Video Replacing TV as the Top of the Funnel

Seldom is there an industry read with which we disagree more than Ben Thompson’s recent writing on his blog Stratechery. In it, he says that “digital advertising is becoming a rather simple proposition: Facebook, Google, or don’t bother.” We don’t agree. While display may have commoditized, video has not, and TV advertisers moving over to online video are choosing to go broader, and to buy from ZINC>

 

Thompson talks about the advertising world of the past, in which newspapers, radio and television found their niches in the advertising spend, which has always been about 1.2% of our economic activity. Each existed at a different point in what used to be called “the funnel” from suspect to prospect to customer:

photo courtesy of Ben Thompson, Stratechery

photo courtesy of Ben Thompson, Stratechery

TV and radio were particularly effective at building awareness — making customers aware that your product existed — and also at building brand affinity — the subconscious preference for your product over a competing product at the moment of purchase. Newspapers, meanwhile, were useful when it came to “consideration”: helping consumers decide to buy the product they were now aware of (coupons were very useful here). Finally, brand managers spent a lot of time and money on their relationships with retailers to help pull consumers through the funnel to conversion, with the vague hope that said consumers would prove to be loyal.

It has always been difficult to manage the top of the funnel through digital advertising, because it is less measurable than performance advertising. That’s why RTB took off first, and brand advertising was so slow to be accepted. However, we now have some very good formats for brand awareness, and some very good cross-channel campaigns. Video has made a huge difference for brand advertisers, and “out stream” advertising has made another. Native provides a third.

Because of the size of their reach, Thompson argues, platforms like Facebook’s and Google’s, which can guide an advertiser through different parts of the funnel by means of their own offerings, will capture the advertising market once and for all: “Google is promising… awareness via properties like YouTube, consideration via DoubleClick, and conversion via AdSense.” And thus it makes no sense to go anywhere else, and every smaller platform, from LinkedIn, to Yelp, to Twitter, will lose.

While Thompson uses this thesis as a way to account for the recent stock market performance of LinkedIn and Twitter, it really doesn’t account for all the publishers in our premium network, who have leveraged inView and inArticle on their own sites to achieve better returns than the bigger platforms. They know that from a cost/benefit perspective, bigger does not always mean better in terms of investment return.

Ultimately, advertisers care about the return on their advertising dollar, and if they are trying to reach special audiences, they’ll spend far more trying to do that through Facebook and Google than they will through targeting niche sites where those visitors spend most of their time.