I know this because within hours of the article being published I received more than a dozen emails from people (most of them from the sell side) forwarding me Dave’s article and asking what I thought. Dave’s interview has a number of great points, only one of which I will cover now.
Regarding display advertising growth, here’s what Dave said:
- Display advertising is projected to grow by $12 billion over the next 5 years or so.
- Most people expect Facebook to grow display revenues from $1.5 billion today to $10 billion over the next 5 years or so.
- Therefore, nearly all of the future growth in display ad dollars will go to Facebook
Dave points out that online media is uniquely winner take all. If you’re an online media company you win by having the most reach. You can also win by creating high-value, B2B niche audiences. Otherwise everything else in between gets crushed. This pretty much describes what all three portals are suffering from right now as they slip behind Facebook and show limited prospects for revenue growth.
In my view there are at least two scenarios where Dave’s vision fails to materialize. The first one is unlikely but not impossible. Namely, something better could come along. Consumers are fickle. Companies can make bad decisions. If Facebook really screws up and breaks its trust with the consumer there are hundreds of startups in the Valley, Chelsea and Brooklyn waiting to step in. Still, with everyone and their grandmother on Facebook its hard to imagine most people will willingly walk away from their own personal network, at least in the short term. Like Microsoft Office, most of us have no choice but to keep using it now matter how clunky it is.
The other scenario is more plausible. The truth is that for large brands the Facebook ad product is limited. If brands don’t like what Facebook has to offer then perhaps they don’t shift all $10 billion dollars to Facebook after all. This has been one reason why online media spend has not kept up with time spent. Most dollars stay in television because online can be a cluttered, low or no impact environment. Given what’s at stake, I have got to believe that Facebook is working on a raft of new ad products for brand advertisers. Of course, I’ve been thinking that for over a year now and nothing much has materialized.
So maybe Facebook doesn’t deliver the right ad products and maybe they don’t speak to Madison Avenue the right way. And then marketers and agencies say, “You know what, I don’t care how massive or targetable the audience is. I don’t want to buy Facebook’s crappy ad products because they don’t get my brand noticed and they don’t drive sales.” And if there’s no other good way to get the mix of reach and targeting that Facebook offers then maybe more of those dollars stay right where they are or, more likely, move to mobile, gaming or whatever else is invented in the next five years.
Baring either of those two scenarios, though, I think if you’re a digital media company your life just got more complicated.
What do you think?