Surprise: Facebook is cannibalizing digital budgets, too
It's no longer just traditional budgets that are under siege by the site
March 13, 2017
For a very long time, digital advertising has been eating away at traditional advertising budgets. But now that online has become the largest media category, there’s a new trend taking hold – digital stealing share from digital. The most notable example is Facebook, which has become a huge force in local advertising and is wooing ad dollars from fellow digital competitors. That’s according to a new report from Borrell Associates, the local ad tracking firm in Williamsburg, Virginia. It says 69 percent of dollars spent on Facebook advertising last year were local, accounting for 7 percent of total local advertising. And those numbers will rise. Gordon Borrell, CEO of Borrell Associates, talks to Media Life about what makes the site so appealing to local advertisers, how much it stands to grow, and why Facebook could stay relevant for years to come.
What did you find most interesting or most surprising about this report?
It’s our finding that other digital media — not traditional media, as many have assumed — is the most disrupted by Facebook’s advertising pillage.
But it makes perfect sense when you consider that digital budgets have become quite large, and thus digital cannibalization is occurring.
What’s the most important thing media buyers and planners can take from it?
They shouldn’t underestimate the allure of Facebook or the investment that companies are making in it.
I would think that an agency that exhibited a mastery of social media could certainly win business, especially if that agency went beyond the basic knowledge of social media etiquette, differences between channels, and targeting capabilities. This is where an agency’s creativity can really shine.
Why has Facebook zoomed past Google in local markets? Do you expect that gap to last?
Two reasons: Facebook’s churn rate is far lower than Google’s in its early years, and Facebook’s marketing execution is nothing less than brilliant.
When a business posts something on its page, Facebook immediately shows a demo of the post in the page managers’ news feed, as in “This is what your post would look like in everyone’s newsfeed if you spent $50 to boost it.” They’ve made it so incredibly enticing, and Amazon-like simple, to buy an ad or boost a post.
Google, valuable as it is to marketers, was never able to make it that simple.
Why are digital budgets impacted the most by Facebook? What’s vulnerable?
When a new, attractive advertising opportunity presents itself, it’s natural for a marketer to cut something that he or she perceives to be less efficient. When Monster.com came along, the target was print help-wanted advertising.
When Google showed up, yellow pages got hit. Then streaming audio and video started peeling away broadcast budgets. Traditional media budgets have already been whittled pretty deeply, and it’s clear they won’t be completely eliminated.
So advertisers are looking inward at digital and saying, “Hey, Facebook seems to be a better use of my dollars than Yelp or Google keywords. I’ll cut those back.” And those are two most vulnerable, along with things like SEO and overall banner advertising.
Why do local advertisers feel comfortable with Facebook?
Oh dear Lord, there are so many reasons. Traditional media has kept advertising at arm’s length from content.
Facebook makes it seem more like a part of the conversation. Facebook makes is supremely easy to place an ad or boost a post. You get instant gratification, too. When has TV ever sent you a message that said, “Congratulations! Your commercial was just seen by 10,421 people and is getting a lot of ‘likes’ and comments!”
It’s highly targetable. Your ad starts appearing minutes after you place it. It’s inexpensive.
Need I say more?
Does it have reps at the local level? How much does the do-it-yourself aspect appeal to advertisers?
Facebook doesn’t have reps at the local level per se, but it does have a significant team assisting the larger regional advertisers, and local franchisees as well. I think you’re seeing a lot of DIY advertising right now, but Facebook is aware that local advertisers don’t possess great marketing savvy and thus may churn out when they flub a few campaigns.
One genius thing they’re doing is embracing the opportunity to empower the estimated 90,000 local reps who sell newspaper, TV, radio, cable, direct mail and yellow page advertising. Instead of considering them competitors, Facebook has been collaborating with the Local Media Association, the Local Media Consortium and individual media companies to develop content and advertising strategies that will foster even more participation by SMBs.
What cities is Facebook taking the largest percentage of money? What do those cities have in common, why is it happening there?
The average is 7 percent of all local advertising expenditures and 15 percent of all digital advertising expenditures, but you’re seeing higher rates in some markets.
Those markets are characterized by high usage of Facebook (which we’re seeing in smaller markets like Clarksville, Tennessee; New London, Missouri, and Blacksburg, Virginia) or where there’s high levels of sales activity for clothes, restaurants and health care (which happen to be the biggest spenders on Facebook ads).
What do you see for Facebook advertising five years down the line — how will it be impacting local?
Five years in digital time is a generation. That’s plenty of time for another new-new thing to overshadow Facebook. I suspect Facebook will get some competition from voicebots like Alexa and Google Home, or perhaps Uber, which Facebook currently sees as potential threat.
That said, I don’t think Facebook will become the next Yahoo. Instagram will give it some staying power with younger adults, and like I said, it’s made some brilliant early moves in figuring out how to make it easy and instantly gratifying to advertise in social media.
Five years from now, Facebook is likely to be today’s Google — big, very dominant, and seeing its growth eaten away by a competitor we haven’t yet identified.
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