Data in Marketing: Advertising and the Beginnings of Digital Marketing

Data in Marketing Series: I was at a client office a year or two ago as one of the sales team was recounting a recent prospect meeting. In his enthusiastic salesmanship of their product, a business intelligence solution, he extolled “data is the new oil!” The prospect – ExxonMobil - wasn’t impressed. Apparently for the oil producers, it seems, nothing is the new oil.

However, investors would be inclined agree with the salesman. Only ten years ago PetroChina and ExxonMobil were the two most valuable public companies in the world by market capitalisation, today these companies have slipped to 92^nd and 54^th respectively. Most of the biggest companies now are purveyors of data in one way or another – Apple, Microsoft, Amazon, Alphabet (Google), Facebook. But in this blog series its two of those companies I want to focus in on - Google and Facebook - and their effect on data in marketing. You’d probably describe them as a search company and a social media platform, but in reality they’re the two largest advertising platforms in the world.

How big is Google and Facebook in the global advertising market?

Here’s a quick calculation on how much of the market Google and Facebook have cornered - the results might surprise you:

• In 2019, global advertising spend was around $550 billion
• Facebook’s revenue in 2019 was $70.7 billion – 98.5 percent was generated from advertising, so $69.6 billion (12.6% of global advertising spend).
• Google’s revenue in 2019 was $161 billion and 70.9% of revenue was advertising – so $114.3 billion (20.8% of global advertising spend).

Together Google and Facebook now command 33.4% of the global advertising market. In other words, they receive over a third of every Pound, Dollar, Euro and Yen spent on ads. Not bad for two companies with a combined age of 38 years.

What is it that makes everyone want to buy advertising from Google and Facebook?

To answer this we need to go back in time to the 1980s..

In the 80s your advertising options were limited: print, out-of-home (e.g. billboards), direct mail, and radio/TV advertising (if you could afford it). We call it offline marketing now but back then those were the main options.

Before the internet the best value “targeted marketing” for small/medium-sized businesses was probably magazine advertising.

If you needed to sell to a specific audience, chances were that there was a specialist magazine for that audience. It explains why so many print magazines did well back then – they were all chock full of ads.

In fact, I recently came across an ad that my parents created in 1983 that ran in “Sinclair User Magazine.” For a few years they had a business called the Software Library which rented out cassette tapes for ZX Spectrums and ZX81s. In order to join you had to cut out the coupon from the magazine and post it off with £5 in order to get the brochure and choose your tapes. The process seems so convoluted now but it was how it worked for years – decades even. Mail in a postal order and a little coupon with your details carefully filled in and a few weeks (yes weeks!) later you get what you ordered in the post.

Fast forward to around 1995 and the internet changed everything. For the first time ads could be delivered directly to (potentially) millions of people at almost zero cost. Plus there was almost unlimited inventory because ads could easily rotate.

However early internet ads were really not much more sophisticated than magazine ads. A majority were display ads and aside from choosing which website they appeared on. Ads were also unsophisticated, often they disrupted the user experience with annoying pop-ups.

But this state of play didn’t last long.

An advertising revolution was on the horizon, and it started on the 23^rd of October, 2000 with the launch of Google Adwords..

This is a three-part series about the evolution of data in marketing . Check back next week to read our next blog on the rise of Google and Facebook.