Digital Video Grows, But Upsets Duopoly

We like research, especially when it aligns with our own corporate strategy. We invested heavily in digital video several years ago, and have been waiting for the market to catch up. Now, apparently, it has, but in a very lopsided way

Pivotal Research Group LLC is an equity research firm that provides research on media, communications, advertising, Internet, and most other major industry sectors to hedge funds and other major Wall Street players. Its major purpose is to identify industry trends and events. It  recently issued a report based on its analysis of Nielsen’s August 2018 data, showing that over the summer, digital media content consumption continued to grow steadily, with double digit percentage gains in August that mirrored the growth reported earlier in the year.   Consumption of digital content on PCs, tablets and mobile handsets  grew 15% to 34 billion person-hours.

This should mean marketers are happy, but actually they don’t know what to make of the rapid changes in the industry. We went back to the source of the research, Nielsen.  According to the Nielsen CMO Report,

There has never been a more dynamic and challenging time to be a marketer. Since the advent of the internet, fueled by available high-speed broadband and ignited by the proliferation of smartphones, marketers have more access to consumers than ever before. We are awash in data and should be living in a nirvana of actionable insights. The reality, however, seems disconnected from this promise. Over the last 18 months, some of the largest and most influential advertisers in the world have spoken up about their concerns with digital advertising, calling the supply chain “broken” and pointing to high incidence of fraud and lack of brand safety. Subscription video on demand (“SVOD”) services are decreasing reach of traditional marketing mediums like TV and radio. The launch of GDPR in the European Union and related privacy challenges have added complexity to the collection and management of consumer data. Combine this with changing consumer preferences and zero-based budgeting and it’s clear that the job of the CMO has become a more delicate and dangerous catwalk. At Nielsen, our job is to provide the science behind what’s next. 

Digital ad spend has eclipsed traditional channels and we expect that trend to continue. When forecasting the next 12 months, 82% of respondents expect to increase their digital media spend as a percentage of their total advertising budget. By comparison, only 30% of respondents plan to invest more in traditional media channels in the near term.

Google gets the lion’s share of digital media viewing, because of YouTube. It alone showed 20% gains and accounts for 18% of all digital content consumption. If you took out YouTube from the results, they’d only be 12%. Google’s YouTube, Google and Waze combined to account for 32.8% of digital media consumption, up from 29.4% in August 2017. Google-related properties accounted for 56% of the growth in overall consumption of digital content.

Facebook, as you might suspect, is having problems. Even with the inclusion of Messenger, Instagram and WhatsApp, it was down to 14.3% of all digital consumption in August 2018 from 16.9% in August 2017 and 18.5% in August 2016. Pivotal says while the number of core Facebook users was up 7.2%, the average time per person was down 6.7%. Total company-wide usage decline was 13.0%. And now several Direct to Consumer brands, specifically Glossier, which had used Instagram to reach customers, are building their own platforms.

After Google and Facebook, Verizon properties were the third-largest platform of digital content time spent. Including Yahoo, AOL and Tumblr (but excluding MSN inventory), Verizon had a 3.2% share of digital media content consumption against 3.5% in August 2017. No real growth here. Same with Amazon. Looking at all activity — including Twitch and Audible — it was at a 1.8% share against  2.1% in August 2017. Snap is more difficult to judge, because it grew monthly users by 20%, but time on the site fell 23%

 

So, as we predicted, the duopoly may be running out of steam, but digital video is not.