The advertising landscape has changed considerably over the last decade. This year for the first time ever, companies will spend more on digital advertising than on traditional advertising. This trend is expected to continue and in four years, it is estimated digital advertising will receive over two-thirds of total advertising revenue.
As recently as ten years ago, traditional media such as television, magazines, newspapers, radio and outdoor had the lion’s share of total advertising revenue. Digital advertising only made up about 6% of total advertising revenue which was on par with radio advertising. As smartphones and other mobile devices increased in popularity, the time spent on mobile devices increased from 46 minutes a day in 2011, to 258 minutes in 2018. Newspaper and magazine advertising have suffered the most as consumers shifted their viewing habits to digital media.
So where are all those digital advertising dollars being spent? The biggest recipients are the two powerful tech companies, Google and Facebook. Billions of people visit Google and Facebook each day making them the largest sellers of digital advertising. Together they receive over 60% of digital advertising dollars followed by Amazon with 8%, Microsoft with 3.4% and Verizon with 2.9%.
Google’s powerful search engine and popular email services attract billions of users every day. With over 1.5 billion active email users, it is the most visited website in the United States receiving approximately 16% of all website visits. Its search engine offers businesses one of the most effective ways to reach a very targeted audience. Google’s ability to deliver ads when consumers are ready to purchase is one of its major strengths. Google’s advertising revenue has grown from $21 billion in 2008 to over $116 billion in 2018. The Google Display Network reaches 90% of Internet users using over 2 million sites and apps worldwide. Eighty-three per cent of Google’s revenue comes from advertising.
Google also owns YouTube which it purchased in 2006, for $1 billion dollars. YouTube is the most popular video sharing social media platform with 2 billion users. Adults over 18 in the United States spend more time watching YouTube than any television network and 18-to-49-year-olds watch more YouTube on their mobile devices than the top 10 prime-time shows combined.
Facebook is the second most visited website and the most popular social networking website with over 2.3 billion users. Unlike Google users, Facebook users are not actively looking for products to purchase, they are visiting the website to socialize. Facebook offers advertisers the ability to target users based on demographics, interests, browsing behavior, location, political affiliation, life events and other parameters. Facebook’s ability to target the audience in detail is a major draw for advertisers. Its advertising revenue has grown from $700 million in 2009 to over $55 billion in 2018.
Facebook purchased Instagram, the photo sharing platform, for $1 billion dollars in 2012. Instagram has over 1 billion active monthly users and its revenue is expected to double this year to $14 billion.
Amazon may be in third position, but it’s advertising revenues are growing rapidly and challenging the duopoly of Google and Facebook. It’s estimated that almost half of U.S. internet users begin their product searches on Amazon versus 34% on Google, a trend that is expected to grow over time.
One of biggest draws of digital advertising is that it allows businesses to target, track and measure their audiences. This holiday season, the retailer GAP has decided to only use digital advertising. GAP’s Chief Marketing Officer, Alegra O’Hare explains, “Digital is the broader medium and it comes across as one of the highest performing so we decided to go all in.”
Advertisers want to reach audiences that are most likely to purchase their products and services. One of the major strengths of digital advertising is its ability to target audiences so that businesses reach the right audience at the right time with the right message. Digital advertising can deliver a personalized message that can be tracked and measured unlike traditional media. In the 1880’s, John Wannamaker, a Philadelphia department store owner lamented, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” With digital advertising, advertisers know which half.