The big shift to mobile advertising.
It’s not all careening downhill, at least not for everyone – or at least not for the biggest two: Google and Facebook. More on our two heroes in a moment.
Internet advertising revenues in the US soared 22% in 2016 from a year earlier to a record of $72.5 billion, surpassing for the first time in history the $69 billion spent on TV ads.
And mobile wins. All these people with their eyes glued to their smartphones as they walk into traffic or sit in a restaurant across from their friends, date, or spouse, they’re consuming ads, constantly:
Mobile advertising, a subcategory of internet advertising that covers smartphones and tablets, soared 77% in 2016 to $36.6 billion. For the first time in history, mobile advertising accounted for more than half (50.4%) of total internet advertising, according to the new report by the Interactive Advertising Bureau (IAB).
This chart shows the annual internet advertising revenues going back to 2003. Note in crisis-year 2009 the tiny 3% dip – that’s all. Also note the acceleration of the increase in 2016. That 22% or $12.9 billion jump was the biggest, both in percentage terms and in dollars in history. Since 2012, revenues have nearly doubled:
Other key milestones for advertising revenues in 2016:
- Digital video jumped 53% to $9.1 billion
- On mobile devices, video revenue skyrocketed 145% to $4.2 billion
- Social media advertising soared 49% to $16.3 billion, thanks to the surge of social media ads on mobile.
But not everything is rosy:
Search ads overall – desktop and mobile combined – rose 19% to $35 billion, accounting for 48% of the total in 2016. But desktop search by itself is not doing well: the desktop share of total ad revenues fell to 24% in 2016, from 34% in 2015. And revenues fell 13% to $17.8 billion.
Display ads (banners and videos) – desktop and mobile combined – soared 44% to $31.7 billion. But desktop display ads alone fell 1% to $13.6 billion.
This chart shows the loss of market share by desktop search ads, desktop banner ads, and desktop “other,” as mobile grabbed over half of the market (chart via IAB):
Here are the ten largest sectors in terms of their share of total internet advertising spend in 2016 (compared to 2015):
- Retail 21% (flat)
- Financial Services 13% (flat)
- Auto 12% (flat)
- Telecom 9% (flat)
- Leisure Travel 8% (down from 9%)
- Consumer Packaged Goods 6% (flat)
- Consumer Electronics & Computers 7% (down from 8%)
- Pharma & Healthcare 5% (flat)
- Media 5% (flat)
- Entertainment 4% (flat)
Online advertising revenues are super-concentrated
The 10 leading ad-selling companies accounted for 73% of total revenues in Q4 2016, according to the report. So who are these 10 companies that grab the largest share of these revenues? The report didn’t say. But analysts for the Pivotal Research Group, cited by Reuters, reported the only two names that really matter: Facebook and Google.
In terms of the industry growth, so in terms of the 22% or $12.9 billion year-over-year increase in total internet advertising revenue, Facebook and Google together grabbed 99% of the growth!
They’re sitting at the sweet spot. Everyone else is fighting for crumbs.
This explains some aspects of the Twitter fiasco. Behind its dazzling homemade metrics, Twitter reported today an ugly reality: Global revenues in the first quarter dropped 8% to $548 million, the first ever year-over-year decline. And advertising revenues in the US, the core of its business model – yes, internet advertising, including mobile where Twitter is big – plunged 17%.
So as Twitter’s US ad revenues collapse, it has embarked on cutting costs to manage its decline. Read… Twitter Revenue Plunges for First Time Ever, Stock soars
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There are a whole lot of tiny companies trying to get seen in the internet by buying adds on facebook and google. For most of them it does not work and is a huge money loss. It is (intentionally?) made that you have to have a lot of knowledge about google and facebook to make these adds work. Those who thought to gain freedom starting their own business enslave themselves to the big coorporations once again. I bet that most of the ‘articles’ about how to make money with facebook and google adds are written by people which are paid for by those two, however, I have nothing to prove that – just a suspicion.
The blizzard of internet/mobile ads is so intense, you have to wonder who really looks at that stuff.
I’ve long thought ads on TV were pure crap (which is why I record & zap ’em). Advertises know this and have moved on to the the next bright, shiny thing: internet/mobile. But the ads are still crap.
I’m a retired businessman and accept that commercial companies need to display/advertise their products, but the internet/mobil blizzard of annoying crap just strikes me as numbingly ineffective.
The old saying “Half the money spent on advertising is wasted, you just didn’t know which half” should be revised to “Half the money spent on advertising is wasted – No! Wait! Both halves might be wasted!”
Media advertising for tiny companies is generally pointless and always far too expensive.
Advertising on FB is not that expensive but you do have to have an attention span longer that a gnat’s to figure out how to target your ad to your desired audience and to decide what exposure you want to pay for. You have to be intellectually curious enough to bother with any of the available tutorials – many on youtube by users.
Some business owners may not be that…savvy and so perhaps they should use the services of a professional instead of DIY or accept that their business may suffer. When you DIY – the quality reflects the maker.
Some of the massive increase in ad revenue for GOOG comes from youtube, which is now biting the hand that feeds them, all in the name of increasing the bottom line.
Most successful youtube channel creators have had their ad revenue sharing drastically chopped back. Some of whom, youtube has deemed “inappropriate” content and has completely “demonetized” their channel.
Now if GOOG which owns youtube is doing so well, then why chop back ad sharing and bite the hand that feeds you?
That is simple. PC politics and, ideally, gaining the power to control who can say what (regardless of the short term PC play).
With regard to YouTube, the vloggers will lose revenue for sure because:
1) Advertisers will realise that they are not getting a good return. Do you take any notice of the adverts. Don’t you click “Skip” or move onto another web page screen while waiting for the advert to finish? So youtube revenue will fall meaning less money for vloggers.
2) There will be more and more vloggers believing they can all make money so there will be less viewings per vlogger and so they will lose income per vlogger
3) YouTube will get greedier and have less to pay out to vvloggers so less of the pie for vloggers.
More and more YouTube adverts can’t be skipped. YouTube is headed the way of commercial broadcast TV.
“Video will play when ad is finished” or whatever the message is. Usually it’s for something like a new car with no one can afford any more.
Or … lots of ads for Miller beer which is a guaranteed headache. It’s swill.
I’m guessing Comcast, Disney and ABC are the other 3 that make up the bulk – 80% or more of all US advertising. Print and billboards seem to be experiencing serious decline.
Facebook and Google have a combined market Cap of over $1 trillion. Ford and GM better not slow down with their Ad spend.
Google and Facebook make so much money because they get your data for free and and sell targeted advertising. Facebook and Google should be paying you to use their service. I suppose it’s only a matter of time before a competitor comes out with a model that pays YOU a fee for each ad placed on your screen. I would gladly use a social service or search service that puts money in my pocket, if I put money in theirs.
” Facebook and Google should be paying you to use their service. ”
I agree. It is like in the 70’s or thereabouts when people like coca cola would advertise on a t-shirt and then you were expected to pay to buy the shirt. Hey wait a minute …shouldn’t you be paying ME to advertise your product…… I refused point blank from day 1 to ever pay money for a t-shirt with some sponsors name on it and then on top of that they are charging top dollar to buy that t-shirt/shirt.
Of course once sports teams started carrying sponsors names the fans should have bitten the bullet and said “no way”. They very soon would have made the names smaller or discarded them completely. Now its everywhere.
As for advertising on the web. Not once have I ever purchased anything based on an advertisement. In fact I have trained my eyes not to look at advertising…… although its getting harder to ignore as the content is starting to disappear down a black hole in the middle of the monitor as advertising munches its way in from the boundary of the screen.
TV ? What’s that ? I haven’t had a TV in my house since about 2011.
My middle finger can be extended a long way up in the air when it comes to advertisers.
Unfortunately everyone agrees to their terms before using the software. Just because the browser software or app says “free” does not mean it actually is. I don’t remember where I heard it but we all pay for this with micro-violations of our privacy. I think it’s an excellent way to encompass what is really going on and you can see these companies are taking full advantage of it. They have engineered this very smartly and the majority of the population has no idea how to manage these accounts that are constantly being data mined. I’m kinda computer savvy and still struggle with keeping my online accounts in order. Non tech people have no idea what the hell is going on.
Yup, if it is free, then you are the product.
get adblock
I understand. But you’re killing my revenues.
Thanks for the reminder to turn off adblock on this site, Wolf.
That is a cool idea and would be potentially disruptive.
“Google and Facebook make so much money because they get your data for free and and sell targeted advertising. Facebook and Google should be paying you to use their service.”
This goes to the heart of capitalism and government. Capitalism exists because government defines some things as private property. My land, my house, my car, in some places whatever exists under my land. Never the air or water supply.
Google and Facebook exist because government makes the conscious decision to say that information about you is not your private property. Whatever is collected about you is the private property of the collector. And that is enforced by the police powers of the state.
Of course Google and Facebook will argue that they shouldn’t pay taxes. But understanding that they are constructs of the state and you realize that they should be paying taxes and you should not.
Advertising works
And you must be right. There must be millions upon millions of people clicking on the ads they see, getting excited by them, and purchasing whatever is being sold. It goes against every grain of my being, but folks wouldn’t be spending so much on advertising if it wasn’t happening.
Here’s my system: Can I borrow what I need from family, friends or a neighbor. No? Can I get it cheap on Craigslist, use it, and sell it back? No? What’s the price of a new one on Amazon? Can I get it cheaper used on eBay? No? Can I get it cheaper than Amazon’s price (check WalMart)? No? Buy it from Amazon. Use it, sell it on Craigslist…
Guess I must be in the minority. Don’t do Facebook, Twitter, or any of those others.
Don’t have any aps on my mobile phone and don’t click on ads on the internet either.
Don’t even have one of mobile phone post paid plans.
Won’t be buying a new car any time soon either.
in that minority, as well, Lee.
Kk
You say “Advertising works”; frankly, I wonder (I’m not an ad guru, so the following SWAG analysis might be a wee bit incorrect…but it’s all I’ve got):
Using Wolf’s numbers, Internet/mobile + TV advertising totals about $140B/yr. Divided by the (my estimate) 50% of the American public who actually make buying decisions (160 million), and you have an ad spend of $875/per decision making person per year.
Using GM’s numbers, ad spending is about 2% of revenue ($3B of $160B).; the same calculation for Macy’s is 6% ($1.6B of $27B). Based on that, I’m assuming ad spending consumes around 3% of what consumers pay to buy stuff.
If the average ad spend per individual is $875, DOES ANYBODY READING THIS SPEND $875/3%=$29,000 BASED ON INTERNET & TV ADS?
I didn’t think so…
One thing we know: advertising works in shifting market share (good ads will give you more business and take it away from a competitor). But in many cases, advertising does not seem to be able to stimulate the overall market. So businesses have to advertise to protect and gain market share, even if overall sales (the entire market) don’t increase, and thus in terms of the overall market, the ad dollars would seem wasted.
Mobile advertising is up as there are not as many good simple add-blocks for it yet, same with video.
People will, tolerate static sidebar header and footer adds, as soon at there is, flash, gif, popups, and adds all through the content it all goes (gets blocked) or people stop visiting the site.
ASll videos simply get blocked.
Then everybody gets hurt because a few, get greedy and go over the top with add-trap sites.
You can tell a bad site, simply by turning on, add, flash, and image block, along with do not auto play video, then watching it load. Or if its a bad site with, load adds first default, not load.
Somebody should develop an add-block that blocks, flash, popup gif, and video, but allows Static sidebar header and footer.
People don’t watch TV,listen to radio, or buy newspapers any more as they are not selling content, they are selling advertising. Most cable has gone the same way. So there is no point in having it.
The $875/per decision may help explain the bizarre decision of Microsoft to overpay for LinkedIn. Several times over.
I can only assume they got an interest free FED loan for that one as it added up to a huge number of MS Office licences..
“All these people with their eyes glued to their smartphones as they walk into traffic or sit in a restaurant across from their friends, date, or spouse, they’re consuming ads, constantly:” Very funny and very sad Wolf.
I just don’t believe any of this anymore. For all I know, google can own the company that does the ‘research’.
You do a google search now and you are not likely to find what you are looking for because of the massive spamming google allows with key words. You click on what you think is a lead and it turns out to be spam dead end street.
The hell with google. And Facebook, you are fools to use it and trust them, God help you.
On the other hand if you don’t like the company….click away and run up their costs.
Yes, either deny them the data, if you can, or contaminate it!
I’ve switched to DuckDuckGo as my default search engine. Results are on par or perhaps more accurate than Google and no search tracking.
Thanks WorldBlee.
I’m trying out the DuckDuckGo.
Agreed, I sometimes run searches in Google but DuckDuckGo works well most of the time.
It seems to me that the economic structure of the internet is a historic blunder. Content is free, and the content providers get their revenue by selling advertising and data. It would have made more sense to charge the users some modest fee (fifty cents per hour), and to distribute that revenue to the content providers proportionate to the amount of traffic at their websites. Then excellent websites like this one would have a stream of revenue based on their merit. Ad-free internet–imagine that.
That was tried in the early days of the Internet and was abandoned. People won’t pay for content if they can get it for free, even with ads. Even great sites lost out to the free competition. In the day it was called “paid content syndication”.
I used to have a newspaper subscription. I abandoned it when I could get Google News for free. There was more actual news, and less actual advertisements.
Really? You wouldn’t pay fifty cents an hour to read Wolf Street? I have a variety of content that I pay for (e.g. New York Review of Books), and I’m happy to pay for it. We need to support our thinking people.
50 cents an hour? $12/day? $4,380/year. Love the site, but, um, no. No offense Wolfman!
When Wolf began soliciting donations, I emailed asking why not institute subscriptions? I’m glad to pay for information I use, but somehow being asked to donate as if Wolfstreet were a charity rubs me the wrong way. Wolf sent a long thoughtful reply. His logic is similar to that of the Guardian (British newspaper). It seems to be a freedom of information issue: they do not want to limit access to their site.
I’m sure there is also a financial double bind. Limiting access would run the risk of losing click-based ad revenue, and it might not be made up by subscriptions.
Whole conundrum leaves me with sympathy for anyone trying to make a living in publishing these days.
Fifty cents per hour of viewing time, not the clock always running.
You need to research how much of the worlds population lives on 1 $ a day.
50 Cents an hour on top of isp cost, is outrageously expensive..
Meanwhile Twitter isn’t doing so hot and is forced to cut costs yet again
Adblock does work but I don’t use them for one reason. I don’t go to websites that don’t deserve my clicks, plain and simple. Wolf gets my clicks because he is providing useful content and entertainment. Same with YouTube. As much as I hate the forced ads I immediately recall the days where you had to buy a $12 cd to hear one song. Now it’s all “free”.
I was working for a company which was subsidiary of a very large company; they had spent 4 years and millions developing 3 very complicated big data API’s; these are API’s which can help you in marketing, search, etc.
At first, they were spending $800/day for marketing on Google ads; that continued for 6 month; then the scaled down to $600/day. And they are still advertising. Out of all this money spent, they have as far as I know 2 paying customers. I am just astonished as to how the upper managers don’t stop this madness, but they haven’t. This is how stock holders’ money is being spent. And by the way, these are API’s; so if you hit the API (the website) 100 times, then you pay them 10 cents; so, those 2 paying customers are probably paying like $200/month to this company.
Einstein definition of insanity “doing the same thing over and over again and expecting different results.” If it was my decision, I would have fired the manager after the first 6 month of this fiasco. In any case, that’s how Google makes its advertising money. People hoping to get customers paying sometimes $100/click.
Right. Only the ad companies are making money. When it comes to actual conversions, it’s a mug’s game. Businesses are losing money because ad revenue isn’t translating into customer sales, customers are losing interest and attention (I mute all the ads on YouTube that can’t be blocked or skipped), and the only people making out like bandits are mobs like Google and FB. You’d think that other businesses would have figured this out by now. Humans are really not *that* stupid.
(No, really we’re not. Beaten down. Propagandised. Berated. Screwed over. Stolen from. But, despite all that, NOT the utter morons our “Betters” would better appreciate.)
Wolf where I am, being in Thailand, I see Thai ads for my advertising and as most of the ads are in the Thai language I don’t know what the heck they are saying anyway. Secondly I live in this world without a credit card and so I can’t buy anything from the web.
I have had a credit card in the past and nearly went bankrupt because of it. Once it was paid off I vowed and . declared I would never let them fool me again. (Like The Who said “Won’t get fooled again”). So far since 2004 I am winning the battle and with me its cash only.
I started noticing lately that if I put something in my Amazon purchase bin, it not only shows up as an advertisement on the computer I used to order the product, it also shows up on my work computer. Scary.
If you have logged in even once on your computer at work, then they have added a cookie; thus they easily know who you are. All you have to do is to get rid of your Amazon cookies and they won’t know it’s you specially that your IP at work is shared by many other employees depending on how big your company is.
Well, to be very technical, if they want to know it’s you, they can rely on other methods, but most companies are content with the use of cookie; I guess they are afraid of being sued for privacy infringement. So, for now, get rid of your Amazon cookies, and they won’t be tracing you on your work computer.
Raise the price, as in this summer driving season gas price increases? Former Consumers don’t “pay more” they network together to ride share and help each other use less. Then they help each other build their financial safety net against the surely increasing tax and health care expenses in the year ahead.
and helped each other discover the mute button on the TV set hand held
on those very few hours a month they are not out in the garden planting their summer fruits and veggies among other useful non TV activities
Wolf,
I know you don’t like discussions on politics, but 2016 was an election year, and bound to be a good year for ad buys. 2016 was also the year that the person buying 5% of total campaign ads, beat the person buying 95% of the campaign ads. This should tell you something about the effectiveness of advertising in the new digital space. Next year is bound to be a lower spending year, both because of the obvious ineffectiveness and it not being an election year.
I would also throw in the harsh reality of retail disintegration, that you have well documented. I would expect lower ad spending and no doubt the companies you reference are in a position to see it as well.
For all the talk of Google’s AI, I keep getting the same old stale ads for stuff I didn’t buy, which their nifty AI should know.
Yes, you’re correct about the election year being a big thing in ad spending. And that contributed some to the big jump, for sure.
But 2012 was also an election year, and the increase wasn’t that huge.
The big thing is mobile. This is really taking off (including political ads).
So I think 2017 will still see a big jump in ad revenues (unless we get a big recession by nlt this summer), but not quite as big a jump as in 2016.
Welcome back Petunia, long time no see…..
99 balooons.
The Palo Alto, & Seattle top have a MOAT.
They are invincible. They dominate the world, control our brains.
They can feel sentiment, touch our pocket.
They know every secret we have. They know when, how, to whom we talk.
They know whom we love & hate. How we look dressed & naked.
They are the bridge between politicians and our heart.
They are admired by the greatest princes of the world. The gurus.
They have connection to all. They are above all.
They can reach us wherever we are.
They are the super nova. They are MEDIA.
The bottom 90% love them, the top 1% love them.
They are so rich. They have no FEAR !
Everybody love & adore them, but : TRUMP!!!
You can have fun, own some fake & imaginary toys.
Fake spending, why not :
Press : Varshau or Beirut hotels ; Corolla ; Nike sneakers : Asus….
Blow add money in the air, you eventually render the great ones
less powerful !
Not every day.
I think Facebook is the only place I’ve seen ads that I’ve actually clicked on and to a lesser extent, made purchases from.
Seems like everywhere else is just get a random mix of stuff, or an amazon ad for something I looked at or searched there in the past, but didn’t buy the product (usually bought something similar).
Real wealth, as opposed to the Fed’s deranged money printing, is created by value-added production of useful things. Someone please enlighten me as to how all these Internet companies are productive enterprises.
It’s like all the ads that come up on this website they are a pain and i do not read them
Ah yes, ads aka clickbait, especially the politically charged kind. Like SJWs and their rhetoric, people will definitely never get tired of seeing them.
One thing not talked about here that has been a problem for advertisers is click fraud. This in one of it’s forms is competitors clicking on each others ads to drain each-other’s ad accounts. This can be carried out with the help of all those high tech’ers in India, Africa, etc, for a few dollars a day. Click fraud is estimated to be in the billions of dollars a year.
I try and get internet sales for the wife’s business, I have had sites up for years, recently gone to zero activity by private blog networks, incredible amounts of spam blogs. It’s just amazing. On the flip side is all this internet advertising. I think mostly it’s because some people can’t combat the spam to get to the first page of G.
Yes if you make the mistake of letting your work computer off track and check your home email, log in anywhere – off work stuff, then they have got you.
Best defense for insulation is delete all cookies, history, and use a good proxy.
As for paying to see Wolfstreet, it’s a sad thing but we have up to now had the experience of seeing the entire internet for the cost of ISP. So no matter how good or bad, we don’t wanna pay anything for it all.
Funny thing I notice watching young people and their entertainment viewing. I will make time to catch a show at 8pm If I wanna see it. A young person will not make the schedule. But will pay $1 or $2. to stream it on an itsy-bitsy screen, often while walking or talking with friends. And for the most part, some one else is actually paying the bill….
I use G all the time, I actually see what effects the ads that show up. Amazon browsing seems to have the largest effect, ebay second, and my wife’s business which I am doing searches on third.
To get random ads and to see what a virgin might see when looking for some stuff the wife sells I have a “clean” computer. No history, no book marks, and no cookies, and goes outside only on a proxy.
They also know your age, I remember years ago before FB there was “Classmates.com” and similar sites. Once they figured out where you lived, and your age, ads followed you about area high schools, reunions all that stuff. Classmates use to spend a lot on ads…
there’s my 30 cents per click….
Now that cable companies can sell our information to advertisers, isn’t that gonna hurt FB and GOOG? I would think it has to.
That probably means the most effective (personally targeted) advertising comes from combining the cable companies’ data sets with Google and FB data sets. To succeed advertisers need as much info on the individual as possible.
This is what Cambridge Analytica , Mercer’s outfit, did for Trump and arguably won the election for him.
The legality of using citizens’ data in this way is also questionable.