Are We On the Cusp of the ‘Digital Ad Bubble’?

By Molly Altorfer, partner at The Common Sense Collective

Fortune 500 companies and most B2B compa­nies remain bullish on the advertising industry as a way to reach consumers and build brands. One only needs to tune in or log on to be inun­dated by a rush of consumer advertising.

In 2017, total media ad spending was esti­mated to exceed $205.06 billion. That’s a ton of intrusive media (radio and television) advertis­ing, with a great deal of the total spent – almost 40 percent – directed to digital platforms like Facebook, Google, LinkedIn and YouTube.

These digital behemoths continue to refine their platforms and monetization strategies as even more users turn to their mobile devices for web search and video streaming. According to eMarketer, “by 2021, digital’s share [of the advertising pot] will climb to 51.3 percent as advertisers continue to reduce outlays on tra­ditional media.”

That’s a lot of dollars allocated to digital advertising.

But, as we’ve witnessed in the recent past with the financial markets, bubbles burst. Could the digital advertising bubble burst? It’s an in­teresting concept to consider for companies in the United States.

Short answer: Yes, the digital ad bubble could burst.

But will it? And, re­lying on our financial analogy, will companies be able to call the “high” and the “low”?

There are several in­dicators of who may precipitate the bursting of the digital ad bub­ble. Recently, Fortune 500 company Procter & Gamble – home to brands Tide, Crest and Pampers – eliminated at least $200 million of its digital advertising last year. The reason: the lack of transparency in digital advertising.

Marc Richards, chief brand officer at P&G, noted the change was made because “such spending had been largely wasteful and that eliminating it helped the company reach more consumers in more ef­fective ways.” In short, Richards and P&G were telegraphing their next move to Facebook and friends: figure out a bet­ter way to track digital advertising ROI or our commitment to digital advertising will diminish and those dollars rein­vested in time-tested stalwarts like radio, televi­sion and print advertising.

Time will tell if P&G proves to be the first among a group of “early adopter” compa­nies that step back from digital advertising en masse. What we know, however, is that other massive brands will be watching to see wheth­er P&G sales in 2018 suffer or surge, and how much of the kudos or blame will be attributed to digital advertising.

This all raises a serious question for small-to medium-sized companies: If a Fortune 500 company with millions of dollars in resourc­es and thousands of employees at its disposal believes it can’t accurately track the results of its digital advertising efforts, what makes your company believe that it can?

Additionally, a third rail of digital advertis­ing is now being discussed openly: how can advertisers justify large spends on digital ads when they lack the basic control of the content that surrounds their message. Brand-conscious companies are now facing the hard truth – their ads may run beside highly charged political messages, off-putting messages or even Russian fake news. Russian roulette, indeed.

These factors ultimately contributed to the waning reliance on digital media by at least one Fortune 500 company and could foretell a shift in the digital industry – if others follow suit. What’s certain is that consumers are not likely to abandon their smartphones. Therefore, any changes to advertising strategies will be initiated by companies that are reevaluating which types of media are best for reach and frequency and which provide the most transparent ROI.

Of course, whether 2018 is the “high” for dig­ital advertising remains to be seen. But, as major companies know and seasoned financial inves­tors preach, it is best to prepare for any “low” with diversification. In this case, diversification in advertising mediums is a safe strategy.

The old adage remains true: don’t put all your eggs in one basket. And, in today’s world, companies would be wise not to put all of their eggs solely in the digital basket.

Molly Altorfer is a partner with The Common Sense Collective, a Corridor-based marketing and advertising agency. This op-ed appeared in the Corridor Business Journal.

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