Kate Bulkley, Media Analyst.

Digital threat intensifies for TV

By Kate Bulkley

Broadcast News

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For Broadcast July 07, 2016

Social media giants are gaining the upper hand, says Kate Bulkley

British television has not escaped the tumultuous fortnight of upheaval in the wake of the Brexit vote. But while the goings-on in Westminster would do justice to a new, multi-episode series of House Of Cards, there are other big beasts in the jungle that are set to affect the course of the TV and production industry for years to come.

Facebook and Google and, to a lesser extent, other social media giants like Snapchat and Twitter, are becoming increasingly important to both advertisers and content owners as delivery platforms to audiences.

This has big implications for anyone making and delivering programming.

The power of what many in the advertising industry call the hegemony of Facebook and Google was in evidence at the Cannes Lions advertising festival. They both had lavish set-ups on the beach, where they were eager to court media agencies and brands.

The tectonic forces behind this shift include the transition from an internet of websites to an internet of mobile apps and social platforms. As consumers spend more time on the latter, the likes of Facebook and Google (including YouTube) are increasingly in the driving seat.

In the first quarter of 2016, 85 cents of every dollar spent on online advertising in the US went to either Facebook or Google, according to research published by Morgan Stanley analyst Brian Nowak.

This makes them the new gatekeepers for the bulk of digital advertising, including video advertising. This may not seem a threat to the TV business, but according to eMarketer, digital ad spending in the US will account for an estimated 35.8% of total media ad spend this year.

And here is the clincher: TV is only one percentage point bigger. Granted that one percentage point is worth an estimated $1.78bn (£1.34bn), but digital ads are clearly the biggest challenger to TV ads.

The fact that only two digital players control the bulk of the spend is worrying to big advertising and content-producing chiefs. “The big shift in the TV business is the tech giants, who are making a big presence here at Cannes,” said Dominique Delport, global managing director of Havas Media Group.

“They have the scale, and the money is shifting to them. This is a new phase for the TV business as well.”

Paul Frampton, who runs Havas’ UK business, is concerned about the lack of visibility he gets from both Facebook and Google with regard to the data they collect. He calls it the “black box” and worries that without it, the ad industry is playing catch-up in a fast-moving media ecosystem.

There was also a lot of talk in Cannes among senior advertising executives about other platforms, from BuzzFeed and AOL, both of which are ramping up video production capabilities, to Snapchat.

The latter has indicated it is growing so fast that it its revenue could almost triple to as much as $1bn (£770m) in 2017, much of it attracted by ads that will start to show up between users’ Live Stories, which include video. Some ad execs see Snapchat as an antidote to the power of Facebook and Google. TV executives take note

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