The Ad World Is Changing Dramatically, and We All Need to Change with It

By Justin Hayashi, CEO of New Engen

Any way you look at it, 2022 was one for the record books when it comes to the advertising ecosystem. For the first time since 2014, Google and Facebook no longer command more than 50% of all digital advertising. All the while Amazon has grown its ad business to over $30 billion annually and Apple and Microsoft have their sights set on a larger share of the digital advertising pie. And this is coming at a time when AI solutions like ChatGPT could upend the entire known order of the internet.

Meanwhile, retail media networks are also gaining ground. U.S. retail media ad spending will hit $40 billion this year and global retail media spending reached $110 billion in 2022. That amounts to 18% of global digital advertising and 11% of all advertising.

It’s not an exaggeration to say that everything we know about the ad world is set to change radically over the next few years—and the pace of that change is only accelerating.

Regardless of whether you’re an advertiser, publisher, brand or competitor, there are big trends to monitor and plan for as we head into the next several years:

The direct-to-consumer party is over (and we are all DTC companies now). It’s been several years since the Warby Parkers and Caspers of the world upended the retail ecosystem and forever changed the way we think about building brands. Barriers to entry collapsed. The only path to consumers is no longer through intermediaries like media partners and department stores. Upstart brands can forge direct relationships with their customers and hundred-year-old brands like P&G and Unilever have long since pivoted to adopt the strategies of their nimbler competitors. In the last two years, that gap has closed considerably, and incumbent brands are leveraging their wealth of first-party data to build direct relationships with consumers.

At the same time, changes to the privacy framework and increased competition have made it more challenging to scale a brand through the old DTC model. Companies now need to be especially thoughtful about how they organize and implement their investments within pure direct-to-consumer models. The easy days of going direct are over. Brands now need to adjust their creative, measurement and the overall media mix, taking an omnichannel approach to finding new customers and monetizing the ones they already have.

Investments in future-proofing first-party data are essential. Cookies are going away. Yes, it’s taking a while and Google has moved the goalposts a few times, but it will happen. And when it does, brands that have made strategic investments in both the collection and utilization of first-party data will outcompete those that have not. Whereas it’s been more recently about building out your customer data lake, simply collecting and owning first party data is not enough. You also need to organize it, analyze it and activate it to realize its full potential. From here on out, it will be about taking that data and putting it to use, driving deeper customer insights and better outcomes. Whether it is using first party data to better segment your customers and create custom tailored messaging, or passing data back to ad platforms to close the attribution gap, the most successful companies will be those that put their data to work.

The time is now for new measurement. Too many brands are still just measuring the last click and they know it’s the wrong approach. Slightly more advanced companies are on a multi-touch attribution (MTA) model but even that fails to place appropriate value in emerging platforms that don’t drive to a click but still drive influence (think OTT/CTV, TikTok, and digital audio, for example). So MTA, too, will fall short for marketers looking to grow and acquire customers. This is the beginning of brands moving away from those limited models.

Marketing measurement will boomerang back to traditional models that relied heavily on geography-based experiments to understand incremental value. The most successful companies will deploy an always-on testing strategy to constantly evaluate the incremental impact of their advertising budgets, leveraging addressable solutions augmented with first-party data to make smart investments across the entire funnel.

As the visionary Alvin Toffler liked to say, “The future always comes too fast, and in the wrong order.” But knowing what’s changing and how it’s raising the stakes is the best way to rise to the challenge and sustain for the longer term

About the Author

Justin Hayashi is the CEO of New Engen, full-funnel performance marketing agency.

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