also could mark the beginning of a significant change in thinking at legacy media operations.
A needed changeThe type of standard display advertising used in print editions of newspapers and magazines never proved very effective online. Making matters worse for those publishers, Google and Facebook have helped to make it continually more ineffective over time, at least in comparison to the approaches to digital advertising those two companies have spearheaded. As the social network and search giant collect an increasingly massive trove of data on their users and figure out more effective ways to use it to deliver the right ads to the right users, standard display ads look more archaic with each passing year.
This has left publishers in an unfortunate predicament: They bear the costs of providing the news and other content that scatters across the Web, comes up in searches, and gets shared across news feeds. But the companies that facilitate the access have been snatching away an increasing amount of the advertising that had been funding the news gathering and content creation.
Indeed, in 2014, Google and Facebook -- just two companies -- combined to control more than half of the $50 billion digital ad market.
The publishers also must contend with shrinking ad revenue from their legacy publications. While digital ads made up about 28% of the total $175 billion spent on media advertising last year, that share is expected to rise to 37% of the total by 2017. Ads in print publications, meanwhile, will continue losing share. In 2012, print ads still made up more than 20% of all media advertising. By 2018, that's expected to be down to 14%.
What does the future hold?This has left a large majority of publishers falling continually further behind the leaders in this game. A recent report by Signal showed that some 80% of publishers today believe that they cannot compete with Facebook and Google for digital advertising without significant change to the technology that's available to them.
Views about how this market will shake out over time vary. It remains possible that the digital ad market will become increasingly more fragmented as publishers and third-party ad agencies develop better ways to reach Web -- and particularly mobile Web -- users.
Edward Menicheschi, president at publishing giant Conde Nast, recently spoke with Digiday about the company's plans to more aggressively pursue ad targeting, and he remains optimistic.
"There are certain advantages that legacy media companies have especially because of our subscriber files, tens and tens of millions of them," Menicheschi told Digiday. "We're in their homes; we know them."
The publishers face an uphill battle, to say the least. Convincing advertisers that they know their audiences as well as digital ad behemoths like Facebook and Google won't be easy. But if they can deliver good ad performance, they may be able to start clawing back more of the advertising dollars that had been steadily drifting away to search and social media.
Remain skepticalThe research firm eMarketer, however, sees Facebook and Google maintaining their combined share of the market as it swells by more than 60% to more than $80 billion over the coming three years.
And a recent report from Goldman Sachs paints an ominous picture for publishers, or really any company banking on digital advertising that is not Facebook or Alphabet. Their analysts foresee major consolidation in the coming years.
These large publishers' experiments with ad targeting could give us an early look at whether we can expect a shift to a more hospitable ad environment for the legacy media. But like the advertisers who sign on, we should remain skeptical until we see proof that it's working.
The article Should Facebook Inc. and Google Be Worried About This Ad Push? originally appeared on Fool.com.
John-Erik Koslosky owns shares of Alphabet (A shares) and Facebook. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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